Globally, We Need Another 50-100 Fabs by The End of 2026 to Support the Demand for Semiconductors

Published  February 5, 2024   0
Dr. Ajai Chowdhry, Co-founder of HCL & Ajit Manocha, President and CEO of SEMI

Over the past couple of years, India has already started boosting its semiconductor industry with the launch of an incentive scheme of Rs, 76,000 crores in December 2021. In an effort to fulfill the mission of the union government, the Indian Semiconductor Mission (ISM) was formed, which aims to build a vibrant semiconductor and display ecosystem. Apart from that, state governments such as Gujarat, Odisha, Tamil Nadu, and Uttar Pradesh also unleashed their own semiconductor policy to grow the industry. According to the media reports, the Indian semiconductor industry is expected to surpass 64 billion by 2026, while the Government of India has aimed to double this growth by 2030, achieving the domestic chip-making industry valuation at US$ 110 billion and securing at least a 10% share in the global semiconductor market. To know more about the chip industry’s challenges, future prospects and investment opportunities we spoke exclusively with Dr. Ajai Chowdhry, Co-founder of HCL Tech and EPIC Foundation, and Ajit Manocha, president and CEO of Semiconductor Equipment and Materials International (SEMI) headquartered in California.

Q. Do you think India is now on the right track to grow its semiconductor industry and to compete globally? The challenges are still huge such as lack of power subsidies, insufficient clean water and many. Is this industry actually growing?

Dr Chowdhry- It’s a great opportunity now for India to emerge as a global destination for semiconductor manufacturing. HCL started in UP and I am very supportive of the state. If we look at the past three years, the central government is very supportive of the policies. But, even if the policies are great, unless the combination of management, business plan, and technology partner is put together nicely, there will be difficulty in getting approvals from the central government. If we look at the current situation, hardly any industrial sector can survive without semiconductors. Very critically, India has to be in the semiconductor business, and I am very hopeful more companies will file applications to begin their operation in the country.

Manocha- The semiconductor industry has taken a center-stage in the electronics ecosystem of the country with the launch of India Semiconductor Mission. The government has put in place one of the most ambitious schemes of $10 billion to promote this industry. This is the right time for India to emerge as a semicon industry hub. Industry bodies and the government has to work closely to focus on the supply chain and help the country to become globally competitive in semiconductor manufacturing. This is a tremendous opportunity to surpass $55 billion by 2026. We are here to make history today. No company and business these days can survive without semiconductors. India can never reach the top spot of the economy without building the semiconductor ecosystem. In the coming few years, the digital economy will surpass the $1 trillion figure. 109 wafer fabs have been announced globally, but it’s not enough to support the demand for semiconductors and we need another 50-100 fabs by the end 2026.

Semiconductor Manufacturing Industry

Q. What could be the contribution of India in the global semiconductor industry in the coming five to seven years? The way we are progressing, do you think this industry can help India in the trillion dollar economy?

Dr Chowdhry- In a large country like India you have to manufacture semiconductors at a large-scale to compete with other countries and to grow other industrial sectors. Hardly, there are any sectors these days that can survive without chips. Until now, we are in VLSI design and that is also for exports. Now, the time has come for India to create products for itself and meet the demand of other countries. Now, if you both create and design products, you need advanced semiconductors. If India wants to be successful, then it has to be a product leading nation. By the end of 2026, the nation’s semiconductor industry is expected to cross 64 billion, and this will be doubled by the end of 2030. We are looking for US$110 billion in this industry and therefore, you can understand the growth potentials.

Manocha- There is a scope for billions of dollars of investment in the country, but companies won’t come to the country for investment unless they see the performance results of Micron and also how we position and market ourselves to the rest of the world. So, the important aspect is how we perform in the next 10-12 months with Micron and also with other applicants. The dependency and importance of semiconductors was never appreciated until the pandemic. It’s very important that we bring as many people as possible on the same page. So, the more we talk and understand the loopholes, the better we can form strategies to boost the ecosystem. With the help of global business summits and SemiconIndia events, we are trying to make India the global manufacturing hub. Challenges are there, but this industry has a huge potential to contribute to India's economy.

Q. Why do you think ‘Make-in-India’ is so important? Until now, people were buying products and there was no problem for the consumers. Is it creating a price difference or a marketing strategy?

Manocha- Now, if we don’t start making products in India and next time when we have a pandemic again, it will make the situation worse. We need to be self-sufficient and self-reliant and become a powerhouse in the semiconductor industry because this is an integral part of our lives now. It’s not only about India, but more countries should be the global hub of electronics and semiconductor manufacturing. But, India is always the best choice for investments because we are the largest market for the industry, the largest democracies and the majority of us can communicate in English. Most importantly, we also comply with international laws. 

Dr Chowdhry- There will always be a price difference if we make products in India. For instance, smartphones and IT hardware products, which are assembled in India, have a price difference of at least 2-3k compared to assembly in other countries. Now, imagine when 80 percent of an electronic product is made completely in India. I agree with Manocha Ji that if we have the talent pool and resources then why should we be dependent on a few countries. We have to utilize our strength in building the ecosystem.  

semiconductor Manufacturing Industry

Q. The US government launched the SCIENCE and Chips act worth $52 billion, the European Chips Act has attracted over €90 billion ($98 billion) worth of investment. Do you think India's Rs 76,000 crore scheme is enough to grow the semiconductor manufacturing ecosystem?

Dr Chowdhry- The USA’s $52 billion is spread across various sectors and $10 billion is just focused only on semiconductors. So, it’s a different ballgame because the US government is offering 35 percent of the capex, whereas India is providing 70% of the capex. The government cannot approve MoUs without having a proper business plans, strategy or future prospects. Earlier, the proposals were not complete, but now, I am hopeful along with the Micron announcement more companies will be interested in signing MoUs and investments. I am very sure in the coming six months more than 1-2 fabs will be announced in India. 

Manocha- I don’t think it's a good thing to compare India with the USA and Europe. We have just started the process and if we can unleash a $10 billion dollar investment scheme then definitely, we can push it for more in the coming years. The problem is not about the investments, but the gap is huge in the manufacturing ecosystem. In the coming 10 years a lot of chip acts will be signed coupled with huge investment. I am sure that the policy-makers in India are thinking about the next phase 2 and 3. India is on the right track and for more growth we have to make Micron’s operation successful.