Semiconductor Industry in Indian Perspective
Volume 1; Issue 1, April 2022
Dr Thakur Sudesh Kumar Raunija
Dy. Head, VFD Quality Control Division, Semi-Conductor Laboratory
Received 1 September 2021, Revised 17 December 2021, Accepted 21 March 2022, Available online 1 April 2022.
In 1874, the invention of rectifier (AC-DC converter) and later in 1947, invention of point-contact transistor by Bardeen and Brattain at BEL lab revolutionised the electronics industry. Since then the industry has seen key developments like computer using vacuum tube in 1946 and Shockley junction transistor in 1948 till the major breakthrough in terms of invention of Metal Oxide Semiconductor Field Effect Transistor (MOSFET) in 1959 by MM Attalla and Dawon Kahng happened. Since this breakthrough invention, the industry has gone leaps and bound. This article presents the overview of semiconductor industry in Indian perspective.
- World Semiconductor Market
The world GDP is around US $83 trillion wherein electronics industry is more than US $2 trillion, approximately 2.5 % of world GDP. The electronics industry consists of various sectors. However, the major driving force in electronics industry is semiconductor industry. As per Semiconductor Applications Forecaster from International Data Corporation (IDC), the global market of semiconductor industry was US $464 billion and is expected to reach a milestone of US $522 billion with a year-over-year growth rate of 12.5%. Similar forecast is made by Business-Standard. Further, the forecasting report from Statista shows the size of semiconductor industry to reach a milestone of US $527 billion in 2021. Further, the global semiconductor market is estimated to grow from US $ 340 billion in 2015 to US $ 650 billion in 2025, with a compound annual growth rate (CAGR) of 6.7%. Memories comprise largest segment of the market share followed by logic and micro-ICs.
Initially, the rising demand of semiconductor devices was typically fuelled by a disruptive new technology. Between 1997 and 2007, rapid increases in the popularity of personal computers (PCs) boosted demand for central processing units (CPUs) and memory chips, while the broad penetration of the internet drove volume for ethernet equipment, network processors and area specific integrated circuits (ASICs). The era of the smartphone began with the introduction of the iPhone in 2007, driving demand for mobile processors, while the adoption of cloud computing has pushed growth for server CPUs and storage. Now, artificial intelligence (AI) will likely be the catalyst that will drive another decade-long growth cycle for the semiconductor sector. We expect the market for AI-related semiconductors to grow from a current US $6 billion in revenues to more than US $30 billion by 2022, a CAGR of almost 50%. Although AI-driven use cases are expected to find their way across every industry segment over time, their adoption will likely be determined by the size of investment in the technology, the pace of its development and the speed at which its benefits are realized.
These new segments emerged in recent years will further increase the market share of semiconductor industry over a period of time. Therefore, semiconductor industry will not only increase in size but also will remain indispensable part of electronic industry. Various industries in present era are heavily dependent on electronics industry and their growth cannot be imagined without electronics industry. One such industry is e-commerce which had touched a thumping mark of US $26.7 trillion in 2021. This particular industry will further go leaps and bound and semiconductor is indispensable part of this industry.
- Indian Semiconductor Market
Domestic demand for electronic goods is growing at a rapid pace as a result the Indian semiconductor industry being the sub-industry of electronic industry offers high growth potential areas. The end-use industries such as mobile devices, telecommunication equipment, information technology, office automation (IT & OA), industrial machinery, automobiles and several other industries have applications for computing in some form or other and thereby necessarily have growing demand for semiconductors. Now with the concept of internet of things (IoT) picking up momentum, the next generation of interconnected devices would further increase the demand for intelligent computing, thereby creating sustainable demand for semiconductors.
India’s share in global electronics market is very meagre. However, in last couple of years marginal improvement in the global share by India is recorded. The share has gone from 1.3 % in 2012 to 3.6% in 2019. This is very low as compared to other leading world economies in electronics sector. Consumer point of view the India has one of world’s largest electronics industry markets which is expected to reach a record milestone of US $400 billion. Semiconductors are also at the heart of electronics products and constitute a significant part of the total value of the bill of material (BoM). Today, India’s semiconductor demand is valued around US $24 billion and is expected to reach US $ 100 billion by 2025. The country’s semiconductor demand currently is entirely met through imports. With growing technology and the advent of IoT and 5G technology in India, the demand for semiconductor chips is on the rise. India is poised to witness a significant demand spike by 2025 driven by electronic manufacturing, IoT products and data centre facilities. Semiconductor shortages in pandemic and new geopolitical realities of semiconductor supply chains further exacerbate the need to develop trusted and reliable sources for semiconductors.
In this huge market, the contribution by India is negligible. The significant growth and market share by India in telecommunication, pharmaceutical, information technology, e-commerce, automobiles, etc., has been gained. However, the electronics industry which is the growth factor of various industries likes e-commerce, defense, telecommunication, automobiles, and pharmaceuticals has meagre share. In electronics system design India has significant share however, the chip manufacturing or semiconductor industry is the biggest weakness or gray area. Except few R&D labs like Society for Integrated Circuit Technology and Applied Research (SITAR), Gallium Arsenide Enabling Technology Centre (GAETEC) and Semi-Conductor Laboratory (SCL) no-other eco-system in chip manufacturing available in India.
- Need for Make in India Initiative
India has a very fast growing electronics system design manufacturing (ESDM) industry. India also has a strong design base with more than 120 units. According to the Ministry of Electronics and Information Technology (MEITY), nearly 2,000 chips are being designed every year in India and more than 20,000 engineers are working on various aspects of chip design and verification. Even though the country is comfortably placed in the arena of electronic design, fabrication capability lags far behind needing considerable augmentation in terms of infrastructure to stem the increasing dependence on imports.
Further, India’s digital economy is expected to reach a milestone of US $ 1 trillion by 2025 wherein major share will be of electronics and its dependent semiconductor industry. The complete import of these may exceed the petroleum and gold import. In this scenario, India will be losing huge currency degradation. Further, the opportunity of using its talented workforce to tap the potential of this particular industry and security of the nation will be lost by the India. Foremost amongst these is the urgent need to develop ecosystem related to fabrication.
- Opportunities in Recent Chip Crisis
Since anything that needs to compute or process information contains a chip, they are extremely important in our lives. And because demand for ICs is greater than the supply, there is a global shortage of them. Further due to covid-19, everything moved online, and the demand for computers surged, leading to a massive supply chain crunch. As 5G and cloud-based services grew, more chips were needed for communication platforms like Zoom and video streaming services. Also, China’s production slowdown post Covid-19 years compounded the crisis. Further, climate conditions like severe winter storms in USA and drought in Taiwan, and fire incidents resulted in shutdown of several foundries for long time apart from China-US trade war.
The auto industry felt the heat of chip shortage as most cars today use advanced semiconductors to run complicated computer systems. The shortage can be traced back to the first half of 2020, when overall consumer demand for cars declined during the lockdown. This forced chip manufacturers to shift their focus to other areas, such as computer equipment and mobile devices, which spiked in demand with more people working remotely.
The U.S. leads the world in developing and selling semiconductors, accounting for 45% to 50% of global billings, manufacturing has shifted to Asia. Taiwan and Korea account for 83% of global processor chip production and 70% of memory chip output, and the region’s lead is projected to continue to expand. This is the time for India to grab major chunk in chip manufacturing sector by taking suitable initiatives to establish number of foundries.
- Indian Efforts to Develop Semiconductor Manufacturing Eco-System
- Through State Owned Research & Development Laboratories
The idea of our own semiconductor manufacturing was conceived as early as in 1972. The committee was formed to submit a detailed feasibility report which took almost 4 years and finally detailed project cum feasibility report was submitted to Electronics Commission in 1976. After this report, the process took another 4 years to form and register a Semiconductor Complex Limited (SCL) in 1980 as Government of India Enterprise under Ministry of Information Technology in Sahibzada Ajit Singh (SAS) Nagar (Mohali), Punjab. In the same year, Area Specific Integrated Chips (ASIC) work was also started in Indian Telephone Industries (ITI) Limited for defense and space applications with 0.8 micron technology. Later in 1981, SCL signed a contract with AMI (American Microsystems Inc) to provide the technology, and factory was commissioned in 1983 at a cost of US $70 million.
In 1985, the production of 5 micron CMOS technology with a technology gap of 15 years was started at Semiconductor Complex Limited, Mohali. The target of achieving 1.25 micron technology was set by SCL to make SCL stand at par with world leaders with utmost a technology gap of 2 to 5 years. Accordingly, the production of Large Scale Integration (LSI) including 8 bit microprocessors used in calculators and mini computers was started first time in the country. Later, the production of 16 bit microprocessors and 16K Random Access Memory (RAM) were started.
After few years, SCL developed 3, 2 and 1.2 micron technology, Electrically Erasable Programmable Read Only Memory (EEPROM) and Charged Coupled Device (CCD). The entity further manufactured Very Large Scale Integration (VLSI) and VLSI based systems & subsystems for low cost digital watches, electronic clocks, calculators, pen watches, home computers, etc. The capacity of SCL was 9 million chips against a domestic requirement of 1 million chips annually at that time.
In 1989, one fine morning the leading semiconductor manufacturing unit of India caught fire and the entire production line i.e. 4” Fab was spoiled completely in couple of hours. The targets set by SCL in 1983 to achieve 1.25 micron technology was about to reach by which Indian Semiconductor Manufacturing was supposed to be at par with World Semiconductor Manufacturing were destroyed once for all. The country who was supposed to be the market leader in semiconductor manufacturing reached at a starting point. The Enquiry Commission was formed which had multiple sittings and finally made a report wherein none was made accused. The case was closed.
The Indian quest to bounce back was started once again and new Fab with 6” Wafer size and 0.8 micron technology node was commissioned in 1996 and production was started. Further, in same year 1996, Gallium Arsenide Enabling Technology Centre (GAETEC) was also started with 0.7 & 0.5 micron Metal Semiconductor Field Effect Transistor (MESFET) capabilities. Further, in 2003, the ASIC works department from ITI Ltd was taken and made SITAR (Society for Integrated Circuit Technology and Applied Research) under Defense Research and Development Organisation (DRDO). Later, in 2004, GAETEC was merged with SITAR. The merged SITAR entity manufactures VLSI and VLSI based systems & subsystems. SITAR has 2 separate fabrication facilities i.e. 6” wafer fab for Complementary Metal Oxide Semiconductor (CMOS) and 6” wafer for Micro Electro-Mechanical Systems (MEMS).
The semiconductor activities in one of the India’s oldest laboratories Solid State Physics Laboratory (SSPL) established in 1962 under Defense Research and Development Organisation were started on research and development level mainly in the areas of RF devices, optoelectronic devices, etc.,
Further, in 2011, SCL got commissioned a new 8” fab with technology node of 180 nm by TSL, Israel through an investment of ₹1000 Cr. This is the second fab situated at SCL in addition to earlier installed 6” fab. This fab was aimed to cater the need of ASICs, etc., needed in strategic applications. Further, in order to cater the need of semiconductor industry, indigenization of raw materials, equipments, parts of equipments, etc., was started at Semi-Conductor Laboratory, Mohali with the objective of progressively reducing dependence on foreign sources for raw materials, spares, subsystems & equipments used in semiconductor industry. Since start of this programme, indigenization activities have gained good momentum and efforts towards indigenous development of a large number of inputs ranging from chemicals, gases, spares & subsystems used in the process & metrology equipment have been developed.
- Through Educational Institutions
In 2019, IISc Bengaluru submitted a proposal of ₹2500 Crore for establishing a Gallium Nitride (GaN) fab for catering the emerging need of solar industry in India. Further, several Indian Institutes of Technology (IITs) have completed academic projects on semiconductor and various projects for the development of indigenous processor are ongoing. 2 commercial processors i.e. Shakti and Kalpna and one strategic processor i.e. Vikram have been successfully developed by IITs and SCL in collaboration, respectively.
- Through PPP Models
In early 2011, an empowered committee chaired by then Prime Minister Dr. Manmohan Singh was formed for identifying technology and investors interested in setting up semiconductor fabs in the country. Accordingly, based upon the recommendations of empowered committee the Department of Information and Technology invited Expression of Interest (EoI) from potential technology providers and investors for the setting up of semiconductor fab plant in India. The 100% Foreign Direct Investment (FDI) through automatic approval route was also allowed for setting up fabs in India. After exhaustive efforts by Government of India (GoI) to get EoI, total 30 applications were received in 2013. In September 2013, 2 fab projects were short listed by the committee comprising Sam Pitroda then adviser to Prime Minister of India. In March 2014, these two projects include Hindustan Semiconductor Manufacturing Corporation (HSMC) consortium of ST Microelectronics and Silterra with an investment of ₹30000 Crore to start chip manufacturing in Gujarat and Another consortium led by Jaiprakash Associates in association with Tower Semiconductor Limited (TSL) and International Business Machines (IBM) to start chip manufacturing in Noida with an investment of ₹34000 Crore were issued Letters of Intent (LoI). HSMC was backed by Advanced Micro Devices (AMD) & received ₹700 Crore from Mumbai based company. In March 2016, due to failure of Jaiprakash Associates, the consortium led by it withdrew itself from the race of setting up chip manufacturing fab. The only left HSMC consortium was given extra time to submit all the documents required to demonstration of commitment as per the LoI. Since the HSMC Technologies India Pvt Ltd inspite of repeated extension of time, the Empowered Committee constituted for the purpose of setting up of semiconductor wafer fabrication manufacturing facilities in the country cancelled the LoI issued to the consortium led by HSMC in April 2018.
In December, 2020, once again Ministry of Electronics and Information Technology (MEITY) invited EoI for setting up/expansion of existing semiconductor wafer/device fabrication facilities in India or acquisition of semiconductor fabs outside India. Proposals invited under EoI are broadly classified into 2 categories i.e. Silicon CMOS and emerging compound semiconductor like Gallium Arsenide, Silicon Carbide, etc. The submission date of EoI has been revised couple of times. Few proposals are received and are under evaluation to understand policy support required to establish a fab. In addition, GoI has launched Production Linked Incentives (PLI) Schemes in 2 rounds to attract electronic manufacturers in the area of mobiles, computers, etc. Recently, Mumbai based reliance Industries’ subsidiary Reliance New Energy Solar (RNESL) acquired Norway based REC Solar Holdings. Tata Group which has already forayed into manufacturing of hi-tech electronics is planning to get into semiconductor assembly and test unit. Tata Group is in advance stage to set-up outsourced semiconductor assembly and test (OSAT) in southern states of Tamil Nadu, Karnataka and Telangana.
- Need to Re-Think
The major challenge in the growth of fabrication capabilities apart from technology and investment are the inputs like raw materials used in fabrication. These include ultrapure chemicals, specialty gases, physical vapour deposition (PVD) targets, wafers, etc. The availability of these speciality raw materials in local market is not available due to several reasons. Reliable analytical laboratories equipped with precision equipment & suitable methods capable of analyzing the quality of inputs used in fabrication are also required mainly owing to the fact that levels permissible for trace ionic impurities levels is much below parts per billion and submicron particles negligible. Likewise spares and expertise required to maintain the process & metrology equipment in good health should also be available locally. Therefore, the subsidies in analytical analysis, raw material manufacturing, tool manufacturing, etc., apart from wafer fab manufacturing must be provided by the GoI to establish a sustainable and fast eco-system.
National policy on electronics 2019 (NPE) and the PLI schemes are not enough to build semiconductor manufacturing eco-system in the country, the government shall provide more than 50% investment in this cost intensive but more revenue generating sector and also ensure the purchase guarantee of the products coming out from these established fabs for at least 10 years.
Further the supply of pure water and uninterrupted power supply are basic necessity for these industries and the availability of these must be ensured by the GoI.
Comparatively the process of chip manufacturing was started late in India. Further with great efforts India reached a surplus chip manufacturing during 80s, the entire semiconductor project faced slow start. The reason behind are the project was in the hands of someone who knows semiconductor but no knowledge of industry and then of someone else who had worked in industry but never with semiconductor. Further, the search for a suitable foreign collaboration was equally confused. Initially, Intel, Motorola, Texas Instruments, National Semiconductors, Fairchild were approached. However, all the foreign companies gave up in exasperation citing one or the other reason. With lot of difficulties, SCL finally settled with Hitachi, Japan but later Hitachi was gone out and it was not ready for chip design. The project was started with 1K memory but due to enormous delay, the contract was signed for 16K memory chips with a provision for 64K chips. The beginning faced unconscionable delays and inexcusable bungling.
Further, the fire took place in the flourishing chip manufacturing sector of the country. The single accident pushed India a long back in the quest of chip manufacturing due to lethal system. The quest for reviving was never given the due attention. As a result of it, the programme went decades back to the world scenario. In early 90s and 2000s GoI tried to revive the sector through the installation of 6” and 8” fabs in SCL. But the efforts were so unattended and unsystematic that the entire programme went back in the past. Thereafter, the efforts to revive it were put in early 2010s and 2020s. However, the world market has gone beyond reach. Indian semiconductor market needs to give exhaustive push through policies and incentives to revive it and make it capable to lead in the world market. The GoI shall not only provide incentives to the wafer fabrication and packaging but also to the allied industries like raw material manufacturers, analytical laboratories, tool manufacturers and maintenance providers.
The expertise developed in terms of electronic system design manufacturing, process development, fabrication, testing, packaging and quality apart from development of several indigenous raw materials, equipments and spares at the state funded laboratories like SCL, SITAR, etc., shall be utilised properly to develop the semiconductor manufacturing eco-system in the country. In addition, the more focus on the development of these expertises shall be given apart from looking for private players with increased subsidies to establish semiconductor manufacturing facilities in India.
S. Malik and T.S.K. Raunija, Tech. Rep., SCL-VFDQC-TR-04-20, 2020
M.J. Kumar, IETE Tech. Rev., 38 (3), 279, 2021