“Make in India” – A Government’s Vision and a Look at the Reality
By Bettina Weiss, VP, Business Development, SEMI
In recent weeks, I have been talking to SEMI members and other stakeholders about India. Some consider any semiconductor industry development in the country a dream, others are looking more closely at current indicators of something real and tangible, trying to determine whether to get involved.
The electronics sector in India will have to satisfy a huge demand growth due to its growing economy and relatively young population. Segments that are experiencing strong demand include telecom, medical electronics, LED lighting, TV broadcast digitization and a few others. The Indian software and services industry alone has grown to employ two million people and generates $100 billion of annual revenues.
Through the introduction of the New Electronics Policy (NEP) in 2012 by the Government of India, the country aims to enable electronics hardware manufacturing capabilities and capacity. Key initiatives include:
- Electronics Manufacturing Clusters (EMCs) in eight cities around the country with state-of-the art infrastructure and capabilities from R&D to production
- Financial subsidies and tax breaks, with up to 25 percent of investment to be provided as cash subsidy, plus other tax incentives
- Preferential market access (PMA) for government procurement, giving preference to products designed and manufactured in India
- Electronic Development Fund (EDF), which is basically a venture capital fund dedicated to the electronics technology
- Standards Regime, a list of 40 electronic devices that have to comply with safety standards on a self-registration basis
- Human resource development, to address workforce development needs as a response to growing demand
And the most important initiative: Two semiconductor wafer fabs which will be built with unprecedented assistance from the government. At last year’s IESA Vision Summit, the Department of Electronics and Information Technology (DeitY)/Government of India announced with great fanfare the approval of these two 300mm fabs, along with generous incentive schemes. The semiconductor wafer fabs are seen as the key to building out a complete electronics ecosystem in the country that will deliver greater economic and business opportunity, address India’s strategic objectives of national and information security and drastically reduce the need for imports.
The fabs will be located in the state of Gujarat and in Noida, just outside of Delhi, respectively. Two consortia had already been formed to support the execution of the fabs (Fab 1: Jaiprakash Associates, IBM and Tower Jazz / Fab 2: HSMC, STMicroelectronics, SilTerra), who were all represented at the Vision Summit and spoke at length to the opportunities for India to satisfy its rapidly growing appetite for chips with its own manufacturing facilities. SEMI hosted a DeitY delegation and event in July 2014 during SEMICON West 2014 where further updates were shared, and even ardent skeptics revealed that there might actually be something real and tangible in the works. Both consortia are expected to submit their Detailed Project Reports (DPRs) – a detailed execution plan, from financing, construction to equipping and ramp-up - to DeitY by mid-March.
Then… silence. This year’s IESA Vision Summit in Bangalore in early February did not feature the fab projects at all. No update, no government or consortia representatives, no presentations. Talking to our multi-national member companies in India as well as several key stakeholders close to the government and industry, the challenge appears to be for the consortia to raise the equity and funding required to be able to tap into the 25 percent capital expense subsidy provided by DeitY. Both fabs together are estimated to cost between $8bn and $10bn, so the stakes for the consortia are high, with at least $1 billion in capital to be raised per fab. That would explain the delay.
Other concerns have focused on infrastructure and overall cost. With power outages occurring every day in India, how can you reliably run a semiconductor fab? Will the fact that pretty much all process chemicals, specialty gases and process tools will have to be imported wreak havoc on overall cost? Others worry more about the ambitious technology choices that were made* – including the choice of 300mm over 200mm – and whether they were sustainable in the long term.
However, there is little doubt that there are strong drivers for the fabs to become a reality, timing notwithstanding. Prime Minister Modi’s strong and sustained national push for “Make in India,” approved government investment “earmarked” for the fabs in the recently approved five-year budget, combined with rapidly growing demand for 3G, smart phones and tablets by a more affluent and younger middle class, and a successful history of being a low cost manufacturing center are all key indicators that India is serious.
So serious that there now appears to be a third fab in the mix. In a somewhat unexpected move, a government official from the state of Madhya Pradesh announced at the IESA Vision Summit that the state just a few days prior had approved the “Analog Semiconductor Fabrication (FAB) Investment Policy” and that an “analog fab” would be built in the state. The accompanying incentives package would include free land, reimbursement for the facility, reliable power and water at internationally competitive rates, tax breaks and other benefits. No other details were shared, which left the audience excited but also slightly bewildered, as this seemed to have come "out of the blue," without much context or seemingly any connection to the other two projects. SEMI has since learned through publicly available information (evertiq.com and cricketsemiconductor.com) that Cricket Semiconductors has signed a Memorandum of Understanding with the state of Madhya Pradesh for an analog fab to be built in the state. Total investment appears to be in the neighborhood of $1billion, which is considerably lower than the per-fab investment for the other two projects.
March 10, 2015