In the traditionally cyclical business of chips, the past year saw an unusual cycle.
Semiconductor demand shot up, its supply was squeezed, and mixed signals from the US-China trade war sent chip companies into an investment overdrive. Between South Korea, the US, and the EU alone, governments have pledged $640 billion to set up new fabrication plants, or fabs.
But even before this super cycle fully unfolded, India had duly scratched its 20-year itch. A new semiconductor manufacturing policy was notified notified MeitY SPECS Guidelines Read more in April 2020, and an Expression of Interest (EOI) for setting up fabs was floated floated MeitY EOI Read more in December.
The EOI deadline has been extended twice, and every few weeks, news breaks that some of the biggest names in chip manufacturing, from Taiwan Semiconductor Manufacturing Co (TSMC), to UMC, Intel, Infineon, and Texas Instruments, have shown interest.
Sources close to the ministry say 19-20 entities have thrown their hat in the EOI ring, though most are private equity and financial investors.
“Everyone wants a piece of the pie except the companies that are actually going to set up a fab. It’s like the investors are in the queue, and tomorrow, if any foundry or chip company raises their hand to actually do it, these guys will come forward with money and equity proposals,” says a consultant in Delhi who is privy to these conversations. Foxconn, an end user of semiconductors as the world’s largest electronics manufacturer, is surprisingly in the queue for setting up a fab and “is agreeable to the government”.
Reportedly, Abu Dhabi-based Next Orbit Ventures, representing a consortium of investors, has filed an application. Invest India, the agency canvassing for this project, cancelled an interaction with The Ken at the last minute and did not respond to emailed questions. Foxconn, Samsung, TSMC, GlobalFoundries, and Intel did not respond to questions.
The economics of fabs is not for the faint-hearted. In the last 20 years, the number of cutting-edge semiconductor manufacturers has reduced from more than 25 to three—TSMC, Samsung, and Intel. The trio has already announced eye-popping investments for expansion or new fabs. Having mulled outsourcing its manufacturing recently, Intel is now doubling down on building fabs in the US. The market leader in high-performance processors, TSMC is spending $28 billion this year alone to maintain its lead.
In the larger scheme of things, India figures nowhere. Its absolute lack of ecosystem ecosystem For any semicon manufacturing, a functional set up of companies doing assembly, testing, marking and packaging (ATMP) is a basic requirement.