CIOInsider India Magazine

The story of semiconductor shortage in India is spewing misfortune in the form of production cuts and delays in manufacturing. Reliance Jio’s JioPhone Next’s diwali launch gets postponed, Maruti Suzuki witnessed 60 percent production decline, Mahindra & Mahindra (M&M) went on ‘no production days’. A lot of global chip manufacturing companies fear that the chip shortage for mobile devices might remain the same for the next six months, adding that the automobile sector of the country is also pessimistic.

Clearly, the nation is looking to build a semiconductor ecosystem of its own and is encouraging companies promising to offer multi billion dollars to construct semiconductor plants. Tata Group has come forward to breathe life into setting up a plant in three states in the country and is already in talks with the three.

Tata Group thinks Three States for its Semiconductor Plant
Upon the bleak reality of India regarding chip shortage, the salt to automobile conglomerate is now looking to plunge $ 300 million in its new endeavour of setting a semiconductor assembly plant as well as testing unit in three states.

In fact the company is already in negotiation of the idea with the three states, Karnataka, Tamil Nadu and Telangana scavenging land to nest its facility.

It has looked at a number of potential locations for the manufacturing, with a decision expected next month. A foundry-made silicon wafer is packaged, assembled, and tested at an OSAT plant before being turned into finished semiconductor chips.

"While they (Tata) are very strong on the software side of things, they want to expand their portfolio, which is crucial for long-term success," the business claims.

Intel, Advanced Micro Devices (AMD), and STMicroelectronics are all potential clients for Tata's OSAT business.

The facility is anticipated to open late next year and may employ up to 4,000 people, according to the source, who added that the availability of competent labour at a reasonable price was critical to the project's long-term survival.

"Once Tata gets going, the ecosystem will change”. As a result, the organization emphasizes the importance of finding the suitable location from a workforce aspect.

This is not only a significant move for the organization but for the entire nation in upholding the government’s ‘Make in India’ initiative concerning electronics manufacturing. As this has already fetched the nation a position of being the second largest smartphone manufacturer in the world.

Likewise, the organization is no less since it has been showing interest from automobile to aviation especially its top software venture, Tata Consultancy Services (TCS), clubbed with its plans of throwing cash at high-end electronics and digital businesses.

On another page, the organization is areadly brewing efforts in building a high-tech electronics manufacturing facility in Tamil Nadu.

Multi-Billion Dollars to Promote Chip Making in India
The Indian government is working on a multibillion-dollar capital support and production linked incentive (PLI) plan to encourage semiconductor manufacture in the nation. Senior government officials are engaged in talks with some of the world's leading semiconductor companies, including Taiwan Semiconductor Manufacturing Co. (TSMC), Intel, AMD, United Microelectronics Corp., and Fujitsu.

The Prime Minister's Office is coordinating and closely monitoring efforts to bring semiconductor makers to India. Several departments have been tasked with developing an appealing policy to attract businesses to the country. The government is likely to provide financial assistance for capital expenditures as well as tariff reductions on certain components. Additional benefits may be available via government programs such as the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the PLI.

While India does not develop semiconductors, it has been relying on imports to meet its needs. Therefore, its semiconductor demand would reach over $100 billion by 2025, up from the current $2 billion.

Next, the Union Budget of 2017-18 boosted the funding for incentive schemes such as the Modified Special Incentive Package Scheme (M-SIPS) and the Electronic Department Fund (EDF) to $111 million in order to strengthen the semiconductor industry.

The government updated the M-SIPS by granting new investor incentives worth $1.47 billion in order to encourage more investment in the industry, generate jobs, and reduce reliance on imports last year.

Then followed by MeitY (Ministry of Electronics and Information Technology) intending to change its regulatory framework in order to expand the industry by providing initial financing in order to attract more private investors and propel India to become a global semiconductor hub.

Telangana's government plans to open T works, India's largest prototyping centre, in Hyderabad to serve as a semiconductor prototyping centre.

The federal government has established an empowered committee for manufacturing in high-tech areas, which will be chaired by the minister of Commerce and Industry and include prominent Indian industry figures such as Tata Sons chairman N Chandrasekaran, Bharat Forge Chairman Baba Kalyani, Mahindra Group managing director and CEO Pawan Goenka, Zoho Corp CEO Sidhar Vembu, and semiconductor expert Anshuman Tripathi.

However, back in the days, India’s efforts in this sphere have failed many times, mostly pertaining to the dislike of governmental incentives by other countries.

Intel expressed interest in establishing a fab factory in 2007, but chose China and Vietnam over India due to the Indian government's unattractive incentives. The government approved two fab projects in 2013, one by Jaypee with a Rs 26,300 crore investment and the other by Hindustan Semiconductor Manufacturing Corporation. Both were unable to provide proof of funding. The government issued an EoI in 2020, asking applications to build semiconductor fab plants and the reaction for this has been lukewarm.

Yet, Tata Group’s entry into the sphere is shining a ray of hope with its plans of building a semiconductor assembly unit and testing plant in three Southern states of India.

“Within a few years, we should have something like a prototyping level chip unit in working order, if not a full-fledged production-level chip manufacturing unit”, says Dr. Abhisek Dixit, Professor, Department of Electrical Engineering, Indian Institute of Technology, Delhi.