Next two years are crucial for India’s semicon plans: Ashok Chandak, President of SEMI India and IESA

Access to critical components in the semiconductor industry, such as silicon wafers is a challenge for India’s nascent semiconductor manufacturing industry. Ashok Chandak, President of SEMI India and India Electronics and Semiconductor Association (IESA) said the association is working on a supply chain management plan to address this issue while working with associated industries on this. Chandak said that incentives from the government would help in bridging the gap in getting the raw materials while global companies can also be encouraged to set up their operations in India.

India lacks adequate access to essential raw materials and imports silicon wafers, high-purity gases, etc. Will this raise costs and make India semicon unviable?

No, it is understood that these are the factors that increase overall cost economics and creates a “disability” for Indian industries. We have to depend on process technology, the manufacturing excellence or some of the raw materials which are not available. That is why the Indian government is putting incentives on the table, 50 per cent of the capex by government and some additional support of up to 10-20 per cent by state governments. We are telling industry to get started even if your raw material cost is a bit expensive.

So, we have a disadvantage, but with the government funding that disadvantage is addressed initially for X years. The industry needs to think how they will sustain beyond these years. IESA is working on a plan called the supply chain management and we have mapped several materials, chemicals required and started the dialogue with various other associated industries that they also start developing those things. A lot of global companies would be willing to come and set up their operations in India. Rather than importing everything from China, Taiwan, etc, even those companies themselves may be doing the manufacturing in India.

Tata Group is setting up a fab unit in Gujarat but they can’t find skilled labour. How do we address this issue? 

India does not have a manufacturing setup so we don’t have the trained manpower available. So multiple things can be done: companies like Tata that have their own collaborator can send part of their labour force to the collaborator for training or the collaborator can send trainers to India to train the workforce. Additional training outputs will also come up. Semi India has already started doing work which is called the workforce development where the online professional development courses are getting deployed. We did two sessions already at IIT Guwahati and IIT Gandhinagar. Companies wanting to set up manufacturing operations in India will have to take steps on both these fronts.

But in terms of creating sufficient workforce, do you have any timeline in mind? 

My view is next two years are going to be crucial. Several institutes have to modify their course curriculum to include manufacturing-related programmes and some of the institutes need to tie up with global companies for training. Of those, some of the people would be interested in manufacturing jobs. That work has already started and it will move forward in next two-three years. We would see that additional workforce is created, that is competent enough to take manufacturing-related jobs.  

US has already come up with a lot of policies with the CHIPS Act. Do you feel that this Make-in-America is going to counter Make-in-India?

It is definitely going to counter Make-In-India just as it will affect any other country’s plans because a lot of chip companies are headquartered in the US. In fact more than 50 per cent of chip manufacturing is by US-based companies. So, they are the dominant player. Last year, the global semiconductor market was $650 billion and more than half is supplied by the US-headquartered companies. However, they do most of the wafer manufacturing or assembly outside of the US. The current President and administration is pushing many companies to return to the US for this and invest there. Obviously, that would impact ambitions of any other country including India as we are looking for manufacturing activity in the country. As for the extent of the impact, the semiconductor market is going to grow beyond $1 trillion by 2030, as per forecasts. It may go even like more than $1.1 trillion. As the market grows there is a potential opportunity for everybody and India has to grab a part of it. Even if the manufacturing is moving to the US, it will not be 100 per cent. There will be something outside the US, and we will have to see how we attract the players and support growth of that portion so that India takes a pie of that total market actually.

But in terms of us having a game plan, do you feel our goals will be pushed back by a few years? 

No. I don’t see our goals being pushed back. Some of the big-time companies like NVIDIA are committing to that side but as a market pie, it is still feasible enough. India should be able to attract part of the business opportunity. It’s just that it becomes challenging to attract companies because many American firms are being asked by their government to set up operations locally.

Most players coming to India are interested in designing and testing. How do we get more players to go into manufacturing? 

That’s a valid point. Most of the global companies so far have committed to India mainly on the design side as they see India has got a chip design/software development/technology development talent. That is one of the positive signs which builds India in terms of the talent pool. On the manufacturing side, the biggest issue is India’s own demand which will increase substantially to about $103 billion by 2030. So, there is sizable demand in India itself which is one of the carrots for companies to invest. There are also several companies who have understood the Indian business model, skilling and competence which helps us compared to Malaysia, Vietnam, Philippines. Further, representatives from design centres of global multinationals keep visiting in India, so we have visibility. Most importantly, Indian corporates are showing a lot of interest in getting in manufacturing as they see a sizable opportunity inside and outside India. Indian corporates are sensing the opportunity and that is why you see there is a commitment by Tata, Murugappa Group, HCL Tech and Foxconn tie-up. There are a couple of other smaller projects such as RRP in Mumbai, Suchi Semicon in Surat, Polymatech in Chennai and RIR Ratan Shah in Odisha. These are clear indicators that Indian corporates are also rising up to seize the opportunity unfolding in this sector. Parallelly, there is a concept to do a fab-less design ecosystem or a product creation. Through this scheme, the chip design start-ups are getting a lot of support in terms of the expensive tools, funding to create their own product designs.

Before the Union Budget you said that there needs to be an increase in the PLI scheme for IT hardware. What was your reaction when the Budget came out?

In the Budget so far, they did not announce any second version of the Semicon India programme. Initially, $10 billion was allocated. Beyond that the next version has not yet come. We have heard Union Minister Ashwini Vaishnaw and also Secretary Krishnan stating in multiple forums that they are working towards the second part of the incentive programme now, which is under consideration. So, that second version of the incentives amount is awaited. Incentives are a must right now considering that we do not have a very well established ecosystem to do the manufacturing activity. Without incentive it would have been impossible for us to get the semiconductor manufacturing moving into the country.

US has now again opened up to the idea of China chipsets. So what does that mean for India?

Before tariff, US was still selling to China, which in turn was selling anywhere it wanted. India’s Semicon programme was planned with that scenario in mind. If US puts more restrictions on China, that is an advantageous position for countries like India surely but even if it does not happen, we are just back to the situation four-six months ago. We don’t know what will finally transpire between China and US. It looks like that there is still a tussle between the two countries. Things will not be worse than four-six months ago considering they recently tightened the rare earth minerals and materials which created problems for many countries.

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