India's semiconductor mission moves into a crucial phase

As the ISM moves into its execution phase, the government must remain supportive and vigilant to ensure companies stay committed to their proposals

The ₹76,000 crore India Semiconductor Mission (ISM), recently announced by the Ministry of Electronics and IT (MeitY), is a resounding statement of intent by the government to gain a foothold in the $553 billion global semiconductor market.

The ISM seeks to create an end-to-end semiconductor and electronics cluster ecosystem. It will support two silicon wafer fabs, two display fabs, and fabs for compound semiconductors, photonics, and sensors. There are also schemes to promote upstream activities such as Outsourced Semiconductor Assembly & Test (OSAT), Assembly, Testing, Marking, & Packaging (ATMP), and chip design. There are also efforts to catalyse industry and academia to create a talent pool of 85,000 trained semiconductor professionals required by the industry at all skill levels, from technicians to researchers.

The response deadline was for silicon and display fab proposals. The MeitY received five proposals – three for silicon fabs and two for display fabs.

Also Read | Five firms submit Rs 1.53 lakh cr proposals to set up semiconductor, display plants

The silicon fab proposals received are for 28 nm - 65 nm nodes with a capacity of approximately 120,000 Wafer Starts per Month (WSPM). In comparison, the world's top five fab companies all have manufacturing capacities of at least 1.5 million WSPM.

In the fab ecosystem, the strength of the venture is revealed by its technology partners. Partners with core expertise in wafer foundry operations are critical to the success of any fab venture. "There must either be a global semiconductor captive company or independent wafer fabs like TSMC in collaboration (with the local partner). There has to be a tie-up for technology," says Sanjeev Keskar, semiconductor veteran and CEO, Arvind Consultants.

Most of the current applicants are unclear; they haven't publicly revealed their technical partners with fab expertise. The consensus of experts interviewed is that while these companies are successful in their respective domain areas and have investment capability, they lack core expertise in wafer fabs.

A profile of the applicants and expert opinions on their bids might answer some questions about what they bring to the table and their plan to achieve success.

Vedanta

Vedanta submitted two fab proposals: a solo bid for a display fab and a joint venture with Foxconn for a 28 nm CMOS fab.

Primarily a mining and minerals company, Vedanta made an abortive attempt to set up a display fab in 2016. In 2017, it acquired a majority stake in AvanStrate Inc., a Japanese display glass substrate maker. Under the aegis of Sterlite, one of its subsidiaries, they formed Twinstar Display Technologies. However, the project was abandoned in 2019, owing to delays from the government.

Vedanta expects the display fab unit to become operational by 2024. "They had done their due diligence and were finalising the land. It was never put on the backburner. So any deals they were negotiating earlier could be rejuvenated. Commencing production shouldn't be a problem for them," says Vivek Saxena, a semiconductor-industry veteran and former CEO of Global Accelerator.

Also Read | Vedanta to invest up to Rs 1.49 lakh crore in semiconductors in India, roll out by 2025

Foxconn will likely invest around $118 -$120 million for Vedanta's chip fab venture for a 40 per cent minority stake. Foxconn has significant internal needs for chips and displays, as well as strong design capabilities, which might explain the disproportionately high stake. However, neither Vedanta nor Foxconn have fab expertise and need to bring technology from outside. "Foxconn is not a fab expert; it's an ECAT (Electronic Card Assembly and Test) expert. What is the underlying technology that Foxconn is going to bring?" questions an industry expert.

"Vedanta says Foxconn has 28 nm IP, but this is usually related to design libraries. What you really need is the detailed technology, the various manufacturing steps. It isn't clear if they have a technology partner lined up or are still looking for one," says Arun Mampazhy, a semiconductor veteran and analyst.

During a recent webinar, MeitY minister Ashwini Vaishnaw stated, "These are very serious players, especially Foxconn, they say we don't need a market, we will consume everything that we can produce in five fabs". He also mentioned Innolux, a name hitherto not publicly announced in the proposals. Given their proposed wafer fab venture with Foxconn, it is likely that Vedanta is collaborating with InnoLux Corp, a Foxconn subsidiary, in the display fab proposal.

InnoLux is the world's third-largest display maker, supplying to companies such as Toshiba, Samsung, and Tesla. Pranav Komerwar, India CEO of Vedanta's Electronic Display and Semiconductor Division, deferred to the advice of the company's PR team and declined to answer queries at this time.

ISMC NextOrbit Ventures

ISMC is a proposal by Abu Dhabi-based NextOrbit Ventures in partnership with Tower Semiconductor, recently acquired by Intel. Tower specialises in speciality fab process technologies for applications such as mixed design, analogue, and RF circuits. They focus mainly on the 65 nm node but also have a 45 nm node for logic chips.

Tower Semiconductor has been trying to set up a fab in India for nearly a decade. "Tower tried opening a 300 mm fab in India since 2012. Perhaps the government at that time did not have a clear, transparent set of policies and incentive structure. Had it taken off in 2012 or 2013, India would have a fab in production by 2018," says Arun Mampazhy. In this previous attempt, JP Group, which was to partner with Tower Semiconductor, pulled out.

ISMC engaged Frost and Sullivan to conduct a market study of technology and electronic products in India. "This gave us an idea about the semiconductor market in India and the technology node to start with. We decided to start with an analogue fab and then work on a digital fab," says Ajay Jalan, NextOrbit's Founder and Managing Partner.

A professional group also studied the logistical feasibility and identified Dholera in Gujarat. "Ours is the consortium model," reveals Jalan, who was also closely associated with the Fab City project in 2006, the drafting of India's National Semiconductor policy, and the founding of the India Semiconductor Association (ISA, now IESA).

"ISMC stands on firm ground in terms of technology partnerships, market, logistics planning and finance. It is also learnt they've formed potential tie-ups with an automobile giant and a few Government Navaratnas," says Arun Mampazhy.

IGSS Ventures

IGSS Ventures Pte Ltd (IGSSV) is a Singapore-based technology investment holding company focused on "building companies with competitive advantages in ground-breaking technologies," according to Raj Kumar, the Founder and Group CEO. Formed in 2013, IGSS's Tier 1 foundry expertise includes CMOS-compatible silicon processes on 200 mm to 300 mm wafers for logic chips, analogue and mixed-signal chips, EEPROM, SRAM, and power ICs.

Raj Kumar says, "Our core expertise is in setting up, establishing, and transforming fabs to Tier 1 foundry fabs. We have solid expertise in developing and transferring CMOS technologies, all the way to 40 nm. We also have a technology partnership with IMEC for 28nm - 65nm and 110nm for both logic and analogue and mixed-signal, which will be licensed to our India entity if selected. We have additional partnerships on loading and customised technologies with selective IDM Partners for Fab India". IGSS has two other key partners, which they are keeping confidential.

IGSS also has fab ventures in compound semiconductors and Gallium Nitride-on-Silicon. Expressing surprise that IGSS hasn't bid for the compound semiconductor fab proposal, Arun Mampazhy says, "They might (submit in the future) since these proposals are open until January 2025."

Elest

Bengaluru-based Elest Pvt. Ltd. was formed in October 2020 and lists its core business as the manufacture of electrical equipment. Elest has proposed a display fab with a projected investment of $6.7 billion, seeking $2.7 billion in support from the Centre under the Display Fab Scheme.

Little is publicly known about this company, which lists Rajesh Mehta and Prashant Mehta as its directors, founders of Rajesh Exports Ltd. (REL). With annual revenues of over $34 billion, Rajesh Exports is India's largest gold exporter and the world's largest gold processor.

Elest's other publicly announced venture is a $3 billion integrated Electric Vehicle and Lithium-ion battery manufacturing plant project, for which they have signed MOUs with the Karnataka and Tamil Nadu governments. Elest has no fab expertise; it is unclear who their technology partners will be in this project. The company has no website or online presence. Efforts to contact CEO Shyam Raghupathy and founder Rajesh Mehta over email and LinkedIn did not receive a response.

Conspicuous in their absence are the fab leaders – TSMC, Intel, Samsung, and Global Foundries. "India needs to position itself in such a way that TSMC will find it beneficial to come here. They will look at logistics and human resources, the availability of land, water, and sand. All these raw materials are abundantly available here. And the market is near. European and US companies with plants in China may shift, and India could become the manufacturing hub like Taiwan," says Shiv Turmari, a semiconductor expert and consultant. "We must show TSMC the leadership of India, the strength in numbers of people working on VLSI, the strength of our technical institutions. Yes, we don't have a foundry, but we have everything else."

IGSS's CEO, Raj Kumar, believes that the big fab companies might consider setting up facilities here once India gains some experience in the foundry domain.

Arun Mampazhy points out that we are still early in the process. "This is just the initial phase of applications. I understand the government personally approached TSMC, Samsung, and Intel, but they have already committed their efforts for the next few years in the US, Japan, and elsewhere. Without the big names coming into the fray yet, the government will have to choose from the best that's available."

"If you are talking about setting up a foundry, it has to be supported by the global market. Chip manufacturing is a mammoth business," says Shiv Turmari.

Also notable is the lack of public interest from India's conglomerates: Reliance, Tata, and Adani, which have financial heft, the capability to partner with leading fabs, and know the Indian business ecosystem. Reliance and Adani Group are focused on the green energy space. In 2008, Reliance made a failed attempt to set up a fab in Jamnagar and are not inclined to dip their fingers into it again. Tata is working in the OSAT (Outsourced Semiconductor Assembly and Test) domain. While there were rumours of a Tata-TSMC fab collaboration, there is complete silence about that at present. If Tata Group chooses to integrate vertically, they might enter the fab space in the future.

India already has numerous low volume fabs using older technology, which can be leveraged to provide expertise to upcoming fabs. Chandigarh's SCL has been handed over to the MeitY, with indications that it may be handed over to one of the private companies. It is also understood that there are plans to transfer DRDO's foundries like STARC, GATEC to private players.

Creating a successful semiconductor industry requires more than just government funds. With the flotsam of failed bids—from Tower Semiconductor, Reliance, Vedanta, and others—littering India's semiconductor technology coastline like beached ships, the apprehension of doing business in India looms large. Unless India can assure smooth sailing with ease of doing business, the hesitation will remain.

The government will now evaluate the proposals and expects to sign agreements with selected companies in 8-10 months. "Eight locations have already been shortlisted; it is for investors to take a final call," Ashwini Vaishnaw said.

As the ISM moves into its execution phase, the government must remain both supportive and vigilant so as to ensure that companies stay committed to their proposals and promise to make India's semiconductor journey a successful one.

(This is the concluding part of a two-part series. The first part can be read here)

(Choodie Shivaram is a senior journalist and researcher)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.