Indian election results were announced on May 16 2014.Nation was cheerful to welcome a
new leader to Delhi durbar (an elite cliques dating back to Mughal era). He was
called by working class voters
as “incorruptible outsider who
would impose discipline”. Industrialists, entrepreneurs, engineers who got
lured by his pre-election speech, believed that he will bring massive mandate
to introduce economic reforms leading to reawakening of Indian economy. After 70 days from his swearing in, chorus of
disappointment came from intellectuals who advised him during pre-election campaigns.
To counter these concerns, he gave another attractive speech from “Redfort” on
the eve of 68th Indian Independence day saying “From ramparts of the Red Fort, I would
like to call people of the world to 'come, make in India'. Come here and
manufacture in India. Sell the products anywhere in the world but manufacture
here...we have the power, come I am inviting you”. If Indian Government wants to bring back these
dreams into reality, government needs to bring back neglected electronics
hardware manufacturing industry into mainstream. Electronics semiconductor
manufacturing industry has both commercial and strategic advantages for the country.
This article explores the same
India : Brand Software, Neglected Hardware
On April 22, 2014, Indian IT services company
“Tata consultancy services” (TCS) made a landmark for Indian IT industry. Company had peeped into the prestigious league of top 10 global
IT services companies for the first time. Other Indian IT services companies like Infosys, CTS are globally
giving tough competition to IT giants like IBM, Accenture. Indian Cities like
Bangalore, Hyderabad have well established R&D centers, to propel
innovative software designs for multinationals like Microsoft, Intel, Google,
Cisco etc.. But when it comes to hardware, India is far behind. India’s lag in
the hardware manufacturing industry will have significant impact for the Indian
economy in the coming years. May be but how?
With smartphones to semiconductor chips, India’s
electronic goods import stood at staggering $33.5 billion. That’s more than
it spent on any imports except oil and gold. Almost
all kind of electronic gadgets like smartphones, tablets are released in Indian
market immediately after their release in U.S and European markets. India’s
large middle class procures more and more digital devices every year, and this
trend going to accelerate in coming years. These heavy import phenomena lead
more strain to Indian economy and its currency. By making few necessary electronics
goods inside India, these strain can be partly avoided But Electronics
manufacturing industry in India is not in good state, absolutely in poor state.
Its inefficient labor markets,
unreliable power supply, and creaky transportation infrastructure have
discouraged investments from even multinationals to start new electronics
manufacturing industries inside country.
Even companies that assemble TV’s like Samsung, LG import most of their
valuable chips, equipment from outside leaving behind the electronics
manufacturing industry in very low end.
Semiconductor Industry Setup
Globally semiconductor industries with sales of around $300
billion have 3 tiers, Companies like Intel, Samsung, Toshiba, IBM not only
design, also make the chips that end up in the devices they make.
This kind of strategy not only helps them to yield high profits, also prevent their
rivals from commoditizing the chips. These companies form the First tier. Second
tier are the “fabless” designers of chips, who outsource the manufacturing to
the specialized chipmakers. Broadcom, Qualcomm, NVidia belongs to these
tier. “Foundries” which have
established huge capacities for a variety of chips that they produce for
clients, form the last tier. Companies such as Taiwan Semiconductor
Manufacturing Company (TSMC), the biggest independent foundry, and Global
foundries are in this league.
India’s Dilemma
As a Late entrant, India faces several obstacles and dilemmas in
entering this highly complicated, expensive chip making industry. Silicon wafer
is one of the important components in the semiconductor manufacturing
process.
Silicon wafer is a thin slice of semiconductor material, such as a silicon
crystal, used in the fabrication of integrated
circuits and other micro devices. Using
these wafers a manufacturer can place anywhere from 10 to several hundred semiconductors or ICs onto it, which are later cut out and used in computers
and other electronics. Depending on the size of the Silicon wafer, the sophistication lies.
The current state of the art is at 300 mm, however the global fab plants
planning to move to 450mm by 2015-2016.
So dilemma with the Indian setup is that
whether it is worth to start late or now. If now then how much Indian fabrication
industry will gain from the internal Indian projects. Good Profits associated with
these fabrication industries can be achieved, only if the plants are loaded
more than 70% of the total capacity. If anything less than this, it will end up
in huge losses. Current estimates say, Indian electronic products can hold to
mere 30% to 40%, catering to the needs of low end tablets (India Manufactured) like
Akash and other secure telecom products. In addition to this, every year the technology
with which number of transistors accommodation inside the chip increases as per
the famous Moore’s law. Due to this it will add more benefits like small size,
less power consumption, more advanced functionality. Industry experts say
planned Indian setup can start from 65nm to 45 nm. Though 65nm to 45nm is
outdated technology (latest technology is 22nm to 14nm), it can cater well to Indian
electronic products need within next 5 years.
Chip fabrication industry is a gigantic project,
which needs intervention of government at multiple levels. Backbone of the
fabrication plant installment is its initial funding. As per 2013 statistics,
building a next generation wafer fab was estimated to be $10 billion. This
massive initial investment can be achieved by means Public-Private partnership.
In India too, private investment along government subsidies and incentives will
play a major role in the success of the project
