India's Hardware Hunger - Part 1

 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 68^th 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

 Sources: Wikipedia, other electronics magazines.