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The chip giants are going to India again

Jessie March 05, 2024

India has been vigorously promoting its chip industry. After several setbacks, in the recent period of time, the big factory to print the core again hot up. Therefore, Indian Union Minister Ashwini Vaishnaw (Ashwini Vaishnaw) in an interview in recent days firmly believed: "Considering the new policy in India now, almost all chip manufacturers are willing to reconsider investment in the Indian market."


On March 1, India gave the green light to three semiconductor plants, approving a total of 1,256bn rupees ($15.2bn) worth of investment in semiconductor manufacturing plants, including not only India's homegrown Tata Group, but also the familiar Renesas Electronics.


Three factories to be built within 100 days


The three semiconductor plants, one wafer fab and two sealed test plants, covering giants such as Tata, LSMC and Renesas, will begin construction in the next 100 days to manufacture and package chips for India's defense, automotive and telecommunications industries in the future:


The first plant, a joint venture between Tata Group and PSMC, is located in Dholera, western Gujarat province, with a total investment of Rs 91,000 crore (US $11 billion), which is expected to start construction within three months and is expected to have a monthly capacity of 50,000 wafers. The plant will cover a variety of mature nodes at 28nm, 40nm, 55nm, 90nm and 110nm, and the partnership with LPC will provide leading mature nodes and a broad technology portfolio.


The second plant, an outsourcing sealed test plant (OSAT) built by CG Power, an Indian Electronics company, in collaboration with Renesas Electronics of Japan and StarsMicroelectronics of Thailand, is also located in Kuchadi province. The investment amounted to 760 billion rupees ($920 million).


The third plant, a closed Test plant built by Tata Semiconductor Assembly and Test Pvt Ltd, is located in the northeastern province of Assam, with a total investment of 270 billion rupees ($3.26 billion).


This news means that India will welcome its first wafer fab.


Go to India, speed up


Since the second half of last year, the progress of the industry giants in India began to accelerate.


In July 2023, Foxconn and Vedanta in Gujarat investment $19.5 billion (about 141 billion yuan) chip factory lost in India, Foxconn announced his withdrawal from the joint venture, but this does not affect Foxconn's interest in the Indian industry.


In September 2023, Foxconn said it was working with ST to build a chip factory in India, and through this move won the support of the Indian government to expand its business in the country. According to reports, Foxconn and Italy are applying for subsidies from the Indian government to build a 40nm chip factory.


In late September 2023, Micron Technology broke ground on a $2.75 billion assembly, Test and packaging facility (ATMP) in Sanand, Gujarat, and said it would launch semiconductor chips next year. The plant's first chip is expected to be produced within 18 months.


On February 13 this year, Israel's Tower Semiconductor restarted its plan to build fabs in India, and currently Israel Tower has submitted a proposal to set up a chip manufacturing plant in India worth about $8 billion. The company plans to produce 65-nm and 40-nm chips in India, which could be used in several sectors such as automotive and wearable electronics. Earlier, Intel's $5.4bn acquisition of High Tower Semiconductor was terminated after Chinese regulators refused to approve it.


On Feb. 26, Qualcomm Inc was in talks with major chipmakers over its plans to manufacture chips locally under a government incentive program, and it was revealed that Qualcomm's total investment would surpass that of rivals such as AMD and Micron.


Us chipmaker AMD plans to invest $400 million in India over the next five years and set up its largest design center in the Indian city of Bangalore to expand its presence in the country. Applied Materials (AMAT) announced that it will invest $400 million to establish a commercial semiconductor innovation center in India to further diversify the semiconductor supply chain. At the same time, Lam Research proposes to train 60,000 Indian engineers through its "Semiverse Solution" project to accelerate India's semiconductor training and workforce development goals.


It can be said that even in the face of all kinds of difficulties, it still cannot stop the giants from going to India. Why is this?


It's a big gamble


The story of Indian core making goes back to 1984. At that time, India funded the establishment of semiconductor manufacturing company SCL, which in the 1980s had developed the process from 5 microns to 0.8 microns, the process is only a generation behind Intel. In 1989, a fire accidentally destroyed the SCL plant, and it was not until 1997 that SCL rebuilt the plant. For eight long years, India missed the golden age of semiconductor development.


Since then, overseas chip manufacturers have expressed their willingness to set up factories in India. In 2005, Intel planned to set up an assembly and test plant in India, but gave up because of the delay in India's semiconductor investment policy. Since 2012, India has repeatedly introduced chip-related incentive policies, but they have been stalled due to capital and water issues.


In December 2021, the Modi government announced the "Indian Semiconductor Initiative" and released 760 billion rupees (about $10 billion) in incentives. When the program was released, the response was lukewarm, with only five applications making it to the evaluation stage. What is more worrying for the giants is whether this is a "blank check", because Foxconn once withdrew from the Indian project because it could not get subsidies from the Indian government.


On June 1 this year, the Indian government officially announced a revised version of the Modified Semicon India Programme. This is a major turning point for Indian core making.


The revised plan aims to develop India's semiconductor and display manufacturing ecosystem and provide financial support of up to 50% of project costs, It also provided 50% capital expenditure financial support for the establishment of compound semiconductor, semiconductor assemble-Test-mark-Package production (ATMP) and semiconductor packaging and Test Outsourcing Work (OSAT) facilities in India.


It can be seen that the above-mentioned Renesas, Italy, and Micron to India manufacturing plants are within the scope of the above New Deal. In other words, the chip giant is actually running to subsidize.


What else is there to go to India for besides subsidies? First, the cost of employing people is low, and the second is that there are many chip related talents. Nearly 2,000 cutting-edge chips are designed by more than 20,000 Indian engineers for global companies every year, and the current chip design talent pool in India accounts for 20% of the total number of semiconductor design engineers worldwide. More importantly, now that geopolitical conflicts have a big impact on the industrial chain, foreign countries are seeking more options.


Chua Chee Seong, president and managing director of Infineon Asia Pacific, has said that India is rapidly growing in importance, as well as being a valuable source of skilled workers - the company already employs 2,000 chip designers and software developers there - the country is also becoming an important end market for automotive and consumer electronics chips.


Of course, trying to make money in India, it's not that simple. First, there are limitations of resources, water and electricity are big problems; Second, the foreign investment business environment is worrying, India's business environment is complicated, with cumbersome administrative procedures and regulations; Third, foreign semiconductor cooperation has been suspended repeatedly; Fourth, the supply chain transportation efficiency is not high; Fifth, Vietnam and other places have competition with India, and India is not the only choice.


If you want to make money, you must be bold, and this is undoubtedly a big gamble for foreign chip giants.


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