India's Semiconductor Journey: Still a Long Road Ahead

Observations from the Conference

• India is at least a decade, if not two, behind global leaders in semiconductor manufacturing.
• Many companies present at the event seemed unclear about their purpose for participating.
• The overall excitement for the event was notably absent, possibly due to subdued capital markets.
• The main conference tracks were full, primarily with government representatives who disappeared after lunch.
• India's primary competency today lies in OSAT (Outsourced Semiconductor Assembly and Test), which involves testing before products enter the market.

Key Participants and Developments

Despite the subdued atmosphere, a few major industry players stood out:

• Tata Electronics, Micron India, and Kaynes were the three most notable companies participating.
• A landmark tripartite agreement was signed between Tata Electronics, Taiwan’s PSMC, and Himax Technologies.
• Jabil India signed an MoU to establish a Silicon Photonics Manufacturing Unit in Gujarat with an investment of ₹1,000 crore.

Understanding the Semiconductor Assembly Process

A typical semiconductor assembly process involves multiple steps, starting from wafer production in a fabrication facility (FAB) and ending with the final packaged chip:

Wafer from FAB → Stealth Dicing → Thinning → Die Lamination → Wire Bonding → Encapsulation → Solder Ball Attachment → Final Packaging

At present, India is primarily focused on OSAT, handling the later stages of this process. However, efforts are underway to move up the value chain.

Major Developments in India's Semiconductor Industry

Tata Electronics: Building India's First FAB

• Tata Electronics is developing fabrication plants (FABS) in Dholera, Gujarat.
• The first FAB is expected to commence operations in 2026.
• This FAB will manufacture chips for power management circuits, display drivers, microcontrollers, and high-performance computing logic.
• These chips will be crucial for automotive, data storage, wireless communication, artificial intelligence (AI), and more.
• At peak capacity, the FAB is expected to produce 50,000 wafers per month.

Micron India: Facing Delays, But Moving Forward

• Micron India initially planned a large-scale rollout in 2023 but has faced multiple delays.
• Their Sanand factory is now expected to produce its first chip by late 2024—over a year behind schedule.
• Micron is investing ₹50,000 crore in two phases, with a total project value of ₹2,40,000 crore.
• The Government of India (GoI) is providing 50% fiscal support, while Gujarat state incentives cover 20% of the total project cost.

Kaynes Semicon: Expanding OSAT Capabilities

• Kaynes Semicon secured government approval in November 2024 to establish an OSAT facility in Sanand.
• The initial investment in this project is ₹3,300 crore.

Our View

India’s semiconductor journey is currently focused on integrating into the global supply chain as an OSAT hub. However, the long-term vision is to establish a strong domestic fabrication ecosystem. While the government is committed to this sector, execution will take significant time, and building a robust ecosystem will be a slow process.

Investors should remain cautious when companies announce grand plans in the semiconductor sector. While the ambitions are high, the execution challenges are substantial. Many of these capabilities being built today will remain low on the value chain for the foreseeable future. The transition from buzzwords to actual production will be long and complex.

Until then, the Indian semiconductor sector remains a work in progress.

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