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Dholera chip fab to drive scale, local value across industries


This move will also help establish a semiconductor supply chain, with global chip companies entering India, bolstering local chip production and subsequently increasing manufacturing capacity, they added.

On 29 February, the Union Cabinet, chaired by Prime Minister Narendra Modi, approved the proposal by Tata Electronics, and its Taiwanese partner, Powerchip Semiconductor Manufacturing Corp. (PSMC), to set up a chip fab in Dholera.

Union IT minister Ashwini Vaishnaw told the media that the chip fab is expected to hit the floor within three years. The facility, with an investment of 91,000 crore, is projected to produce 3 billion chips annually, in 28 nanometers (nm), 50nm, 55nm, and 90nm ‘nodes’, Vaishnaw added.

Experts said the move could mark the beginning of India’s evolution as a market that not only produces components, but also manufactures indigenous products. “Almost everything is imported today. Now, at least for mature node requirements in automobiles, washing machines and white goods, semiconductors produced in India will be used domestically,” said Ajai Chowdhry, cofounder, HCL.

According to Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA), the true impact of this initiative will be realized through the growing scale of electronics manufacturing in India. “The key factor here is scale, which may not necessarily provide net value-addition, but will significantly contribute to gross value addition in electronics manufacturing.”

“For instance, in a $300 billion market, if we achieve $60 billion in value addition, it will represent local value addition of 20%. In contrast, an $80 billion market would yield $32 billion in local value addition—a share of 40%. Achieving 20% addition is crucial because India’s aim is to become a major-scale electronics manufacturer with capabilities across all sectors,” he added.

The node size indicates the size and level of advancement of a chip. For example, the latest generation Apple laptops use Taiwan Semiconductor Manufacturing Co (TSMC)’s 3nm node, making them one of the most advanced commercially available chips today. 

The older nodes which will be produced at the Dholera plant are “mature” nodes, which have widespread applications across automobiles, defence, space engineering, consumer appliances and networking infrastructure industries, among others.

The Micron facility in Sanand has already attracted five key supplier companies to India, said Vaishnaw. “As the market develops, more and more suppliers will come to India, thereby increasing development of the local semiconductor market,” he added.

“So far, the value addition in domestic manufacturing was primarily from assembly, testing and packaging. Now, components will be included in domestic value generation, such as memory modules. Some amount of peripheral logic will come under it, too,” said Rajeev Chandrasekhar, union minister of state for IT, in a press briefing recently.

The Dholera facility follows US chipmaker Micron’s assembly, testing, marking, and packaging unit in Sanand, which was the first project to have been approved under India’s semiconductor PLI scheme.

“Over time, there will be some value addition that will increase as a consequence of the local semiconductor ecosystem. Through PSMC and Renesas (a 7,600-crore assembly, testing, marking and packaging facility with CG Power in Sanand, Gujarat), value addition in automotive and industrial electronics, as well as sensors, will go up significantly once the project is approved,” Chandrasekhar added.

According to a report by market researcher Counterpoint, published on Wednesday, China, the world’s largest electronics economy, made significant strides towards achieving self-sufficiency last year with investments in manufacture mature node chips, similar to what India’s first commercial fab will produce. This led to a 31% year-on-year increase in semiconductor demand in China. The report also highlighted that one-third of all chips produced globally, were supplied to China due to the scale of its electronics market.

China’s electronics imports total $650 billion, and India could emerge as a significant player to meet global demand as it increases capacity, said Mohindroo.

“All said, unless we start making products in India, the semiconductors won’t be purchased locally. To do this, the Centre has set-up a task force to make India a hardware product nation. This task force is working on identifying which products should be made in India, in terms of systems to chips,” Chowdhry added 

ICEA’s Mohindroo concurred. Industries beyond mobile phone and laptop manufacturing are “very significant consumption items”, he said. “Most of our electronics and appliances do not require the latest nodes, and our attempt is to build foundational industries. Cell plants for battery assemblies are coming up. We’re also trying to localize PCB manufacturing. Display manufacturing is also being localized, besides looking to localize manufacturing passive components.”

 

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Published: 06 Mar 2024, 09:12 PM IST



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