India chooses the fab path

Having established itself as a global destination for R&D, design, software, EDA and IP development, the only lacuna in India’s electronics food-chain is semiconductor manufacturing. This lacuna is about to be filled up. More than a dozen fabs are coming up, which are being set up by Indians as well as MNCs. SemIndia has AMD as its partner, while NanoTech Silicon India has Intel. These two companies have a capacity of 600K wafers p.a., with production starting next year. Hindustan Semiconductor Manufacturing Co. (HSMC) and India Electronics Manufacturing Corp. (IEMC) are also starting their production next year. Nest Group is investing $1 billion in memory fab. Infineon is setting up a chain of fabs in India.

The reason for the spurt in fab building in India is that that the sales of electronics goods is projected to increase 10 times in the next ten years, reaching $363 billion by 2015, of which semiconductor content will be worth $36 billion. In order to boost investment in semiconductor manufacturing, the Indian government pays up to 20 percent of the project cost through equity participation, tax breaks, or other financial incentives.

I would like to make three points here. First, China has a huge domestic electronics goods market as well as semiconductor manufacturing infrastructure. However, most Chinese fabs are either running at a loss or making only a marginal profit. China meets 90 percent of its IC requirements through imports. Second, there is a huge fab overcapacity already existing globally. Getting business to keep fabs working at full capacity is going to be very challenging. Third, to be a semiconductor power, it is not necessary for a country to have a fab. Being fabless is a business model that is growing in popularity and has fewer risks.

Now that India has chosen the fab path, what are the new opportunities opening up for designers? This supplement will discuss these.