Spike Narayan is a seasoned hi-tech executive managing exploratory research in science and technology at IBM.
On Aug 9, 2022, the President of the United States signed the Chips and Science Act to bring semiconductor manufacturing back to the US over time but with a sense of urgency. The Chips part of that Act totals about $52 billion which is aimed at bolstering research and manufacturing of next-generation semiconductors.
All of this came about when our supply chain woes started hitting multiple industry segments all at once putting a spotlight on our over-dependence on chips manufactured overseas. That combined with the geopolitical developments this year in Russia and Ukraine and the military activity in the Taiwan straits showed how fragile this foreign dependence can be. As reported by Semiconductor Engineering many companies are ramping up their investments in the US.
According to that article, that same day that the President signed the Cops Act Micron touted a $40 billion investment through to 2030, which it expects will create 40,000 American jobs. “This legislation will enable Micron to grow domestic production of memory from less than 2% to up to 10% of the global market in the next decade, making the U.S. home to the most advanced memory manufacturing and R&D in the world,” said Micron President and CEO Sanjay Mehrotra.
The day earlier, GlobalFoundries and Qualcomm announced they are more than doubling their existing strategic global long-term semiconductor manufacturing agreement, previously entered into by GF’s and Qualcomm’s respective subsidiaries. The agreement secures wafer supply and commitments to support U.S.-based manufacturing through capacity expansion at GF’s most advanced semiconductor manufacturing facility in Malta, New York.
The sudden interest in onshoring chips technology is seen in many countries. India and many European countries are also announcing significant investments to reduce foreign dependence. India has announced that it will spend nearly $30 billion in electronics and semiconductors in the coming years. The European version of the Chips Act is likely follow shortly where the EU will likely address semiconductor shortages and strengthen Europe’s technological leadership. It will mobilize more than € 43 billion of public and private investments and set measures to prepare, anticipate and swiftly respond to any future supply chain disruptions, together with Member States and our international partners.
In the wake of the Chips Act a Japanese chemical manufacturer has indicated that they will triple the production, in the US, of materials for the semiconductor industry. Within the last month alone between the US, India and the EU we have seen new investments of $125 billion. Many more countries will no doubt follow suit this year. With this tsunami of new investments, the supply chain landscape is expected to change dramatically this decade.
According to the Economic Times the Indian investment of ~$30B will target restructuring the IT industry and build up a semiconductor supply chain to ensure it is not “kept hostage” by foreign providers. This is exactly the same fear that is driving similar investments globally. This Indian investment initiative is aimed to boost local production of semiconductors, displays, advanced chemicals, networking, and telecom equipment, as well as batteries and electronics.
In this article, Gourangalal Das, director-general of the India-Taipei Association is quoted as saying that “there is a rise in demand for semiconductors and that India’s chip demand is expanding at a rate roughly double that of the rest of the world. By 2030, India semiconductor demand will reach $110 billion. By that time, it will be over 10% of global demand.” Das goes on to say that “unlike the United States and the European Union, who want to bring in some of the most cutting-edge chip production, India wants to bring in more “mature” chips”.
India has, on many previous occasions, attempted to address the absence of a semiconductor fab in India and each time it went nowhere, or we can say the will was not really there. I would say that like the US and the EU, India was getting comfortable and complacent with the globalization of many industries including that of semiconductor chips supply.
The pandemic, geopolitical tensions and the resulting supply chain issues have brought these issues into sharp focus and, I believe, there is now the will to do something about it. The issue is not merely about over dependance on Taiwan or China but it is about the lack of an entire ecosystem that surrounds chips manufacturing. I view this infrastructure needs as falling under multiple categories.
The first is needs like energy, water, materials, etc. which, in my opinion, is necessary but not sufficient. Assuming India gets past these basic needs with sufficient investments and incentives we get to the next level of infrastructure which is the talent pool. India has made tremendous leaps in this area and we have a relatively large engineering talent pool that only needs some modest retraining to get them ready for the semiconductor and other upstream industries that are part of the supply chain to the chips factories.
The next higher level of the infrastructure are various key industries that enable the semiconductor industry. These include chemical companies that make and supply the materials needed for semiconductor manufacturing, chip design, layout and verification capabilities, test and packaging (assembly) to name a few big line items. Of these, India has a rather robust chemical industry and can move into this space with some encouragement.
India is also well positioned in the chip design space as the large global EDA (Engineering Design Automation) companies like Synopsys, Mentor Graphics and Cadence Design Systems have large footprints in India already. This has created a well-trained workforce for this enabling industry.
Finally, the test and assembly infrastructure are weak. I would assume that a chunk of the initial $30 million investment will go to building up this capability. This test and assembly or packaging is a good way to gain entry into the chip space because unlike the semiconductor manufacturing factory the demands for test and assembly are more modest. As an example, the chip manufacturing factory floor has a very high clean air requirement while the packaging sector is far more forgiving. The cleanliness is classified as the number of particles greater than 0.5 micrometers in a cubic foot of air sampled. It is common for the state-of-the-art fabs to be Class 10 (no more than 10 particles bigger than half a micrometer in size).
In contrast, a test and assembly factory can be Class 10000. This has huge implications on construction costs and air filtration costs. Similar requirements are there for liquids and solvents that come in contact with the silicon wafer during the manufacturing process.
On a different note, while India has been helping with the EDA aspects of chip technology, it has been mostly engaged with chips designed in the US. This must change as India will need the indigenous intellectual property for security reasons. To this end I want to draw the attention of our readers to a significant “India Designed” chip effort.
IIT Madras recently created India’s first microprocessor called “Shakti”. This chip may soon power your mobile phones, surveillance cameras and smart meter per an article in the Times of India. This article also mentions that Shakti, designed, developed and booted by the Indian Institute and with a microchip fabricated in the Semiconductor Laboratory of the Indian Space Research Organisation (ISRO) will reduce dependency on imported microchips and the risk of cyber-attacks making it ideal for communication and defense sectors.
In summary, there is a great push globally to change the supply chain landscape for semiconductor chips and many countries are vowing to invest significant resources to reduce foreign dependence on chips. For countries that already have an ecosystem to manufacture these devices it is only one of increasing the capacity but for countries like India where this infrastructure is lacking it will be an uphill task to create this capability. That said, there is now a greatly increased focus to address this issue and the initial $30 billion investment by India will help jump-start the industry.