As the global semiconductor shortage drags on, every tech company asks the same question: When will it end? The reality is that the chip crunch probably won’t end on a single date. Many disruptive factors continue to dog semiconductor supply chains—acute events such as Covid-19 lockdowns, extreme weather that lead to short-term operational disruptions, and structural supply chain weaknesses that have caused shortages. On the brighter side, the shortage of computer chips is also driving fresh investment into the industry as demand grows.
In a recent statement, Qualcomm President & CEO, Cristiano Amon said, “I think we are getting behind the shortage. We no longer see this as a problem. We made a prediction at the beginning of the year that supply and demand will normalise at the end of the calendar year 2022.”
Manufacturing Today spoke with Vivek Tyagi, Chairperson of India Electronic and Semiconductor Association (IESA), the ESDM knowledge partner of the nation, to know more about India’s standpoint with respect to semiconductors and how Make in India initiative is triggering a new wave in this sector. IESA is the premier Industry Body representing India’s ESDM & Intelligent Electronics industry. Through its deep connection with its member companies, IESA aims to grow the ESDM & electronics business segment in India & make India the preferred destination for electronics & semiconductor design & manufacturing. IESA acts as a trusted knowledge partner to the Central & State Governments helping device policies & incentives for the ESDM industry to help attract investments into India.
What kind of role does IESA play in boosting the semiconductor industry in India, and what is the focus?
Today in all industries, electronics or digital, semiconductors play a very important role. We at IESA divide the semiconductor applications broadly into seven different segments. The first one is automotive electronics the second one is aerospace or defence electronics, where all the modern satellite communication and military equipment use a lot of electronics, and semiconductor has the application there. The third vertical is telecommunication. Semiconductors play a very important role in 5G services. The fourth is IT products- data centre servers, laptops, and tablets. Everything is built with the application of semiconductors in consumer electronics. Whatever we use as consumer electronics we use at home, whether it’s a smart TV or setup box, wi-fi routers or digital radios, these are big applications where semiconductors are used. This includes home appliances like refrigerators, automatic washing machines, and microwaves. In short, any appliance that uses a ‘smart’ system inside has a semiconductor base bundled with the software. The most important—we can’t live without today’s smartphones. The core technology inside is a semiconductor. Smartwatches for healthcare or your fitness band all of these have semiconductors inside. Last but not least is industrial products. Industrial products also include medical equipment.
What are the key trends dominating the Indian semiconductor ecosystem?
In the Indian semiconductor ecosystem, the first and most important trend is India is consuming more and more electronic equipment. Our consumers are buying more consumer electronics. Governments and enterprise companies are consuming more and more servers for data centres. So, the trend is clear that demand for semiconductors is growing, as per the IESA study we did with the market research agency. In the year 2021, the consumption of semiconductors in India was about USD 27 billion, which will grow to about USD 65 billion in the year 2026.
The second trend we observe is that during the Covid period, even the Indian Government realized the strategic importance of semiconductors as a major raw material to any intelligent electronic equipment. The government of India has come out with a new policy, both for the manufacturing of semiconductors and incentives, as well as a design-related incentive policy for designing semiconductors in India.
How is the PLI scheme expected to impact the sector?
In the past, most electronics were imported entirely from outside India, such as Apple mobile phones coming from outside, Samsung phones and wearable devices coming from outside, and consumer electronics coming from Korea and China, the same as telecom. There was a limited consumption or demand for semiconductors in India. But now, due to the PLI scheme, there are global companies and some local companies that are starting to manufacture electronics in India. And when manufacturing equipment in India, they require semiconductors as raw materials. Now, some buy semiconductors locally in India. Initially, global companies were collecting & buying kits from their headquarters and shipping them here. But eventually, the indigenization process started to take place. Because of the PLI scheme and local manufacturing, the demand for semiconductors will grow rapidly in the next five to six years, which is visible from the semiconductor report of IESA—demand growing from USD 27 billion to USD 65 billion in the next five years.
What are your views on the recently announced USD 10 billion incentive program by the Government of India to develop a semiconductor and display ecosystem in India?
My views are very positive.
IESA welcomes such kind of scheme because, in the past, we did not see much attention to the semiconductor sector from the state or the central government. But now, there are two things. One is the Government of India came out with a ten-billion-dollar incentive scheme. Secondly, the central Government has also set up an India semiconductor mission or ISM or entity setup within the mighty ministry of it and electronics. So, it’s clearly a welcome and positive step because this will now have a dedicated body to look at semiconductors in India, and also these incentives are one of the best incentives in the world because, as per this policy, if anybody is coming forward to set up a semiconductor manufacturing irrespective of the type of technology, they get straight away fifty, upfront money from the central government. It’s really good for our country. Hopefully, with this scheme, we will be attracting a decent amount of investment in this sector.
What is the current status of the Indian semiconductor manufacturing system/ecosystem?
No, we do not have a manufacturing ecosystem except for one entity set up by the Indian government called the semiconductor complex in Mohali set up in 1980. That is the only semiconductor manufacturing facility in India. We must remember that 20 – 25 % of the design of SC of the world happens in India. That is mainly driven by MNCs and GCCs out of India. That’s why incentives will motivate many global companies to come and set up now.
Will IESA collaborate with any major semiconductor manufacturing organization from across the world in the future?
We are mainly an industry body. IESA mainly influences the policy discussion based on our member companies’ feedback. We provide input to the government on having the right policy. And if the government requires any help, or our member company requires any help to facilitate the discussion with the right stakeholders. We facilitate that kind of discussion. Other things then are between the Government of India or State governments and companies interested in cycle manufacture.
For future expansion purposes, if they require any facilitation with any State government or central government place, for example, looking for additional space or additional capacity anywhere or the right set of incentives, etcetera. So, we can facilitate such kinds of discussions between our member companies and the various government bodies.