Taiwan Semiconductor Manufacturing Company (TSMC), the largest chip manufacturer in the world, has announced the building of its second chip plant in Arizona, the US, for the production of high-end 3 nanometer (nm) chips by 2026. The announcement came after TSMC's first $12 billion announcement made in 2021 for a fabrication plant (that will produce 4nm chips starting in 2024). India has yet to approve the proposals it received earlier this year under the India Semiconductor Mission, while the US is attracting large investments for semiconductor businesses.
On December 15, 2021, the Indian government unveiled a semiconductor programme worth Rs. 76,000 crore with the goal of luring semiconductor and display fabs to the nation. In the first round, which ended in February 2022, the government received proposals for three semiconductor fabs and two display fabs. In September of this year, the government changed the programme in response to industry complaints, providing a uniform 50% incentive to all certified fabs. States were intended to use a different set of stimuli to entice applicants. This delay in approval has caused some applicants to feel a little uneasy and has drawn criticism from some industry experts since the government has not yet announced the applicants approved under the scheme.
Business veterans who have closely worked in the semiconductor industry, however, hold various views. "The US is offering a 30% incentive. The national government of India contributes 50%, and the state governments contribute 20% more. Forget about the state or the federal government; India is covering [generally] 70% of the project's costs. It takes time to make judgments when you are 70% responsible because you have to be very careful not to spend Indian government funds. Ajai Chowdhry, Chairman of the Epic Foundation, Co-Founder of HCL Technologies, and Member of the Advisory Committee on India Semiconductor Mission, stated that they are managing public funds.
A chip fabrication facility (fab) cannot be set up as easily as a smartphone or a production line for wearables. Even planning before establishing a fab takes roughly one to two years, while the actual building of the fab takes two to three years. After all, it calls for advanced technological procedures, complex equipment, the sourcing of raw materials, and the creation of an ecosystem, to name a few. Additionally, there is a lot to catch up on because India is starting its fantastic journey very late.
Over the past few years, there has been a significant change in the setting in which the Indian government operates. The nations that are involved in semiconductors have changed dramatically over the past two years, unlike any other time in the industry's history. There is a common desire to keep those supply chains internal given the recent chip problem following the COVID-19 pandemic. Under the condition of anonymity, an industry expert explains the situation as follows: For the past 40 years, the US has given semiconductors to the entire globe without blinking. They have returned everything over the past 14 months. The operating environment has seen a clear change as a result of this.
Contrary to the reports suggesting India is waiting for better applications, the expert says further: “Unfortunately for the US, which is where most of this technology resides, there has been a sudden inflationary pressure that has caused the entire high-tech market, an entire stock market in fact, to drop 30 to 70 per cent. So, in that environment, the companies who would normally look at India in a very positive light (as 70 per cent is a huge incentive) are just trying to save their companies from going under."
Praising the government, Satya Gupta, CEO of Epic Foundation and President of VLSI Society of India, an association helping to grow Indian R&D and talent in the semiconductors ecosystem, said, “Given the type of technology, infrastructure, global partnership required, and considering the complexity of the issue, I think we have made tremendous progress. One also needs to understand that it's not a private company but the government that has to decide. And they have to act in a certain way. You take a look at any government. I think this is probably the fastest execution I've seen. Not just from India's point of view, from a global point as well.”