Govt places its chips on public-private partnership for new fab in Mohali

The govt has been pushing for a local semiconductor ecosystem to reduce dependency on other countries for semiconductors

At a time when global chip giants are still scanning through India's modified government incentives programme for building a local semiconductor manufacturing fab, the Ministry of Electronics and Information Technology (MeitY) has made another offer. This time, the bid is for turning an existing semiconductor laboratory into a mass production unit as a partner to the government of India.

MeitY late last week issued an expression of interest (EoI) seeking commercial and technology players with the necessary technological and operational expertise to modernise its Semi-Conductor Laboratory (SCL) in Mohali. The government has suggested three ways to do this – either transforming the plant into a Research and Development (R&D)-led Centre of Excellence for chip making or making it an "at-scale" manufacturing entity or a combination of these paths.

Founded in 1984, the fab plant has been supporting the government with the chips necessary for crucial applications like defence and space exploration. The facility was devastated by a factory fire in 1989 and could not fully recover to operate at its full capacity. Nevertheless, it was SCL that fabricated the Vikram Processor (1601 PE01) that allowed the navigation of the launch vehicle and camera configurator on the lander of Chandrayaan-3.

The modernisation and commercialisation of the facility are part of the government's $10-billion programme for the development of the semiconductors and display manufacturing ecosystem in India announced in 2021. As per its invitation for bids, the government is open to providing 100 per cent capital infusion for the modernisation under a Build, Operate and Maintain model. Experts say this model of public-private partnership for India's chip mission may turn out attractive for global firms.

"Across the world, the development of semiconductors has happened with substantial investments from the governments of the respective countries. Chip giants of today like Taiwan Semiconductor Manufacturing Company (TSMC) came out of the Industrial Technology Research Institute founded by their government," said K Krishna Moorthy, president and chief executive officer of India Electronics and Semiconductor Association (IESA).

According to Moorthy, the underlying reason for the government's intervention and substantial participation in the semiconductor industry is due to the constant need for continuous Research and Development to remain competitive in the sector. He pointed out that similar investments have been made by the governments of Germany, the US, Japan, Korea, and Taiwan.

The government has been pushing for a local semiconductor ecosystem to reduce the dependency on other countries for semiconductors. Domestic production of electronic goods in India more than doubled to Rs 8.25 trillion in FY 2022-23, as per the Directorate General of Commercial Intelligence and Statistics (DGCIS) portal. However, semiconductor chips worth Rs 1.29 trillion were imported in FY 2022-23 due to the absence of commercial fabs in India.

Kanishk Maheshwari, co-founder and board member at Primus Partners, said a local fab under the new project may create value not just for electronics but IT Hardware, Automobile, Aerospace and Defence sectors as well. "In the last few years, India has emerged as a prominent hub for mobile manufacturing and developed an all-round value chain for electronics. But the missing link in the value chain is the fab manufacturing. The government has been striving to indigenise fab manufacturing but could not take off due to inadequate R&D capacity in this sector," Maheshwari said.

He added that "SCL remains a prominent and only R&D facility in India in this sector. However, the scale of operation and lack of commercialisation of technology or products have been a hindrance in tapping the true potential and integrating with the electronics value chain. With the capital infusion and R&D realignment towards industrial use rather than just academics would help in fostering the electronics ecosystem."

The government is also open to having a chip fabrication or R&D unit for compound semiconductors like Gallium Nitride or Silicon Carbide at the Mohali plant. In certain application segments such as power electronics for electric vehicles and green energy, the best technology is available in compound semiconductors. The focus on compound chips may provide a good head start as this technology is still in the evolutionary stage unlike the matured technology used in silicon chips, as per experts.

"Even if a new fab is built in the country, the self-reliance aspect can happen only if there is a constant R&D development happening on it. As silicon technology is becoming saturated, people are exploring new technologies like Silicon Photonics. The government has offered a capital subsidy to entities scaling up the production to the level of a commercial wafer fab mostly to attract major investors and serious players to come in," Moorthy said.