India’s bid to attract global semiconductor units to face challenges

NXP semiconductor
Semiconductor production. Image by kenny001 | Bigstockphoto

Dutch semiconductor manufacturer NXP Semiconductors said that India’s bid to attract global players to set up fab production units will not be easy since it will require significant investments and the country will have to compete against other countries in the region which have become “favoured destinations”. 

Sanjay Gupta, NXP Vice President and India Country Manager said that the investment required for setting up a single fab hovers around $8 billion and the figures grow rapidly over time. “Semiconductor fabs have very high operating costs, and technology usually needs to be replaced every 3-4 years,” he added.

The company considers India as one of its largest design and research and development (R&D) hubs globally. It has centers in Noida, Bangalore, Hyderabad and Pune that are involved in  hardware and software R&D and design activities.

“Establishment of Semiconductor Wafer Fabrication (FAB) units in India has long been challenging, even though India has done well in terms of chip design and manufacturing of electronics. The fact is that semiconductor manufacturing requires huge investment, and it is one of the main obstacles in setting up fab production units,” Gupta was quoted as saying by the Economic Times.

He suggested that the country needs to take “big steps” to create the basic infrastructure for semiconductor manufacturing.

His comments come at a time when the Indian government is planning to offer $1 billion in incentives to attract global companies to set up fab units in the country.  The country’s Ministry of Electronics and IT recently invited expressions of interest for setting up a fab in India.

Market watchers, however, believe that the government needs to sweeten its incentives for semiconductor companies since huge investments are needed to set up units besides bringing long-term policies that cover infrastructure, water and electricity supply among others. 

“…in addition to the enormous cost running in billions of dollars, setting up fab units takes hundreds of gallons of pure water to produce even a single chip, which may also be difficult to find in India. Another big challenge is an undisturbed electricity supply. The heart of the problem is that, in terms of the basic infrastructure required to pursue efforts in the chip manufacturing space, India needs to take some big steps,” Gupta further explained.

The Indian government recently said that setting up semiconductor plants is critical since India will increase its share in global manufacturing of mobile phones, IT hardware, automotive electronics, industrial electronics, medical electronics, IoT and other devices in the near future. India aspires to have $400 billion of electronics manufacturing by the year 2025.

The Indian government had in 2013 tried to attract semiconductor fab companies through various incentives but failed due to a non-existent electronics manufacturing ecosystem and relevant policies.

India recently started tracking chip and processor imports to the country by making import registration mandatory for chipmakers. Experts said that the move is in line with the Indian government’s ongoing assessment of the viability of setting up semiconductor fab in the country.

India offering $1bn for semiconductor firms to set up manufacturing plants

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