In the past two decades, India's achievements in software have been world-class. India has also made significant strides in semiconductor design, but much of that talent is in the India-based engineering and R&D centers of global semiconductor giants like Intel, Samsung, Qualcomm, Broadcom, Texas Instruments and Nvidia. India is way behind in semiconductor and electronics manufacturing.
This looked fine in a globalizing world, with trade becoming freer, and with India sitting on an abundance of foreign exchange. The dominant economic theory has maintained that countries should focus on what they are most competitive at, and trade those goods & services with other countries to get in return products that they make more efficiently. China and Taiwan make semiconductors so efficiently that it’s best to get these from them.
But today, as globalization retreats and China threatens India’s borders, India looks terribly vulnerable in the absence of a strong local semiconductor and electronics base. A semiconductor is a substance that conducts electricity under some but not all circumstances. Manufacturers are able to customize the conductivity of a semiconductor, such as introducing a sensitivity to heat or light, or altering conductivity based on the direction of the current. Chips are at the heart of everything around us – smartphones, PCs, tablets, cars, watches, agriculture, drones, medical devices, and modern defense equipment.
“Senator Ben Sasse of the US Senate’s intelligence committee has said that modern wars are fought with semiconductors. And we (India) are absolutely not ready. We have done nothing. It has become more and more worrying with the current geopolitical situation with China,” Ajai Chowdhry, co-founder & former chairman of HCL, said at the recently-held Times Techies roundtable, in association with the India Electronics & Semiconductor Association (IESA). HCL had started as a company designing and manufacturing PCs in the 1970s, but abandoned the effort soon after India signed the World Trade Organisation’s Information Technology Agreement in the 1990s that eliminated tariffs on these products, making imports cheaper.
Chowdhry has since been part of multiple governmental committees that recommended ways to build a domestic electronics industry. But little headway has been made. "The kind of money China has put into semiconductors is just phenomenal. The US recently passed the Chips for America Act to bring semiconductor manufacturing back to America and ensure no security issues emerge. India has done nothing in this area."
Satya Gupta, chairman of IESA, said semiconductors “is very strategic.” "Our problem is not ideas, it is execution. Between industry, government, academia, we have enough good ideas. Synthesize everyone’s opinion, and create a 15 year roadmap which involves R&D, products and manufacturing," he said. He noted that both the US and Japan are today trying to get semiconductor companies back into their countries.
All panelists emphasized the need for India to articulate a vision for the industry. Jitendra Chaddah, country manager for global supply chain in Intel India, said there needs to be a global vision and it must not be targeted at select segments (like medtech or agriculture) or select companies, but must encompass everyone. "We need to clearly articulate a global vision for this industry. A vision to create products to better the lives of the 7 billion people on the planet using billions of devices. And it must carry all segments along, not be focused on a few sectors or companies."
He said India must focus not only on design/R&D and manufacturing, but also materials. “We should look at how materials used in the pharma, paints and petro industries can be upgraded so that they can be used in the semiconductor industry,” he said.
IESA, Gupta said, has recommended to the government to create a 15-year roadmap and allocate $30 billion over this period or $2 billion per year. “Allocate it in the ratio of 70% for manufacturing, 20% for product design, 10% for R&D. Manufacturing is investment heavy so needs more money,” he said.
He noted that the Centre gave about Rs 44,000 crore as production-linked incentives (PLI) for smartphone manufacturing. “Instead, going by our formula, if we had used 20% of that, or about Rs 8,800 crore, on designing and developing our own smartphone, we could have come up with five fantastic products that could give Oppo and Vivo a run for their money,” he said.
Several panelists noted that entrepreneurship in hardware is far tougher than in software. It requires lots more money, partly because it takes longer to bring a product to market. Radha Shelat, CEO of Pune-based Nevis Networks, which had built a series of high-performance security products including its own chip, most of which it sold to a US company in 2017, says it was absolutely frustrating building the company, and she’s glad she’s out of it. Nevis received funding to build the product. “But the moment the marketing starts, you need more capital. You need to break through the government layers. Meeting the compliances, certification, selling in the defence sector, everything becomes tough. There’s the government’s L1 system (under which the lowest bidder is given the contract even if someone else has a better product), and that’s impossible for a startup to crack,” she said.
She added, "There are so many DRDO labs, government bodies that have done their own R&D, been funded for years. They might have a lot of IPs, assets, but there’s no data available on it. We should be able to take them and start building based on them."
There’s also the issue of how to get talent from the high-paying MNC centres in India to come out and build products for India. The government funding suggested by IESA is seen to be absolutely crucial. Chowdhry says even overseas Indian talent can be attracted back if we give them challenges. “Look at the way Taiwan built its semiconductor industry. They brought back Morris Chang (from the US) and he set up TSMC (one of the world’s biggest chip makers).
Where India Stands
China is the largest exporter of computer devices in the world, with over 40% of the entire global market in 2019. Mexico has the second largest share, at 8.7% (Data from Howmuch.net, which took it from International Trade Centre)
Between 2013 and 2017, China accounted for 28% of the global exports of computers, electronics, and optical products, according to McKinsey. This was up by 13 percentage points compared to the period between 2003 and 2007 (Data from Statista)
India’s electronics consumption in 2019 was $183 billion, out of which $84 billion was imported
Electronics imports constitutes India’s biggest import item after oil
India’s electronics manufacturing grew at a good 23% cumulative annual rate of growth over the past five years
There are over 300 semiconductor R&D companies in India working on cutting edge chip design
This semiconductor R&D produces almost $3 billion in revenue
IESA’S Suggestions
👉Articulate a vision for the industry
👉Set up an independent National Electronics Commission reporting directly to the PM
👉Spend $2 billion per year for the next 15 years. Allocate it in the ratio of 70% for manufacturing, 20% for product design, 10% for R&D
👉Spend $1 billion to create a dedicated national research institute for electronics & semiconductor
By Sujit John and Shilpa Phadnis,
Source : TOI
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