Semiconductor Fab: The Unfinished Agenda


    In Context 

    • Semiconductor fabrication represents the ultimate frontier of human tech advancement. 

    About Semiconductors:

    • What are Semiconductors?
      • Semiconductors are the thumbnail-sized building blocks of almost every modern electronic device from smartphones to connected devices in the Internet of Things (IoT). 
      • They help give computational power to devices. 
    • Components:
      • The basic component of a semiconductor chip is a sliver of silicon, which is etched with billions of microscopic transistors and projected to specific minerals and gases, forming patterns to control the flow of current while following different computational instructions. 
    • Semiconductor nodes and uses:
      • The most-advanced semiconductor technology nodes available today are the 3 nanometre (nm) and the 5nm ones. 
        • Semiconductors having higher nanometre value are applied in automobiles, consumer electronics and so on. 
        • Those with lower values are used in devices such as smartphones and laptops.
    • Semiconductor fabs:
      • Semiconductor fabrication plant is a factory for semiconductor device fabrication.

    Semiconductor Industry 

    • The global semiconductor industry:
      • The global semiconductor industry is currently valued at $500-$600 billion and caters to the global electronics industry currently valued at about $3 trillion.
      • The chip-making industry is a highly-concentrated one, with the big players being Taiwan, South Korea and the U.S. among others. 
        • 90% of 5 nm (nanometre) chips are mass-produced in Taiwan, by the Taiwan Semiconductor Manufacturing Company (TSMC). 
      • Issue of the global chip shortage: 
        • U.S.-China tensions over Taiwan, and the supply chain blockages owing to the Russia-Ukraine conflict have led major economies to enter the chip-making sector with a renewed push.
    • India’s semiconductor sector:
      • The country’s electronics and semiconductor products manufacturing sector has witnessed a quantum growth in the last almost a decade. 
    • Import & manufacturing:
      • In 2014 some 92% of the mobile devices sold in the country were imported while in 2022 some 97% of mobile devices were manufactured in the country. 


    • In 2014, the country’s electronics ecosystem that comprises manufacturing, designing, innovation and production pegged $10 billion, and in 2022 it grew to $75 billion and expected to cross $300 billion by 2025-26.
    • FDI in the sector: Electronics and semiconductor sector captured 66% of the FDI that came to India in the last three years.
    • Sector specific production: The electronic devices industry is segmented as Mobile Phones (24%), Consumer Electronics (22%), Strategic Electronics (12%), Computer Hardware (7%), LEDs (2%) and Industrial Electronics (34%) comprising Auto, Medical and other industrial electronic products.
    • Demand: Technology transitions such as the rollout of 5G networks and IoT are driving the accelerated adoption of electronics products. 
    • Initiatives such as ‘Digital India’ and ‘Smart City’ projects have raised the demand for IoT in the electronics devices market and will undoubtedly usher in a new era for electronic products.


    • Setting Up of Semiconductor fabs:
      • Semiconductor fabrication represents the ultimate frontier of human tech advancement. But the progress of miniaturisation is accompanied by higher complexity and costs.
      • Investment in a semiconductor fab is one of the riskiest. Billions of dollars need to be recovered before the technology becomes obsolete.
    • Challenges of chip manufacturing:
      • Developing an ecosystem for chip manufacturing in a greenfield location is a major challenge. 
      • Hundreds of chemicals and gases are required for chip fabrication, people need to be trained, and abundant clean water be made available. But above all is the art of chip-making. 
      • Despite the best of equipment, poor quality and low yields can make fabs fail.
    • Need for an advanced technology:
      • There are other issues, such as whether to set up a logic/processor, memory or analog fab. 
      • Electronic equipment and its functionalities are characterised by their logic chips, which are therefore strategically important and generate the highest profit. 
      • The most advanced set of technologies is needed to manufacture them.
    • China’s monopoly in the sector:
      • Elaborating on the opportunities for India currently, he said electronics and semiconductor products today was a $1.5 trillion industry with China solely accounting for almost 75% of it and having enjoyed a monopoly in the sector for over two decades now.

    Lessons from China & way ahead 

    • India’s strategy has been to set up a new logic fab. China, which acquired loss-making fabs and then set up its own logic fab, provides lesson. 
    • Acquiring existing fabs has many advantages: They are reasonably priced, have stabilised technology, a supply chain ecosystem, an established product line, and market. 
      • They will enable India to build the fab ecosystem and train human resources. 
      • Much lower subsidies would be required, and the funds saved could be used for advanced R&D in fab technologies which will help build state-of-the-art fab in next few years. 
    • Another strategy could be setting up ATMPs: Tessolve, now acquired by Tatas, had set up an ATMP in 2013-14. This ATMP is successfully packaging chips upto 7 nm feature size. China has over 100 ATMPs.
      • China started on the fab journey about 20 years ago. As the Chinese saying goes, the best time to plant a tree was 20 years ago, but the second best time is now.


    Daily Mains Question

    [Q] What is the potential of India’s semiconductor industry? What are the challenges? What should be the strategy to potentially upgrade the sector?