India to focus only on 40nm chips at present

India to focus only on 40nm chips at present

Subject: Economy

Section: Monetary Policy

Key points:

• India to currently focus on mature nodes like 40nm chips only, and will focus on fab later.
• Earlier, the government was seeking 28nm plants in the country, but position has changed owing to assessment of challenges and industry response.
• Chip “nm” (nanometer) significance:
  • Chips based on 40nm nodes have applications in the automotive sector, networking equipment, medical devices, printers, and in digital cameras.
  • Although it does not go into laptop or smartphones, it is used in automotive, for Internet of Things (IoT) and white goods, that have volumes.
  • PC and smartphones require minimum 14 nm or less size chips, which at present India will have to continue to import.
  • 28-nanometre chips require investments upwards of $3-4 billon
  • range of 3-7 nm, require investments of over $20 billion
• TSMC’s not coming to India at present is explained by this decision. TSMC is known for cutting edge nodes.
• Several companies (Micron, Tata Electronics, Vedanta-Foxconn etc) are coming into assembling, packaging and wafer fabrication of 40nm chips.
• The Modified PLI Scheme takes into account this change of approach. Under the scheme the government will provide fiscal support of 50% of project cost support setting up semiconductor fabs across technology nodes and for display manufacturing.
• There is an international trend for promoting domestic manufacturing of Chips, with the Chips Act ($280 billion) passed by the US and EU Chip Act ($47 billion).
• India’s Semiconductor Mission (ISM) with financial outlay of Rs76,000 crore and Modified-PLI are efforts to extend government support to the sector.

What are challenges for setting up a fab?

• Huge initial investment involved. Also reliable supplies of raw material have to be set up.
• Another big challenge is to get sufficient chip orders. Because it is only with volume that cost per unit comes to competitive levels.
• Specialized chip design engineers needed.