MEITY stands firm, defends domestic semiconductor policy

The domestic market demand for 28 nanometre (nm) and above semiconductor chips in 2023 is in the range of $17-20 billion annually, according to estimates by the Ministry of Electronics and Information Technology (Meity), said a top official in the ministry.

This accounts for around half of the total domestic semiconductor chip market requirement, which is pegged between $35 million and $40 billion in 2023.

According to a broader estimate by Counterpoint Research, between 2025 and 2030, the total semiconductor demand in India will be $600 billion. Of this, the 28 nm and above market is expected to be 30-35 per cent, or $180-210 billion.

“Even if you assume that 5-10 per cent of the market will shift to the country’s first fabrication (fab), you are looking at a market of $9-10 billion going up to $18-20 billion, which is big and will continue to be there for a long while,” says Neil Shah, founder, Counterpoint Research India.

It is this market, which is currently met mostly by imports, that the country’s first fab plant by Tata plans to address. The Tatas have invested $11 billion in a 50,000-wafer-per-month plant to be set up in Dholera in Gujarat, added the official.

However, noted economist and former Reserve Bank of India governor Raghuram Rajan had expressed doubts about India subsidising the semiconductor industry by ~75,000 crore when the annual budget for education is much less.

Rajan noted that if all goes well with India’s fab strategy, the country will get 28 nm chips when, in fact, the state-of-the-art in modern cell phones is 3 nm and below.

“If we are to become a global chip manufacturer at the frontier, we have to subsidise a few generations of chip factories before we reach that frontier,” said Rajan.

The senior Meity official defended the government’s strategy.

“We are addressing the issue by first manufacturing the mature nodes which are 28 nm and above as there is a large market in India which currently is met mostly by imports. There is a large market globally too. After that, we will move to the next stage of lower nodes. We estimate that the total demand for semiconductor chips will go up to $100 billion in the next five years on a conservative basis. If manufacturing goes faster, which is likely, the market size of semiconductors will increase further,” said the official.

Experts also point out that in modern mobile phones, only a few currently use 3 nm chips: the iPhone 15 Pro and Pro Max with the A17 chip is Apple’s first entry into this space (earlier they used 5 nm chips).

The world’s largest fab plant, Taiwan Semiconductor Manufacturing Company, was expected to mass-produce its 2 nm chips sometime in 2025, but reports say this could be delayed until 2026. However, there are numerous other chips in a phone which are 28 nm and above.

Tata has identified its semiconductor products. It will be making chips in mature nodes which include 28, 40, 55, 60, and 110 nm, for which Tatas will be offered technology by Taiwanese Powerchip Semiconductor Manufacturing Corporation.

It has also identified its markets. It will make chips for the growing automotive, computing and data storage, wireless communications, and artificial intelligence markets.

Tata will also make chips for applications such as power management integrated circuits, display drivers, microcontrollers, and high-performance computing logic.

Given the growth of electric vehicles, the automotive sector — both two- and four-wheelers — is expected to pick up in India and this too will generate a large requirement for semiconductor chips to power the vehicles.

The semiconductor sweepstakes

• Market for mature nodes — 28 nanometre (nm) and above — is pegged at $17-20 billion in India, most of which is imported
• Between 2025 and 2030, the semiconductor demand in the country will be $600 billion, of which 30-35 per cent will be for 28 nm and above
• The market for fabrication in India will range from $10-20 billion in this period
• Tata project is focused on meeting this demand by ‘Making in India’
• India will initially start production with mature nodes and then in the next stage make chips below 28 nm
• Usage of lower nodes is still limited globally in mobile devices and more advanced technology like 2 nm chips might be mass-produced in 2026 by TSMC

Business Standard