Indian semiconductor industry STILL has much more to do! Downturn also looms!!

The Indian semiconductor industry is currently going through a rebirth or renaissance. This is largely due to some recent announcements made. There have been three announcements around semiconductors made by the Government of India. These are:

• Maharashtra -- $22 billion investment by Foxconn and Vedanta to manufacture semiconductors in India.
• Karnataka -- $3 billion investment by Israeli firm, Tower Semiconductor and ISMC Digital. The ISMC plant will manufacture 65nm analog semiconductors.
• Tamil Nadu -- $3.2 billion investment by Singapore firm IGSS Ventures. It will be setting up a semiconductor high-tech park in the state.

BV Naidu, Chairman, Karnataka Digital Economy Mission (KEDM), and Founder and Managing Partner, StartupXseed Ventures, said there is huge interest in semiconductors and manufacturing. ISMC and Tower Semiconductors have already expressed interest. There are several other states that are waiting for approval from Government of India. One or two new announcements will further motivate people to enter the industry. However, creating the supply chain will further need some more time.

In the USA, large companies, such as Intel, TSMC, Samsung, etc., have announced plans. USA has passed the Chips Act. In this scenario, the Indian government also needs to work, and act fast. Following India's semiconductor plans, fab equipment manufacturers should now come to India. There is also need for ATMP players to come in. There has been chip shortage for automotives. Now, the global competition is also very high.

Naidu added that for 10-22nm nodes, the Government of India further needs to make plans. Keep in mind that the 10-22nm production is going to be more expensive. We definitely need to start somewhere.

S. Uma Mahesh, a member of the original India Semiconductor Association, now IESA, and Co-Founder of Innatera, said the Indian semiconductor must do better in the future. He is a veteran entrepreneur, with a strong record of contributions to the Indian semiconductor ecosystem since the early 1990s. Regarding future nodes, he said one need not mandatorily be at a given node, as long as the chosen or implemented node for local manufacturing and delivery has paying customers.

Innatera’s ultra-efficient neuromorphic processors mimic the brain’s mechanisms for processing sensory data. Based on a proprietary analog-mixed signal computing architecture, Innatera’s processors leverage the computing capabilities of spiking neural networks to deliver ground-breaking cognition performance within a narrow power envelope.

Dr. Satya Gupta, President of the VLSI Society of India, and Founder and CEO, EPIC Foundation, said there will be a lot more clarity and faster movement towards processing of projects from Meity once the ISMC CEO is selected and announced.

Vedanta is said to be in discussions with the Maharashtra Industrial Development Corp. (MIDC) for a proposed manufacturing facility for semiconductors and display fabs. With a high concentration of skilled manpower, connectivity to the port, seamless domestic supply-chain and highly developed industrial infrastructure, Talegaon in Pune has emerged as a prominent option for Vedanta and Foxconn for their $22 billion investment that can generate over 200,000 direct and indirect jobs.

ISM initiatives

India Semiconductor Mission (ISM) was announced with the aim to attract large-scale investments for manufacturing facilities in the midst of a global chip crisis. Production-linked incentive (PLI) schemes have been announced for a range of products.

PLI for large-scale electronics manufacturing segment includes: mobile phones, specified electronic components, SMT components, discrete semiconductor devices, like transistors, diodes, thyristors, etc., passive components, including resistors, capacitors, etc., for electronic apps, PCB, PCB laminates, prepregs, photopolymer films, PCB printing inks, sensors, transducers, actuators, crystals for electronic apps, system-in-package (SIP), micro/nano-electronic components such as MEMS and NEMS, and assembly, testing, marking and packaging (ATMP) units. Tenure of the PLI scheme has been extended up to FY 2025-26.

PLI for large-scale electronics manufacturing, electronic components, has companies such as Ascent Circuits, Sahasra, AT&S, Silicon Power, TDK, Rakon, Vitseco, Vishay, Shogini, Tibcon Capacitors, CDIL, Alcon Electronics, Globe Capacitors, Deki, Keltron, Shivalik, WALSIN, CIPSA TEC, etc. Mobile phones have players such as Foxconn, Samsung, Pegatron, Wistron, Lava, Micromax, Padget, United Telelinks Neolyncs, etc.

In PLI IT hardware, companies include Lava, Dixon, Micromax, VVDN Electronics, Neolync, Netweb Techcnologies, Panache, Optiemus, Dell, Wistron, Flex, etc.

Under the scheme for promotion of manufacturing of electronic components and semiconductors (SPECS), approved companies include Tata Electronics, Salcomp Technologies, Molex India, TECIPL, IFB Industries, Hical Technologies, Sahasra, Idemia, CDIL, Deki, etc.

Under the modified special incentive package scheme (M-SIPS), approved companies include Havells, Daikin, IFB, etc.

Under the modified electronics manufacturing clusters (EMC 2.0) scheme, two have been approved, Andhra Pradesh and Haryana, and two others were being finalized for Telangana and Uttarakhand. EMCs are said to be coming up in Mundra, Gujarat, Mysore, Jharkhand, Hyderabad, Bhopal, Tirupathi, Bhubaneshwar, Aurangabad, Bhiwadi, Sri City, Andhra, etc.

Some technicalities!

Ok, all of these look very fine. Now, to some technicalities!

First, why has India chosen to start with 28nm? Why not the lower, latest nodes? If I recall, I wrote on 28nm back in 2008-12. There is the issue of high-k metal gates (HKMG), and fin field-effect transistor or FinFETs. Who is modeling FinFET metal gate stack resistance for 14nm node? There is also the series of process technologies, like strain engineering, 3D FinFET and HKMG.

FinFET provides advantages over bulk CMOS, such as higher drive current for a given transistor footprint, and higher speed, lower leakage, leading to lower power consumption, no random dopant fluctuation, better mobility and scaling of transistor beyond 28nm. Transistor performance meets technical challenges such as critical dimension (CD) shrinking beyond 32/28-nm nodes.

We also have DUV or deep ultraviolet, and EUV, or extreme ultraviolet. DUV light used in chip production has wavelengths of 248nm and 193nm, while EUV light has a wavelength of 13.5nm. Who is working on those?

Immersion lithography is an advanced semiconductor technology compared to traditional dry lithography. Immersion can improve lithography resolution to 45nm or higher by replacing the air between wafer and bottom lens with liquid of higher refractive index.

These are just some examples. India needs to develop semiconductor research and research institutes, as well, besides handing out licenses for semiconductor manufacturing. India also has a weak ecosystem and shortage of resources. India doesn't have uninterrupted power and clean water supply for chip manufacturing. There are so many problems to fix! And, fast!!

Downturn started?

Now, Future Horizons has reported that in line with its December 2021 forecast, June’s WSTS Blue Book Report confirmed the current chip boom is over! The chip market downturn has apparently started. Is anyone in India even keeping an eye on this segment?

Malcolm Penn, CEO, Future Horizons, said the current semiconductor super cycle is finally drawing to a close, and the 17th market downturn has now well and truly started. At the macro level, the worldwide semiconductor momentum indicator, pictured above, passed through the ‘Death Cross’ in March 2022 signifying storm clouds on the horizon. June 2022’s market data saw the start of the storm.

Anecdotal indication of the downturn has started to filter into the industry consciousness, especially, at the commodity end of the market, with several second-tier foundry houses and IDMs reportedly mulling scaling back or postponing their planned capacity expansions.

Already, Global Foundries has warned it expects to see its capacity utilization fall in the second half of the year, due to order cuts by its fabless clients, and Samsung is reportedly suffering a similar impact too. The downstream knock-on effect on the semiconductor equipment and materials industry has already started to bite, with some firms starting to see second-half year push backs and delays.

PC and smartphone shipments, two key semiconductor market drivers, are both showing declines in the first half of 2022, with PC shipment now reportedly at their lowest level since 2019, and smartphone shipments are expected to show negative growth in 2022.

Products that require specific manufacturing capacities, such as automotive, are still showing signs of tightness, but the end market demand for cars is likely to soften as prospective customers, now squeezed by and struggling with inflation and a massive spike in energy costs, put off buying that new car.

With demand for consumer MCUs, display drivers, power management and other mass-market chips falling, nearly all mature node fabs have seen their customers scale back wafer starts for the second half of 2022 prompting several second- and third-tier foundries to start cutting prices. Some are even rumoured to be offering fire-sale incentives and cut-price deals for additional wafer orders to maintain their fab utilization rates.

Such actions will, however, we believe, prove fruitless given the industry-wide pressure, and customer need, to offload bloated inventories, built up over the past two years of supply shortages. Time will tell if customers violate their long-term agreements (LTAs) to ease inventory pressure or, if they do, what actions the suppliers could in reality actually do.

While TSMC is in a better position overall, due to its market dominance especially at the leading-edge – leading-edge capacity is, by definition, always in short supply – it too will not escape the effects of the downturn, given the wide diversity of the end markets it serves. TSMC will need to tread very carefully, if it is to avoid an inevitable anti-trust challenge by customers and competitors of market exploitation and price gorging if it carries out its plan to raise its prices in 2023 against the prevailing market trends.

At the detailed level, monthly IC unit shipments and ASPs shrank sequentially 10.6% and 14.9% in June, resulting in a whopping double-digit sales value decline of 23.9%. The comparable numbers for the previous month were all positive at 3.3%, 7.8% and 11.4%, respectively.

The inventory correction was inevitable, and is now starting to manifest itself by way of reduced unit shipments with all sectors showing negative monthly growth vs. May. This was in sharp reversal to May’s unit growth results, which showed all sectors still growing, other than micro, which suffered a modest 0.6% decline.

Reduced unit shipments will quickly translate into a sharp cutback in new orders, taking the pressure of fab capacity, and eventually, shorter lead times, just as the first wave of increased capacity is coming online. In parallel, IC ASPs fell an eye-watering 14.9% in June vs. May, with memory hit hardest dropping 19%. Micro ASPs fell 8.5%, followed by logic at 7.2% and analog at 3.7%.

This combination of negative ASP growth, falling unit shipments, increased capacity and a weak global economy that will tip the semiconductor market into negative growth in 2023.

Right now, we can welcome the baby steps that India has taken to enter the semiconductor manufacturing. Much more needs to happen in India, and fast! Keep watching this space!!