India has a golden opportunity to kickstart semiconductor manufacturing again!
As the world is undergoing an industrial revolution with technology at the crux, the semiconductor shortage has been the emphasis of technology and industry discussions. However, much of these discussions have focussed mainly on leading-edge manufacturing nodes at 7nm, 5nm, and 4nm, etc. While capacities at the leading edge are being ramped up, the bigger challenge lies with the trailing edge when it comes to supply and demand.
India has a bargaining chip:
- The worldwide chip scarcity, as well as geopolitical tensions between key economies such as the United States and China, China and Taiwan, and Japan and South Korea, have focused attention on the semiconductor industry but not placed emphasis on the trailing edge of the semiconductor supply chain.
- The global chip scarcity, in particular, has slowed the recovery of numerous industries following the Covid-19 pandemic.
- According to Goldman Sachs analysts, the issue has affected as many as 169 end-use industry sectors, ranging from household goods to gaming systems and industrial gear.
- India can focus on building and enhancing trailing edge semiconductor manufacturing capacity as it is far less capital intensive and does not require cutting technology. India already has a chip design advantage as many top semiconductor firms have set up their R&D facilities in India,
What are trailing edge chips used for?
While semiconductors are the beating heart of the ubiquitous technological revolution, chips manufactured via mature nodes rather than the leading edge are used in cars, displays, industrial equipment, appliances, medical monitoring equipment and even some computers and smartphones. A good example of a ubiquitously used trailing edge semiconductor is the chip microcontroller.
The bulk of firms producing these chips, which are mostly made using 90nm and higher technologies, are based in China. These chips are generally considered a commodity, which is why most large fabs do not devote much attention to the trailing edge. Despite this, most current digital gadgets use at least a few chips from the trailing edge. So, while legacy chips aren’t as flashy as cutting-edge processors, they’re nevertheless crucial in the production of computer devices of all shapes and sizes. Trailing edge semiconductors also use planar transistors unlike the 3D FinFET transistors used in cutting edge chips, and also do not need advanced manufacturing techniques such as EUV that can further add to the cost of manufacturing.
Often, the trailing edge uses the older 200mm wafers to produce 350nm to 90nm parts rather than the 300 mm wafers that are predominantly used in the leading edge. Since the manufacturing focus is not on the trailing edge, parts and components used in the manufacture of these mature semiconductors are often refurbished instead of being produced at scale.
Thus, certain trailing edge semiconductors require the use of refurbished manufacturing equipment that is no longer manufactured. Now, the semiconductor shortage is certainly impacting the leading edge, but the situation is far worse at the trailing edge due to the aforementioned reasons. Further, a lack of steady investments has further exacerbated supply chain woes. Can you imagine an 18-month-long wait to get semiconductors for specific products? This is exactly what’s happening at the trailing edge and the waiting times are expected to get longer unless investments are made to ramp up capacity.
Should India invest in trailing edge semiconductors?
The trailing edge could be lucrative from an Indian perspective. Not only is there significant demand but the trailing edge is not as capital intensive with regard to manufacturing and frequent upgrades when compared to leading edge semiconductors. Presently, India’s chip manufacturing capabilities remain relegated to being a “design services job shop’. The country finds itself in a unique position to leverage the Quad partnership, and try and convince a Japanese or American corporation to produce semiconductors in India, even if it’s at a low-cost node like 65 nm. An effective collaboration with partners will reduce the chance of failure while preserving the security of India’s fundamental defense and strategic interests. India is lacking in terms of manufacturing ecosystem for technological appliances and the Quad partnerships can help get the ball rolling.
The AUKUS defence alliance has demonstrated that the United States is prepared to share sensitive technologies with crucial allies, something it has previously refused to do. The Quad should adopt this new technological alliance mentality as well. India should lobby the United States to lower investment hurdles and loosen export restrictions. The first step would to be to focus on ramping up Integrated circuitry manufacturing capabilities which are je ne sai quoi of an effective electronics manufacturing ecosystem. India already has an advantage with regard to chip design and tech talent.
Recently, ISMC, a semiconductor consortium, claimed it would invest $3 billion in a fab on a 150-acre location in Karnataka, India. ISMC’s proposed 65-nanometer analog semiconductor production plant, according to Karnataka government sources, will employ 1500 people directly over the next seven years and create opportunities for more than 10,000 jobs in the ancillary ecosystem.
Countries like China and Japan are also ramping up their trailing edge manufacturing capabilities. News reports state that China is spending billions on improving trailing edge manufacturing capabilities whereas Japan is set to become home to Taiwan Semiconductor Manufacturing Company Limited’s two new trailing edge fabs. While India is still decades away from manufacturing cutting edge semiconductors, a focus on the trailing edge is a step in the right direction for the country’s semiconductor ambitions.