Some thoughts on VLSI manufacturing in India

This particular post is an extension of the previous one. Here, Rajat Gupta, MD, Beceem Communications, shares some thoughts on what can be done in India for VLSI manufacturing. So, rather than these comments getting lost in the blog, it deserves an individual post.

VLSI manufacturing: The government of India has to give appropriate incentives to this industry and suitably phase these to allow an ecosystem to build up. The fabless model is fine for companies to transact their business. But, India needs to have this technology or some semblance of it to start with or else it would never be able to count herself amongst the leading nations of the world. How can we achieve that?

a) One of the quickest ways to get started is to create an organization (with equity wholly or partly owned by the government of India) with the charter that that company invest in/fractionally own some of the leading semiconductor manufacturing facilities in Taiwan. TSMC may be very difficult to own even modest percentages, but simultaneously buying reasonable stakes in UMC, Chartered Semiconductor, the IBM multi-platform consortium may be possible with (my guess) at under $1 billion that gives adequate leverage. This organization then makes available fab capacity (that is available to them now due to their fractional ownership) to fabless product companies with intended product sales in India.

b) Repeat the above for packaging, assembly, and VLSI test operations. (The challenges are less here though, but these are just as important elements of the ecosystem).

c) With this, India will “own” leading edge VLSI technology although in a circuitous manner, but given that we missed the boat by over 20 years I think this is a reasonably low cost but effective way to get a starting foothold.

d) Next, and in parallel, the government ought to give incentives to companies to create semiconductor manufacturing capacities on Indian soil but buying re-furbished and lower cost equipment at previous generation technology nodes.

Some policies are required here that allow easy transport back-and-forth of sub-assemblies for repair and replacement.

The business model here would be that the government provides land (to drive the concentration of such technology around three to four zones distributed across the country) but companies should be able to do this on their own should they so choose to. These companies in return bring in (a) captive manufacturing load (whether for sales in India or export, both are ok) and additional spare capacity (or, equivalently, a commitment to scale up with an incentive/penalty structure) to stimulate manufacturing by Indian fabless companies.

e) Eventually, the organization(s) in (d) above will “catch” up with those in (a) above. There will need to be phased modification of the incentives, reducing some, changing some such that over a six-seven year period all incentives can go away and the eco-system will be self sustaining.

f) Well, not quite, we will also need to address (i) the semiconductor manufacturing, assembly, test equipment manufacturing and (ii) the semiconductor manufacturing raw materials (silicon wafers, silicon grade pure chemicals, etc etc). The focus to these technologies have to be phased to the decade after the steps outlined in (a) to (d) have yielded some measurable results.

Friends, please feel free to share your thoughts, comments, etc., and add value.