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India, Taiwan May Ink Mega Deal to Set Up $7.5 bn Chip Manufacturing Plant

INDIAPOSITIVE

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In order to address the global semiconductor chip shortage issue, India is in talks with Taiwan. According to an exclusive report by Bloomberg, this could bring chip manufacturing to South Asia along with tariff reductions on components for producing semiconductors by the end of the year.

The Bloomberg report said that officials in New Delhi and Taipei have met in recent weeks to discuss a deal that would bring a chip plant worth an estimated $7.5 billion to India to supply everything from 5G devices to electric cars

World leaders and executives at multinational corporations have been worried about the global scarcity of semiconductors, which has hit manufacturing and sales in numerous countries and no early solution is in sight.

Here’s a closer look at the crisis:

What caused the semiconductor shortage?

Semiconductors, or chips, have properties that are somewhere between conductors and insulators. Usually made of silicon, they are used to power a wide range of devices - cars, laptops, smartphones, household appliances and gaming consoles.

These tiny objects perform a host of functions such as powering displays and transferring data. So, a supply crunch has a consequent impact on sales of cars, fridges, laptops, TVs and other electronic devices.

Manufacturing cannot be increased on short notice. As a Bloomberg report points out, making chips is a complex process that takes months.

Taiwan Semiconductor Manufacturing Corporation (TSMC) is the world’s largest contract chipmaker, whose customers include Qualcomm, Nivdia and Apple. It holds 56 percent of the foundry business of manufacturing chips.

The surge in sales for electronic devices during the pandemic created a huge demand for semiconductors. But COVID-19 is not the only factor behind the shortage.

The tense relationship between the United States and China is also a factor, since many US companies do business with Chinese companies. For instance, Huawei, which supplied to American chip makers, has been blacklisted by the US government.

What are the possible fallouts?
Since production cannot be pushed at short notice, it takes chip manufacturers a long time to catch up with demand.

A report published by Gartner in May estimates that the chip shortage across categories of devices could continue well into the second quarter of 2022.

“The semiconductor shortage will severely disrupt the supply chain and will constrain the production of many electronic equipment types in 2021. Foundries are increasing wafer prices, and in turn, chip companies are increasing device prices," said Kanishka Chauhan, principal research analyst at Gartner.

One report by Bloomberg points out that chip lead times, or the period between ordering semiconductors and delivery, rose to a record 21 weeks in August, from six weeks in July.

According to data from Society of Indian Automobile Manufacturers (SIAM), automobile wholesales in India declined 11 percent year-on-year in August.

Maruti Suzuki, India’s largest carmaker, will see a 60 percent cut in production in September due to shortage in supply of semiconductors.

Mahindra and Mahindra M&M said it would cut output by 20-25 percent in September due to the semiconductor shortage. The automaker will observe seven “no production days" at its automotive plants during the month.

There is a strong likelihood that the semiconductor shortage will impact sales during the upcoming festive season in India.

What about laptops, smartphones etc?
Production of electronic devices has also been impacted by the shortage of semiconductors.

During a post-earnings call with analysts, Apple CEO Tim Cook had said that “supply constraints will hurt sales of iPads and iPhones. Cook said the shortage is not in high-powered processors, but “legacy nodes,” or chips that perform functions like driving displays or decoding audio, which can be manufactured using older equipment.

South Korea’s largest conglomerate Samsung Group had in August said it would invest 240 trillion won ($206 billion) in the next three years to expand its footprint in biopharmaceuticals, artificial intelligence, semiconductors and robotics.

Many tech companies have begun developing their own chips, a move that will not only alleviate the current supply concerns but will likely help the industry in the long-run



 

Surya 1

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This one is an ignored area. India need it badly. Building of electronics industry is the need of hour and essential to noost India's GDP by 10 pc for next 25 years.
 

Dustom999

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But of course, by the time the plan comes to fruition ( probably a decade) , the chip shortage would have been resolved by manufacturers who are THE- already players in the area. Manufacturing would already be in surplus and prices plummeting!
As Usual story of " A minute late, a dollar short "
 

Dustom999

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I hope not. And India in any case needs an enlarged chip manufacturing plant other the smallscale and niche SCL in Chandigarh.
"Hope" Is not a plan!
Atleast not one worthy of being a success!
India needs a lot of things, needs are not capabilities.
 

Globenim

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Thats going to become a ****show with unsustained pure water and energy supply. Those things arent sweatshops where you can just diddle around the process with some Jugaad hacks.
 

STREANH

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Points to note:

Taiwan has welcomed cooperation between the two sides on semiconductors although it is still evaluating the proposal given a lack of ecosystem for setting up a chip fabrication plant in India, people familiar with the matter said. The Taiwan side has flagged concerns on the supply of water and electricity, and suggested that it may be more feasible for India to start creating a chip design sector first before proceeding to building fabs, according to one of the people.

India Accelerates Talks With Taiwan on Chip Plant, Trade Deal (bloombergquint.com)

I doubt our short sighted politicians will be willing to invest tens of billions of dollars into this venture.
 

jamahir

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The Taiwan side has flagged concerns on the supply of water and electricity, and suggested that it may be more feasible for India to start creating a chip design sector first before proceeding to building fabs, according to one of the people.
@Anik101, the underlined. You said that Indian companies / organizations design chips and I negated that. The Taiwanese agree with me.
 

Sudarshan

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Points to note:

Taiwan has welcomed cooperation between the two sides on semiconductors although it is still evaluating the proposal given a lack of ecosystem for setting up a chip fabrication plant in India, people familiar with the matter said. The Taiwan side has flagged concerns on the supply of water and electricity, and suggested that it may be more feasible for India to start creating a chip design sector first before proceeding to building fabs, according to one of the people.

India Accelerates Talks With Taiwan on Chip Plant, Trade Deal (bloombergquint.com)

I doubt our short sighted politicians will be willing to invest tens of billions of dollars into this venture.
We have a very big fabless industry already
 

jamahir

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We have a very big fabless industry already
The SCL in Chandigarh does produce chips at small-scale for ISRO and I suppose also for the military but the commercial fabless companies here don't design anything of consequence but just use use Western designs either through licensing ( the ARM architecture for example ) or implement open source architectures ( for example IIT-Madras' Shakti project which is an implementation of RISC-V or IIT-Bombay's AJIT project which is an implementation of SPARC ).
 

kankan326

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1, If India talked with Taiwan government instead of TSMC, don't have high hope to the deal. Taiwan government is pretty much like Indian government. Really unreliable. It is only good at plans and bragging.
2, China mainland may reunify Taiwan in 5 years.
3, China mainland may have fab that produce 14-7nm chips with fully domestic technologies. Which made-in-India chips can not compete with by then.
 

FairAndUnbiased

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Even if this happens, it will take 10+ years to finish, the equipment is going to be 100% imported, the chemicals will be 100% imported, costs will be sky high because they need multiple backup generators due to poor electrical reliability and the fab will operate at very low productivity due to lack of talent.

it takes 7-8 years to build a fab in the US. Is India faster or slower than the US? Can someone tell me if India is more or less business friendly than the US?
 

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