Semiconductors - Essential Snacking Chips of India's Digital Future

Happy Weekend to you!

“The number of transistors on an integrated circuit will double every two years with minimal rise in cost” – Moore’s law.

If you have come across this statement and do not understand what it means, don’t worry, you’re not alone. This “law” has been a guiding principle of the semiconductor industry. And I’m going to attempt to provide a basic understanding of the semiconductor industry.

When I first heard someone talk about semiconductors, I thought it was very technical and would require a detailed study just to understand the industry basics. So obviously, I was hesitant to even begin reading about it.

But the last long weekend gave me enough time to mentally prepare myself and I dived into it. I realized I was wrong. Semiconductors are not that hard to understand. It is, however, vast. In fact, there’s so many things clubbed within the “semiconductor industry” that it is tough to even define it.

What are Semiconductors?

Let’s start with basics – materials may be classified into 3 types primarily based on whether or not they conduct electricity.

A semiconductor’s electrical properties can be controlled through “doping” – process of adding certain impurities. Thus, there are 2 types of semiconductors:

• N-type: Doped with impurities containing extra electrons, such as phosphorus, arsenic, antimony, or bismuth. These extra electrons make the semiconductor more conductive.
  

• P-type: Doped with impurities containing fewer electrons, such as boron, gallium, or aluminum. These "holes" create vacancies in the crystal lattice, making the semiconductor less conductive.

Great, but where are these semiconductors used?

Semiconductors are ubiquitous in our lives, powering everything from our computers and phones to cars and medical devices. They make our devices more compact, affordable, and powerful.

Here’s a technical breakdown on the types of semiconductors and their applications, along with the key global players for each type.

Gateway to Growth: The Broad Appeal of SOC Segment for Companies

In the ever-evolving semiconductor landscape, Intel's dominance in microprocessors has reshaped the competitive dynamics, leaving few contenders in the mainstream market apart from AMD. Meanwhile, the memory market's consolidation has driven prices to historic lows, allowing only major players like Toshiba, Samsung, and NEC to sustain their presence. With razor-thin profit margins, the commodity integrated circuits segment poses challenges for smaller players, while the SOC segment emerges as a beacon of opportunity amidst the industry's shifting landscape.

Like I said before, the semiconductors space is VAST. Therefore, while understanding applications / use is helpful, it is equally crucial to grasp the industry's structure from a value chain perspective. Over time, the industry has evolved with companies specializing in distinct activities within the value chain.

The Semiconductor Value Chain

Semiconductor firms typically structure their operations around the primary stages of semiconductor production, which encompass design, manufacturing, testing, and packaging. Otherwise regarded as ancillary, one must also consider companies that manufacture equipment used in the semiconductor production process. Here’s a quick overview –

Why has the semiconductors space gained traction recently?

As stated earlier, semiconductors are essential components in mobile phones, other electronics, automobiles, computers, etc. Before the COVID-19 pandemic, Taiwan (TSMC), USA (Intel & AMD) and Korea (Samsung) were global leaders in the semiconductors space.

As the pandemic struck, the need to become digital arose. Thus, the demand for semiconductors shot up massively. But the pandemic-induced lockdown caused shortages and disruptions in production across industries. That’s when nations realized the importance of self-reliance and began focusing on their semiconductor production strategies. Initiatives include investing in domestic chip-manufacturing capabilities, diversifying production locations, and fostering collaboration among stakeholders.

What does this mean in the Indian context?

India’s electronics consumption has surged in the past few years. Resultantly, India’s semiconductor market size is projected to reach ~US$ 55Bn by 2026. About 60% of the semiconductor demand in India is primarily from smartphones & wearables, automotive parts, computers, data storage.

What’s noteworthy is that India relies heavily on imports (Taiwan, South Korea, China, Singapore) to meet its semiconductor requirements. And while things were manageable until 2019, the pandemic was a huge eye opener because even Taiwan and other countries could not escape the lockdown and labour shortages. This impacted India’s electronics production.

Consequently, the Government of India approved the Semicon India Programme with an outlay of ~US$ 10Bn (INR 76,000 crore) in 2021 which contained schemes to attract investments in semiconductors and display manufacturing.

The Semicon India Programme was modified in 2022 to include the following schemes:

• Scheme for setting up Semiconductor Fabs in India

• Scheme for setting up Display Fabs in India

• Scheme for setting up Compound Semiconductors / Silicon Photonics / Sensors Fab / Discrete Semiconductors Fabs and ATMP / OSAT units in India

• Design Linked Incentive (DLI) scheme

Additionally, the government also approved the modernization of Semiconductor Laboratory as a brownfield project.

Furthermore, the Government of India recently (Feb 2024) approved a major investment in 3 semiconductor plants worth US$ 15.2 billion (INR 1.26 trillion). All 3 plants are targeted to begin construction within 100 days of the investment approval.

The Tata Electronics Plant will manufacture high-performance computing chips with 28nm technology at a total capacity of 50,000 wafers per month (1 wafer has ~5,000 chips thus it translates to a capacity of ~3 billion chips a year). These chips will broadly cater to sectors such as high-power computing, electric vehicles, telecom, defense, consumer electronics, automobile, and power electronics.

As for the TSAT plant, 2 large American conglomerates are said to be part of it. The chips from the Assam plant will largely be exported to companies like Tesla.

CG Power and its partners will have a JV, with CG Power having the highest stake at ~92% for an investment of US$ 205 million, followed by Renesas at for ~7% for a US$ 15 million investment, and Stars at ~1% for US$ 2 million.

Additionally, the Government had approved US chipmaker Micron Technology’s US$ 2.7Bn investment in a semiconductor packaging plant in Gujarat.

Yes, India has directed focus towards semiconductor manufacturing, and it will be interesting to see how the space develops.

In Conclusion

Conclusion? Already? It is probably too soon to conclude given that there are a lot of unanswered questions – such as different types of chips and their uses, contribution of each value chain segment, share of end-use applications, landscape of Indian companies in the semiconductor universe, way forward and just so much more.

While the semiconductors concept in itself is not too hard to understand, it surely has a lot of layers to unfold. One article cannot possibly to justice to all those layers, and so I will come back trying to cover as many aspects as possible in subsequent  write-ups. In the meantime, feel free to tell me what you’d like to read about in this space, or even otherwise.

Till then, toodles!

3 Weekend Recommendations by Yours Truly –

Exercise!

Go for a walk / jog / run for 5kms (for starters) or more (if you’re a regular). I did my first ever 10k run last weekend and it was exhilarating!

Live life on dopamine high!

Cook!

There’s a “no bread sandwich” trending on social media. It is either made of semolina (rava / suji) or lentils (dal) or a combination of the two. There are other recipes too. I tried the one with lentils (because hey protein is important!) and it turned out great! Yes, it works! Here’s a photo for reference – and hopefully enough motivation for you try it out!

Show some love to the furries!

There’s an impending heat wave in the country which means that our animal friends need a little extra care. If you can, please do keep a bowl of water at your window or in your society and help the furries quench their thirst or have a nice bath!

We generally have water bowls and food dispensers at our windows round the year for birds and in our society for cats and dogs. But a little help from you in the summers will go a long way 😊