05-04 ISMC semiconductor

[Image above] Semiconductor chip consortium ISMC signed a memorandum of understanding with the government of India’s southern Karnataka state to set up India’s first commercial semiconductor manufacturing plant. Credit: Invest in Karnataka, Twitter

As we enter the fifth month of 2022, it is becoming increasingly evident that time alone will not solve the ongoing supply chain crisis. Instead, analysts expect that the approach to storage and shipping of goods will shift, with companies sourcing and manufacturing items closer to the point of consumption.

For this shift to happen, however, facilities capable of manufacturing the desired goods will need to be built domestically. The semiconductor industry is one sector already making great strides toward this goal.

Semiconductor chips are small electronic circuits that provide the foundation for computers and other electronic devices. When the COVID-19 pandemic started upending everyone’s lives in 2020, several factors culminated into an ongoing global semiconductor chip shortage, causing severe problems for industries that rely on electronics.

This shortage and other supply chain issues led manufacturers and government officials alike to consider more closely the benefits of domestic manufacturing. Recently, the results of these deliberations became public as the U.S. government as well as multinational corporations such as Intel announced initiatives and new fabrication sites to support domestic chip manufacturing.

Of course, U.S.-based entities are far from the only ones considering ways to fortify domestic supply of semiconductor chips. In recent months, the government of India laid the groundwork to bring commercial chip manufacturing to India for the first time.

Though defined as a lower-middle-income country by the World Bank, India has made significant progress integrating into the global economy since the 1990s and is now counted amongst the world’s leading emerging markets.

Information technology is one industry in India that particularly stands out, accounting for 8% of India’s GDP in 2020. However, while India excels in providing information technology-enabled services, domestic manufacturing of electronic components remains lagging.

Semiconductor chips are a prime example. While India has done well in research and development of semiconductor chips—an India Briefing article states the Indian semiconductor design market was projected to reach US$52.6 billion in 2020—the country has few semiconductor fabrication plants and none are for commercial use.

In November 2021, India prime minister Narendra Damodardas Modi announced that India aimed to become a major global manufacturer of semiconductor chips during his keynote address at the inaugural Sydney Dialogue, hosted by The Australian Strategic Policy Institute.

In his speech, Modi said the government was working on a package to push domestic semiconductor chip production. A month later, on December 15, the Indian government approved the Semicon India Program, with an outlay of INR 760 billion (>US$10 billion) for the development of a sustainable semiconductor and display manufacturing ecosystem in India. On December 30, the Indian government announced it would start receiving proposals from companies for semiconductor and display manufacturing from Jan. 1, 2022.

On April 29–May 1, 2022, the inaugural SemiconIndia 2022 Conference took place, organized by the Indian Semiconductor Mission, an independent business division established by the Semicon India Program to drive long-term strategies. The conference served as the formal launch pad of India’s semiconductor strategy and policy, and Modi emphasized again during the opening session why India is uniquely positioned to play a bigger role in the global semiconductor supply chain (see video below).

Credit: Bharatiya Janata Party, YouTube

To date, India’s government has received proposals from five companies to establish electronic chip and display manufacturing plants with an investment of INR 1.53 trillion (~US$20.5 billion).

On May 1, chip consortium ISMC, a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, publicly announced its plans to invest up to $3 billion in India’s southern Karnataka state to set up India’s first commercial semiconductor manufacturing plant. (Intel announced plans to acquire ISMC partner Tower Semiconductor).

ISMC is not alone—Reuters reported on April 30 that Indian multinational mining giant Vedanta is in talks with several Indian states and supposedly has a planned investment outlay of $20 billion to begin its foray into semiconductor and display manufacturing.