Taiwan can help India build semicon industry

Recently, Taiwan has drawn worldwide attention for its capacity to supply leading-edge computer chips. Leading chip producers in Taiwan, including TSMC, UMC, MXIC and others manufacture more than 60 per cent of the semiconductors for the world market. Big automakers and electronic 3C companies asked Taiwan suppliers to provide more chips because the demand for electronics surged during the Covid-19 pandemic.

To solve the problem of chip shortage, building a stable semiconductor supply chain is the only solution, and seeking cooperation with Taiwan looks like an attractive option for India where the demand for semiconductors is rising in automobiles and electronic industries.

Semiconductor chips make up the brains of electronic products. They are used in all electronic products like mobile phones, 5G networks, high-speed computers, automobiles, and so on. Very few companies today can manufacture the most advanced chips, which are made in semiconductor fabrication plants, also known as foundries (or 'fabs' for short).

The most famous and advanced fab company in Taiwan is TSMC. Its innovation and capability has ensured that Moore's Law continues to hold even today - that is, the number of transistors on a dense integrated circuit (IC) doubles every two years. TSMC holds a major share of the global chip market, roughly 56 per cent. Smaller fabs such as UMC, MXIC, PSMC and VIS also play major roles in the semiconductor industry. Taiwan’s closest competitor is South Korea, where Samsung holds roughly 19 per cent of the chip market share globally.

A semiconductor supply chain (SSC) comprises system companies, EMS companies, IC design houses, IC manufacturing fabs, IC assembly houses, testing companies, verification, packaging houses and end consumers.

To support a sustainable and continuous SSC, it is crucial to understand the principles of supply chain management. At the same time, SSC companies need to focus on environmental processes, social practices and economies of scale. To create a sustainable future, supply chain companies should work to improve the manufacturing process and quality, reduce the environmental impact and work to protect labour rights.

In India, the ecosystem required to manufacture semiconductor chips and equipment suppliers does not exist at the moment. Building a semiconductor fab could be the future, but the question is, how long will it take to develop a semiconductor manufacturing ecosystem? Another crucial question is funding. Should the funding be generated from the government, or private players, or a mix of both? In fact, some important strands of the semiconductor ecosystem outside of an actual fab do exist in India. Virtually, all large chip design companies in the world like Intel, AMD, Mediatek and Google have their technology offices/labs in India.

Moreover, a considerable number of startup companies with the potential to go global are designing chips in India. Most importantly, India has a huge consumer base with which no other country can compare. 33 million smartphones were sold in Q2 2021, and millions of consumers are waiting to upgrade to their first smartphones. India’s large smartphone, 5G, and IoT markets can trigger a burgeoning semiconductor manufacturing base.

For now, India’s journey to an indigenous semiconductor sector has already begun with some global fabless IC design houses starting their assembly, testing, marking, packaging (ATMP) operations here.

India has to make strategic plans about how to learn from Taiwan’s experiences, expertise and technologies through mutually beneficiary arrangements. It is necessary to encourage the private sector to get involved, create an SSC ecosystem through connecting local fabless IC design companies, and formulate proper strategies to set up semiconductor fabs. Taiwan could be India’s best friend on a long term basis should India focus on creating its own semiconductor eco-system, starting from fabless IC design houses, building ATMP plants, and finally setting up its own fabs. If India can get all the experience it needs from one source, it is from Taiwan.

(The writer is associate director of Taiwan Desk, Electronics Industries Association of India.)