Being Chipper

With Tata-ASML deal, India’s finally getting into chip manufacturing, and in a big way

It won’t be long before semiconductors, or chips, sold in a year are worth more than oil. Just last week, TSMC, world’s largest chipmaker, said annual chip sales could touch $1.5tn by 2030. How many might be made in India? A few days ago, the answer would have been a clueless shrug. Now, after Saturday’s agreement between Tata Electronics and Dutch firm ASML, it’s fair to say we’ll be a significant player.

Truth is, we are big players in chipmaking already. Only, not in the most obvious way, which is to manufacture the chips themselves.

Our tech talent has a big role in the brainy job of chip design. By most estimates, 20% of world’s chip design engineers are Indian. Early this year, Qualcomm acknowledged the contribution of its Indian team in the making of 2nm chips – currently the most advanced. We’ve also become big players in back-end tasks of testing and packaging chips made by others. Two years ago, we were ranked the third most attractive destination for these tasks, behind Taiwan and Malaysia.

The Tata-ASML deal, however, puts us on the road to actual chip manufacturing, the front end. ASML, if it’s slipped your attention, is the only manufacturer of machines that print out circuits on silicon wafers. Each of which costs a few hundred million dollars. And Tata’s plan is to invest $11bn in its brand-new chip factory at Dholera, Gujarat. But it won’t make headline-grabbing 2nm chips, or even the 4nm type that’s a smartphone staple now. Instead, it will make workhorse chips of sizes ranging from 28nm to 110nm.

That’s not a bad thing, because bulk of chip demand is for these ‘mature’ types that have been around for years. For example, 2013’s iPhone 5s had a 28nm chip. These older generation chips cost a few dollars each now, but are indispensable in cars, and industrial equipment. Their shortage can jam assembly lines.

And as the big-name firms pivot to making AI chips, shortages of mature chips are looming. That’s why China is ramping up capacity, and it’s a good opportunity for India to make the leap, too. The fact that Tata has chosen to use 300mm wafers, rather than 200mm, to fabricate chips shows it’s aiming for scale. GOI also wants 70-75% of India’s chip demand fulfilled locally. That will save billions in forex, and quell any doubts about our chipmaking ambitions.