Tech Take: The many times when India missed the Semicon bus

Over India’s history as an independent nation, there have been many instances where a single decision would have changed the technological fate of the country for good. Many a time when major tech companies wanted to set up semiconductor research and development (R&D) units or fabrication plants India faltered.

However, government apathy, logistical challenges, corruption and the mind-numbingly slow-moving bureaucracy of an older India ensured that no major tech company considered India as a safe bet to set up a semicolon hub in. Figure this: In 1987, fabs in India were only two generations behind the rest of the world. Today, according to estimates, we are nearly 12 generations behind.

Governments, bureaucrats, ministers and Indian private businesses alike, simply did not have the vision that could nurture a semicon industry in India, irrespective of the party in power.

It all started in the early 1960s, when Jawaharlal Nehru was the prime minister. Fairchild Semiconductor, one of the biggest giants in the transistor and semiconductor space back then, wanted to set up a silicon-based fabrication unit in India. This was at the moment when the silicon revolution was at its cusp. However, because of bureaucratic lethargy, Fairchild ultimately went to Malaysia.

Again, in 1969, Intel had planned to set up a semiconductor manufacturing facility in the country. During his visit to India, Robert Noyce, the co-founder of Intel, who was exploring opportunities to set up a fabrication and R&D unit in the country, was told by the Indira Gandhi-led government, that he could only set up a fab unit if the production and export did not exceed hundreds of thousands of chips every year. Obviously, this was an unacceptable condition.

Meanwhile, after the 1962 war, Bharat Electronics Limited or BEL did set up a fabrication unit that made silicon-based chips, but mainly manufactured germanium transistors. However, we did nothing to protect BEL’s technology, and simply gave ourselves up to cheaply made, and higher quality integrated circuits from China and Taiwan, in about two decades.

In the late 1980s we had Metkem Silicon Limited which, in partnership with BEL, designed and made polysilicon wafers for solar cells and electronics. This could have been a major step to bring in an electronics revolution in India. However, because of a lack of vision and cheap ICs from China and Taiwan, BEL couldn’t match the global quality and price competition, and many of the fab units went defunct as demand for India-made ICs and chips dwindled.

Surprising is the inadequacy with which India’s governments handled fabrication units that were operational and were churning out good and cheap ICs.

Semiconductor Complex Ltd. (SCL), Chandigarh, for example, started by making ICs using the 5000nm process in 1984, and quickly developed their own 800nm process by 1986. During this time China and Taiwan were just getting started with ICs and were at a nascent stage.

An unfortunate fire at the SCL Chandigarh plant in 1989 set back SCL, and thereby India’s silicon industry by decades. There was very little to no initiative by the VP Singh-led government to revive SCL in any way, even though SCL was a core supplier to many government-run industries. Ultimately, it was bought for scraps by ISRO, and was used to make about 5,000 to 10,000 chips a year, down by about 90-95 per cent from its best years.

Sometimes, India’s semicon dream was also dashed owing to external forces. In 1998, in the aftermath of the Pokhran nuclear tests under the leadership of Prime Minister Atal Bihari Vajpayee, the US imposed several sanctions on India. Owing to the sanctions a major silicon designing and manufacturing company headquartered in the US, had to back out of discussions for setting up an R&D centre and a fab unit in India.

“We were this close in setting up an R&D centre in India back then,” a senior level executive at the company told Firstpost. “We were exploring options near Hyderabad and Bengaluru for it. However, we had to back out because of those sanctions.”

In 2005, right after former Prime Minister Manmohan Singh took charge, Intel started their operations in India and had employed several experienced professionals and established a state-of-the-art cleanroom, specifically a class100 facility, to inspect semiconductor impurities.

However, the required equipment imported from the US encountered significant delays at the port and was stuck for several months. Furthermore, in addition to facing substantial import duties, they were also burdened with substantial demurrage fees.

Ultimately the equipment was taken away from India and sent to China, two years later. China not only welcomed the project but provided the company with all the necessary support as well as incentives worth billions.

On top of all this, one of Intel’s major competitors, who were also planning to set up a unit in India, saw what happened, and decided to set up their shop someplace else.

This one experience with Intel, came to haunt us again in 2012-13, when the government led by PM Manmohan Singh set aside Rs. 39,000 crore to construct two semiconductor fabrication plants in India. The JP group, IBM and HSMC, participated in the bidding process.

The government of Gujarat promptly provided the necessary infrastructure and earmarked 300 acres of land near Gandhinagar. However, because the government had treated Intel, HSMC was unable to assure its investors of a promising market and a favourable environment in India. Consequently, it had to withdraw its bid.

After decades, we have foreign chipmakers, the best ones no less, interested in setting up shop in India. It is imperative that we don’t lose them this time. If we do, we will be playing catch up with the latest fabrication technology for another 15-20 years, given the rapid pace with which it is developing today. More importantly, though we will miss a major opportunity to become a major player in many other aspects of technology that will shape the future.