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Setting up a single semiconductor manufacturing foundry requires massive investments, usually running up to $3 to $4 billion. To compare it with current investments, Micron is pumping in $825 million just to set up its packaging facility.
“Given our infrastructure and the lack of an ecosystem for semiconductor supplies, it would require many auxiliary industries, which are not present in India, to import into India,” said BITS Pilani Campuses group vice-chancellor Professor V Ramgopal Rao, in an interview with AIM.
The Indian government has been very clear about its semiconductor mission, which was launched in 2021. Currently, India is the second largest importer of semiconductor chips globally after a 92% increase in chip imports in the last three years.
Rao said that investing so much in a country where the infrastructure is not up to the standard is not an attractive option for big companies.
India is all About Manpower
Many companies from the Global North look to India as a source of cheap labour. This is where the problem lies. According to Rao, the semiconductor industry does not require as many employees to work as India has to offer.
“A full-fledged foundry with 50,000 wafers will hire only 1,500 employees. That’s all,” he said. Such small numbers, he elaborated, compounded with the missing infrastructure, do not attract the investments needed. In comparison, Malaysia, Singapore, and Taiwan are much better options for them.
Though there are a number of designing and manufacturing companies in India, there is no foundry. Despite several startups in Bengaluru, manufacturing still happens in other countries. Rao said that the increasing number of such front-end semiconductor companies might attract more investments in the future. “For design, India is a powerhouse,” Rao said.
To put this into context, Mindgrove Technologies, a fabless semiconductor startup supported by Peak XV Partners, recently unveiled India’s inaugural commercial high-performance SoC (system on chip) dubbed Secure IoT.
Rao gave the example of the automotive industry, saying even though India is one of the major players exporting components to several countries in the industry, there is no innovation in the country. “Does India have any cars that others don’t?” asked Rao, saying that the cars that India builds are generations behind.
On the other hand, Rao believes that the reason India hasn’t built something like a Tesla is a lack of collaboration with academia. “Nobody wants to take mechanical engineering in the country because there are no jobs and no collaboration from the industry with academia,” said Rao.
Coincidentally, in a similar post on X where a user said that India cannot compete with Japanese or American cars, Mahindra Group chairman Anand Mahindra thanked the person for the scepticism.
“We were told the same thing when Toyota and other global giants in the EV space entered India. But we’re still around. Every day is a fight for survival,” he said while acknowledging that there needs to be more innovation and investment in the automotive industry.
Even when companies want to build a technology, they choose to partner with companies outside India and do not focus on academic partnerships. The same is the case with the semiconductor industry. “Companies want to come to India for cutting costs with cheap labour, not for innovation capabilities,” said Rao.
Meanwhile, there is also a rise in semiconductor GCCs in India, which accounted for 30% of the GCCs set up in Q4 2023.
Need for Industry-Academia Collaboration
As Rao mentioned, there is a significant lack of collaboration between academia and industry, hampering the innovation potential across sectors. “The future lies in connecting academia with industry, which will enable India to lead in markets like sensors and IoT,” he said.
Although there is considerable research happening in academia, it isn’t being utilised for innovation in Indian products, agriculture, or future technologies. Additionally, students are not industry-ready because industries aren’t collaborating with academia.
The missing link is the lack of collaboration between academia and industry. Once the industry gets involved, it will direct research, making it more relevant.
“When it comes to semiconductor jobs, there’s a significant gap in India. While there is a demand for design specialists, there are fewer opportunities in fabrication and sensor-related jobs,” Rao added. Consequently, many semiconductor specialists end up working abroad.
Similar to the semiconductor industry, the development of AI is also slow for similar reasons, namely a lack of investment in research and development. “India’s research spending is insufficient to support innovation in high-tech areas like AI. The government’s reluctance to invest further exacerbates the problem,” he added.
“It took OpenAI tens of billions of dollars to make ChatGPT. The research funding in India is so tiny,” Rao added. For AI, there is a dire need for GPUs. Indian universities barely have GPUs in the double digits for AI research. Meanwhile, the total amount of research funding that Indian universities receive, China spends on just two universities.
The bureaucratic hurdles in spending allocated funds make it challenging for researchers to utilise the money effectively, leading to further cuts in research spending. “The next government looks at the last budget and adds some 5% to that, but the base is already very low,” Rao explained.
The same happened with the INR 600 crore that the Indian government had allocated for quantum computing research. “Not a single rupee has come out still, though there are around 400 proposals submitted,” said Rao.
The government’s hesitation to invest more in research is due to the low base of research spending, coupled with bureaucratic hurdles in spending allocated funds. This vicious circle hampers innovation and research in India, but unfortunately, it’s a topic that receives little attention.
