Why Doesn't India Produce Chips for the Automotive Industry?
India, a nation renowned for its educational institutions and software development, is often discussed in the context of its technical expertise. However, the question of why it doesn't produce chips for the automotive industry remains intriguing. This article explores the reasons behind India's inability to manufacture automotive chips, highlighting the differences between design and manufacturing, the requirements of modern chip fabrication, and the global equipment shortage.
The Distinction Between Design and Manufacturing
To begin with, it's essential to understand the difference between designing and manufacturing chips. While designing a simple chip can be relatively straightforward with today's advanced tools and software, manufacturing is a complex and capital-intensive process. Manufacturing requires billions of dollars' worth of specialized equipment and deep expertise that not everyone can match.
The complexity of chip manufacturing is such that it necessitates the existence of foundries—dedicated facilities that produce chips for the world. These foundries maintain stringent purity levels and intricate processes to ensure the quality and functionality of the chips they produce.
India’s Technical Expertise
India does have the technical expertise to design and possibly even use microprocessors in automotive applications. However, the bulk of the chips used in cars are simple components such as amplifiers and analog-to-digital converters. These chips can indeed be manufactured by simple semiconductor fabrication plants, but even these require significant investment.
Setting up a simple fabrication plant (fab) capable of producing automotive chips would cost tens of millions, whereas a leading-edge sub 10-nanometer 300mm wafer fab would require billions. The expertise required for the latter is not in short supply, but the capital to invest in such facilities is.
Equipment Scarcity and Delayed Delivery
A major challenge in semiconductor production is the availability of key equipment. Over the past two years, there has been a global push to increase the capacity of semiconductor fabrication plants. As a result, the equipment needed for these facilities has been in high demand and is currently out of reach for most newcomers.
Manufacturers typically do not build equipment for inventory; instead, they produce according to orders. This means that building a semiconductor fab is not just a matter of putting up a building and buying the necessary equipment. The lead time for the sophisticated machinery required can be long, often taking years from order placement to delivery.
Furthermore, the demand for used or repurposed equipment is intense, reducing the availability of such resources for industry newcomers. This equipment shortage has likely led to many industries, including India, falling short of fully developing their semiconductor capabilities.
Global Context and Future Prospects
While India faces challenges, the semiconductor industry is not unique to India. Most countries are struggling with the same issues. Large capital equipment, experienced scientists and engineers, and massive amounts of capital are required for semiconductor production.
To overcome these challenges, countries often look to leading companies for collaboration. For instance, Intel, a major player in the semiconductor industry, is investing billions of dollars in facilities and RD. TSMC, the largest foundry in the world, plans to expand production significantly, and Samsung is also making substantial investments.
Given India's technical expertise and the growing demand for semiconductor manufacturing, it could become a player in the industry. One potential avenue is to attract investment from leading companies such as Intel. Raising about 10 billion dollars in initial funding would be a necessary step to show seriousness in this venture. Intel, for instance, is investing 20 billion dollars to expand its Phoenix facilities and plans to invest 200 billion dollars in new facilities in Ohio and Germany. TSMC has plans to spend 100 billion dollars to expand its production capabilities, while Samsung is planning a 205 billion dollar investment.
India's automotive sector could benefit from semiconductor advancements, enhancing its global competitiveness. With the right strategic investments and partnerships, India could forge a successful path in semiconductor manufacturing.