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Veterans Draw Semiconductor Industry Post COVID-19

As deaths climb and the human toll mounts, leaders are focused on containing the virus and saving lives. Alongside, pertinent efforts are been made to clutch the consequences of COVID-19. Long-running lockdown in this country(India) has its own implications to several businesses, and many seem to face the heat. But, one industry, i.e. Semiconductor is known for influential approaches for decades and has been a mill-runner has understood the balance and has found new opportunities during this crisis. In our earlier articles, I did skedaddle on the latest announcements made the Central Government including a production-linked incentive scheme, with a total outlay of almost Rs. 48,000 crore, Production Incentive Scheme (PLI) for Large Scale Electronics Manufacturing among other vital announcements to help foster indigenous electronics manufacturing. Dr Satya Gupta | IESA Chairman and Founder & CEO, Seedeyas Innovations Pvt Ltd & Kuldeep Malik | Director – Corporate Sales, MediaTek India shares their school of thoughts on the situation of the Semiconductor Industry and way-forward transformations post COVID-19.Semiconductor Industry

Ingredients to Make India a Fabless Semiconductor Manufacturing Hub

According to the recent IESA ESDM 2020 report, the Indian market has grown at a CAGR of 14%, between 2016-19, and is likely to grow at 16.6% CAGR from 2020-25. While electronics production contributes 3.3% to the economy at present, it is seen rising to US$320Bn by 2025.

Citing about the fabless industry, Dr Satya Gupta quoted, The fabless industry by the very definition does not depend on local manufacturing. Fabless companies like Qualcomm, Broadcom etc. have developed path-breaking semiconductor products without having their own fab or fab in the close proximity. Most of the fabless companies use the fabs in Taiwan, Singapore etc. Fabless semiconductor product companies are very important & essential for any country in today’s environment as these products are at the heard of most of the systems across any industry. It also gives the country a significant strategic edge and paves path for successful wafer Fabs in the future. In India, for various reasons the Chip design talent which has been groomed by many MNC companies over last 3 decades, has not translated in vibrant fabless product companies & Eco-system. Some of the factors which can help in changing this situation are 1). Provide mechanisms for appropriate funding, 2). Help start-ups and Innovators on business, funding and product marketing type of the areas. 3). Create mechanisms of creating fabless product companies out of the R&D done at premier technology institutes in India. This has worked very well in Silicon Valley, Taiwan & China.

Whereas, Kuldeep Malik, Director – Corporate Sales, MediaTek India believes, The COVID-19 crisis and resulting social distancing have made wireless communications necessary for India’s economic and strategic interests. The lockdown has created a major opportunity for the semiconductor sector as the work from the home economy is seen increasing the requirement for storage solutions. We expect to see an economic shift due to the work from home trend which will continue to raise demand for mobiles, routers, servers, data centers, laptops, display monitor, and other computing segments, boosting opportunities for India’s fabless semiconductor segment as newer business models will be created, centering around technology.    MediaTek has always been focused on R&D in India and is keen to support the government’s ‘Make in India’ initiatives. While announcing the economic relief package, the Finance Minister stressed on technology-driven systems as one of the five key pillars of growth and focused on self-reliance. The stimulus and relief packages are expected to help India’s economy to overcome the negative effects of the lockdown and we are hopeful that these initiatives will further India’s growth towards becoming a digital economy. Authorities are also taking several measures to harness local talent, while helping nurture academic institutions and startups. The huge talent pool in India is a major ingredient that could enable the semiconductor sector, and several local companies and incubators have already become functional. These companies and test centers are designing and testing chips, microprocessors, and allied technology that could power the sector. However, to ensure that these initiatives are successful, it is imperative that venture capitalists invest in such indigenous companies and provide the funds necessary to propel development.

Semiconductor Can Empower India

Stating about how India can be empowered, Kuldeep Malik stated, India has a huge talent pool and a massive opportunity for new use cases in the semiconductor sector. Development of the sector will lead to tremendous new job opportunities as well as a $60 billion to $100 billion reduction in imports, according to the IESA report. To empower India on the semiconductor front and make the country self-reliant, measures need to be taken by design companies to incentivize training, internships, and IP creation. A public-private seed fund for start-ups and incubators would support capital requirements, boosting innovation. Considering India’s vast potential in terms of space, it is important to include all states and territories under electronic innovation schemes. Reports also suggest the creation of national institutes for semiconductor and electronics research to aid the segment. The government has recently taken three major steps to empower India on the semiconductor front, including the Production Linked Incentive (PLI) Scheme, Electronics Manufacturing Clusters (EMC) 2.0 and Scheme for Promotion of Manufacturing of Electronics Components and Semiconductors (SPECS). These schemes are aimed at supporting electronics manufacturing in India by further expanding it and incrementing domestic value addition. We look forward to positive outcomes from such schemes and are prepared to support the country in all possible ways.

Dr Satya Gupta elaborates, Govt and Industry have to come together and create eco-system, infrastructure and funding mechanisms to kick-start the fabless product industry. Leverage the R&D in academic institutes. Help faculty and Scholars to take their cutting edge ideas to successful fabless product companies.  Consolidate our efforts. If we can do a couple of initiatives well and make them successful, rather than doing many, it will certainly help. For example, we can create a single meaningful infrastructure which can be used by everyone across the country via the cloud rather than creating infrastructure in many places.

India as a Market

India as the market for semiconductor players has been a highway for the global semiconductor players. Kuldeep Malik believes, India as a country has, and will continue to provide global semiconductor players tremendous opportunities, in terms of both, supply and demand. As a market, India’s large population and demographic diversity ensure that the country is one of the major consumers in the world. According to IESA data, India currently imports 50% of its total electronics products demand, worth $134 billion, and by 2025, the total product demand is seen rising to $368 billion. Further, India has a large, educated youth populace, as well as government support through initiatives such as ‘Make in India’, 100% foreign direct investment (FDI), support of subsidies, and major incentives, making the country an attractive investment option for global players. With India recently signing an MoU with the Singapore Semiconductor Industry Association, to develop trade and technical collaboration in electronics and semiconductor industries, global players are now recognizing the potential of India’s electronics sector and investing heavily in manufacturing.

Dr Satya Gupta cited, India is the excellent market for consumption of Electronics products and therefore the semiconductors which go into these products. Unfortunately, since these products designs are not conceived or belong in India, the decision about choice & procurement of the semiconductors for these products is also not made in India, thus giving India very little leverage.

Current Scenario of the Indian semiconductor Industry and Way Forward Post COVID-19

The current Semiconductor industry in India is predominantly engaged in design & R&D, where cutting edge chips and products are designed by Indian engineers for the Global companies. Due to Covid-19 related situation and lock-down, most of the Global Semiconductor companies have decided to take very cautious approach keeping the safety and health of employees of paramount importance. As most of the design work can be done by working from home, things have started working quite efficiently with minimal staff going to the office. Most of the companies in this domain are encouraging their employees to work for home much beyond the government-mandated lock-down said Dr Satya Gupta.

Dr Gupta further apprises on the post-COVID 19 situation, As far as to post Covid-19 situation, although the economy worldwide has slowed down, it has also created a significant opportunity for technology innovation to keep things moving in the new environment. We foresee increased demand for Healthcare, Medical Electronics, Sensors, Communication (5G and others), augmented and virtual reality, Cloud, AI/ML and automation-related technologies and products in the very near future. We also foresee a lot of interdisciplinary collaborations between researchers and companies find solutions to complex problems.

Kuldeep Malik stated, beginning 2020, the COVID-19 pandemic started to impact business and manufacturing hubs, affecting productivity across the globe. Epicenters were greatly impacted, and the crisis highlighted the need for a strong electronics research and manufacturing ecosystem, within the country. Intelligent electronics form the backbone of economically and strategically relevant sectors, such as healthcare, telecommunication, security, transport, agriculture, and financial institutions.

According to the recent IESA ESDM 2020 report, the Indian market has grown at a CAGR of 14%, between 2016-19, and is likely to grow at 16.6% CAGR from 2020-25. While electronics production contributes 3.3% to the economy at present, it is seen rising to US$320 Bn by 2025, thus boosting the economy and supporting important ancillary sectors. The report suggested that the Indian semiconductor industry has the potential to reach US$410 Bn by 2025, with additional impetus. The sector has enormous potential to provide alternate employment sources to the IT sector and meet the domestic demand, making the country self-sufficient and promoting the “Make in India” initiative.

However, the crisis and the resulting economic slowdown have impacted consumer buying sentiment and, it is likely that business may be affected in the short-term. We are hopeful that, going ahead, consumers will resume buying, in keeping with the pent-up demand that has been created during the lockdown period.  As the country prepares to resume manufacturing activities, semiconductor companies should focus on implementing contingency plans to manage disruptions, in the near term. The crisis reminds the industry that global supply chains are quite fragile and completely unexpected aspects can cause significant levels of impact. The COVID19 the situation provides us with an opportunity to rethink and remodel industrial paradigms, creating space for semiconductor-based business, suppliers to collaborate and establish agile supply networks for a more resilient future. Post COVID-19, it is imperative that semiconductor companies assess and consider modifying their supply chain strategies and operating points to mitigate single points of failure like geographically concentrated hubs.

India – The Next Manufacturing Hub?

Can India become the next manufacturing hub? If so, then how and by when? Many questions conclude to what Dr Satya Gupta had to say, India has put up a very good set of policies for Electronics and Semiconductors and everyone in both the Government and Industry is working very hard to make more manufacturing happen in India. While there is a significant opportunity, we have to be aware of the competition coming from 2 fronts.

  1. Firstly from the other Asian countries like Vietnam, Malaysia, Indonesia etc. These countries have got bulk of benefit during the trade was between the US and China and may still get significant benefits from the current situation as well.
  2. Secondly, the challenge is coming from the parent countries of the product companies (e.g. Cisco, Apple) which have the potential of moving their manufacturing operation out of China. Based on recent announcements from Japan and USA, it appears that both of these countries are putting up the significant effort and incentives for their product companies to move back to home countries rather than to some other destination. As the manufacturing of Electronics & Semiconductors have become highly automated, availability and cost of labour may not be significant factors any more.

On the other hand, Kuldeep Malik shared the concluding words, emphasizing, the current situation has made us realize the importance of setting up agile supply chains that are not confined to a specific geographic location and we believe India has huge potential and capabilities, in terms of resources and trained manpower, to attract such manufacturers. In addition, the government has consistently taken efforts to promote ‘Make in India’ and boost FDI, ensuring the country is a suitable ecosystem for manufacturing plants. Preferences of manufacturing companies will be reshuffled post-COVID, and we expect positive momentum in the country’s manufacturing sector, arising out of this.


Niloy Banerjee

A generic movie-buff, passionate and professional with print journalism, serving editorial verticals on Technical and B2B segments, crude rover and writer on business happenings, spare time playing physical and digital forms of games; a love with philosophy is perennial as trying to archive pebbles from the ocean of literature. Lastly, a connoisseur in making and eating palatable cuisines.

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