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Indian mining giant Vedanta recently signed an agreement with Taiwanese electronics assembler Foxconn to manufacture semiconductors in India. A business that will not only put India on the global map but that is also critical to Prime Minister Narendra Modi’s vision of making India atmanirbhar (self-reliant) in key futuristic technologies.
The deal is expected to go a long way in helping India build a $ 1 trillion digital economy. It is expected to play a critical role in establishing India as an electronics hub and will help attract suppliers and device assemblers to set up shop in India. India has vowed to spend $ 30 billion to overhaul its tech industry and build local chip supply chains to avoid being dependent on foreign producers.
Shamsher Dewan, SVP & group head, Corporate Ratings, ICRA, gives us a lowdown on different kinds of semiconductors and what it takes to manufacture them.
What are the different types of semiconductors?
Integrated circuits (ICs) are sophisticated semiconductors that often contain numerous transistors and perform high-level functions, while discrete devices often contain fewer transistors and perform simpler functions.
There are two basic classifications that can be used to define the different semiconductor types.
Intrinsic material: An intrinsic semiconductor material is made from very pure chemicals. As a result, it possesses a very low conductivity and has very few charge carriers, namely positively-charged holes and (negatively-charged) electrons, which it possesses in equal quantities.
Extrinsic material: Extrinsic semiconductors are those where a small amount of impurity has been added to the intrinsic material. The purpose of adding impurity to the semiconductor crystal is to increase the number of free electrons or holes and make it more conductive. These are used to make devices such as diodes, transistors, integrated circuits, semiconductor lasers, LEDs, and photovoltaic cells.
Further, extrinsic types of semiconductors are classified into two groups:
N-type: an N-type semiconductor material has an excess of electrons. In this way, free electrons are available within the semiconductor lattice (the atomic structure of a semiconductor) and their overall movement in one direction under the influence of a potential difference results in an electric current flow. In an N-type semiconductor, the charge carriers are electrons.
P-type: in a P-type semiconductor material there is a shortage of electrons, i.e., there are ‘holes’ in the crystal lattice. Electrons may move from one empty position to another, and in this case, it can be considered that the holes are moving. This can happen under the influence of a potential difference and the holes can be seen to flow in one direction, resulting in an electric current flow. Here, the holes are the charge carriers.
Which industries are they used in?
Semiconductor chips find usage in a variety of applications. Globally, computers account for the bulk of semiconductor demand, estimated at around 32 percent, followed by mobile phones and communication devices at 31 percent.
Automobiles, consumer durables / electronics, and industrial equipment each account for approximately 11-12 percent of semiconductor demand.
Rising demand for mobile devices, communication infrastructure, smart cars, and automation has pushed the demand for semiconductor chips, which is estimated to have grown at a CAGR of 7 percent over the past decade.
What are the steps in the design and production process?
Semiconductor chip manufacturing is a fairly complex process, involving multiple steps. It starts with chip design, followed by manufacturing semiconductor wafers (in foundries), followed by the assembly, testing, and packaging.
The United States dominates the chip design ecosystem, while Taiwan, South Korea, and China account for the bulk of semiconductor manufacturing.
Given the high entry barriers owing to high capital intensity and technology prowess, the chip manufacturing industry is highly consolidated with a few large players having a dominant market share.
What will it take for a country like India to get into semiconductor production: low-end, high-end, full-spectrum, or assembly?
The demand for electronic devices shot up significantly post the pandemic as adoption of digital services and work-from-home (WFH) accelerated. This, coupled with the supply-side disruption caused by the pandemic, resulted in an acute shortage of semiconductor chips.
To address these concerns, major economies such as the USA, Europe, and recently India, have announced reforms / policies to attract investments and expand chip manufacturing capacities.
Following the government’s announcement, several foreign players have shown interest in India’s push towards manufacturing chips locally. These investments will flow into the sector either directly or in-collaboration with global technology players, some of whom already have a presence in India.
While it may be early to comment on what type of chips will be produced in India, the policy’s aim is clearly to encourage local manufacturing and thereby aid domestic value addition and employment generation.
Is there an improvement in the availability of semiconductors?
The shortage of semiconductors was at its peak in the middle of last year, and the situation has been gradually improving. As per the automobile industry, which consumes nearly 11-12 percent of global semiconductor production, the supply situation has steadily improved to meet almost 90-95 percent of the requirement.
As a result, the premium in securing semiconductor supplies has gradually eased. Similar views have also been expressed by electronic device manufacturers, especially after the opening up of supplies from China.
What are the initiatives being taken by the government on this front?
Last year, electronics and automobiles were among the sectors adversely impacted by the shortfall in semiconductor supplies.
Setting up a semiconductor plant is a highly specialised, complex and capital-intensive process. To mitigate the supply chain uncertainty, the government has introduced a Production-Linked Incentive (PLI) scheme with a total outlay of Rs 76,000 crore to drive domestic semiconductor production with a view to reducing dependence on imports, mainly from China and Taiwan.
The government has received 23 applications under this scheme. Some foreign players have shown interest in setting-up units in India and are in talks for joint ventures to set up manufacturing plants here.
Vedanta has partnered with Foxconn through a 60:40 joint venture to set up a semiconductor plant in Gujarat.