PM Lawrence Wong (left) and his Indian counterpart Narendra Modi touring the semiconductor facility of AEM Singapore on Sept 5. - MDDI
NEW DELHI: Mujeeb Mundayil, managing director of Singapore start-up Cleantech Services, is feeling optimistic about his firm’s expansion plans, which include setting up a manufacturing unit in India to tap opportunities in the nascent semiconductor industry.
The firm, which provides gas and chemical supply equipment and systems used in chip manufacturing, is in talks with Micron, Tata Group and other semiconductor companies that are among the early movers in India’s fledgling yet ambitious plan to become a semiconductor hub.
Singapore and India signed a semiconductor memorandum of understanding (MOU) during Indian Prime Minister Narendra Modi’s visit to the Republic on Sept 4 to 5, to help facilitate the entry of Singapore companies – including ancillary businesses in the semiconductor industry like Cleantech – and supply chains in the Indian market.
“We now see momentum is there (in India) and it is building up,” noted Mundayil, whose three-year-old firm expanded into India two years ago.
Cleantech, which also supplies equipment for the solar industry, currently brings equipment into India from South Korea.
“But because customers like Tata and Micron are talking to us, when we have heavy volume, we will start local manufacturing,” Mundayil told The Straits Times, adding that the start-up is looking at an initial investment of at least $1 million.
India’s semiconductor industry is at a very initial stage, with units under construction in different parts of the country.
India’s Tata Electronics, a venture of the salt-to-software conglomerate Tata Group, is building an assembly and testing unit in the north-eastern Assam state.
It has also partnered with Taiwan’s Powerchip Semiconductor Manufacturing Corporation to build India’s first semiconductor fab with an investment of US$11 billion (S$14 billion) and manufacturing capacity of up to 50,000 wafers per month in the western Gujarat state. Construction is expected to begin in 2024, and the plant will generate over 20,000 direct and indirect skilled jobs in the region.
Meanwhile, American chipmaker Micron Technology will start pumping out chips from its assembly and testing facility, which is under construction, in Gujarat by 2025.
Foxconn-backed automotive technology company SiliconAuto has set up its research and development (R&D) centre in Bengaluru to focus on semiconductor product design, while Japan’s leading chip equipment manufacturer Tokyo Electron is reportedly planning to build a team of engineers in India.
Kaynes Semicon is setting up a chip assembly and test facility, with an investment of 33 billion rupees (S$505 million). The facility will pump out six million chips a day.
India is seeking to build a semiconductor industry from scratch after the Covid-19 pandemic drove home the vulnerabilities of the world’s heavy reliance on Taiwan, which accounts for over 60 per cent of global semiconductor production.
The government wants India to become one of the top five producers of semiconductors in the world in the next five years. Industry experts predict that while it is not easy, India does have the potential to move fast.
The South Asian country has positioned itself as an attractive destination for investment in the semiconductor industry, touting its large domestic market, massive pool of young workers and attractive government incentives that include fiscal support for up to 50 per cent of a project as well as tax benefits.
India is also seen to have a geopolitical advantage amid a simmering US-China chip war over semiconductor intellectual property and advanced manufacturing technologies.
During Modi’s visit to the US from Sept 21 to 23, the US announced a partnership with India to build the first semiconductor fabrication plant focused on defence and other national security applications.
Ajit Manocha, president of US-based association Semiconductor Equipment and Materials International, noted that India’s semiconductor plans had global ramifications.
“If you have more hubs, then you can de-risk some of the calamities... One hub gets fever or flu, the whole world gets sick,” said Manocha, adding: “The world is looking into what are the other countries where we can grow the hubs so we don’t run into the same problem we ran into when we had chip shortages.”
Asian countries such as Vietnam and Malaysia are also vying to become semiconductor hubs.
Manocha noted that India as a democracy and a big market ticked many of the boxes.
“I think the stars are aligned in favour of India. The policies are right, the vision is right and geopolitical tensions are such that India is considered as a preferred country to work with,” said Manocha.
Under India’s MoU with Singapore, Enterprise Singapore and India Semiconductor Mission are helming a business-to-business Cooperation Forum to help foster private-sector partnerships between Indian and Singapore firms.
The Republic accounts for 10 per cent of all chips produced worldwide, and about 20 per cent of global semiconductor manufacturing equipment production.
Karthik Nachiappan, a fellow at the Institute of South Asian Studies at the National University of Singapore, said: “Singapore offers expertise, experience and capital. And India offers scale and growth. These are natural synergies.
“And investing in India’s chip-making capacity can provide new sources of growth for Singaporean firms keen to expand. There’s no dearth of space in India to establish fabs.”
Enterprise Singapore (EnterpriseSG) took eight Singapore firms to India in August to meet Indian stakeholders and understand the Indian ecosystem. This was followed by 22 firms, including Cleantech, in September to showcase their products and solutions at Semicon India 2024, a semiconductor conference and trade show which saw 250 participating companies from India and overseas.
G. Jayakrishnan, executive director for South Asia, Middle East and Africa at EnterpriseSG, noted that the newly signed MOU between India and Singapore formalised developments on the ground.
Referring to the big players in the semiconductor industry, he said: “These companies have Singaporean suppliers and there have been some Singaporean companies that have followed that chain to India. They have to be next to the large companies, otherwise there is a risk of losing business.”
He added: “They (the larger companies) can’t operate if they don’t have the ecosystem around them, so that’s where I think we are primarily focused.”
India suffers from bureaucratic red tape, including in the import and export process, which can exacerbate existing logistical challenges faced by the industry.
Helping smaller firms navigate the system is a crucial step in building up the semiconductor ecosystem.
“The enabling environment has to be there to make it conducive for this industry to take off,” noted Jayakrishnan.
For Singapore firms seeking to enter India, this is where the MoU is opportune.
Ronald Yeu, general manager for sales at APP Systems Services, said: “I think it really helps a lot because there tends to be a lot of bureaucracy and having to deal with government processes. It will smoothen a lot of things.”
APP Systems Services entered India in 2006 when the country had earlier tried to set up a semiconductor industry. The Singapore firm provides small components and subsystems for semiconductor manufacturing equipment.
“There are a lot of things to be tackled on the ground – manpower training, infrastructure – and that takes time, but it is good to see that both governments are talking,” Yeu added.
Sendil Kumaran, country manager for APP Systems Services in India, said: “The Indian government has to be really flexible on import and export, so that if there is any equipment that has to be serviced, it can be shipped out of India and brought in easily.”
He added: “We don’t have the facility to service all the components in India, and to set up in India, it’s going to cost a lot.”
The South Asian country also lacks a workforce with the requisite high-tech skills required for the industry, and addressing the skills gap will also determine the speed at which the semiconductor industry takes off.
Modi, in reference to the skilling under way, said at the inaugural session of Semicon 2024 that India will soon have “a semiconductor workforce of 85,000 technicians, engineers and R&D experts”.
Various institutions and specialised training programmes between the public and private sector across India are involved in this talent pipeline.
The Prime Minister also noted that the semiconductor industry has already received 1.5 trillion rupees in investments.
Officials said India is moving to plug the deficiencies amid an ambitious plan to grow the electronics sector from the current US$155 billion to US$500 billion by 2030.
“We do see that that evolution will be much faster because there is learning from other places (countries),” said Mr Sreenivasa Chakravarti, vice-president for the Internet of Things and digital engineering business unit at Tata Consultancy Services, which is working with semiconductor companies on the R&D side.
And for now, many in the industry feel upbeat about India’s ability to push ahead with its semiconductor plans in spite of the challenges.
EnterpriseSG’s Jayakrishnan said: “I think this time around, there is enough momentum. Now the wheels are turning.” - The Straits Times/ANN
