Government of India strategic investment of over 70% in Micron semiconductor plant represents a pivotal step towards fortifying the nation’s semiconductor industry. The semiconductor sector is of paramount importance in the digital era, and India’s proactive measures aim to position itself as a significant player in this crucial industry. This article delves into the detailed reasons behind India’s substantial investment in Micron’s plant and the potential impact on the nation’s technological growth and economic prosperity.
Why critic say this is extreme level of Subsidy to Micron by India
The current arrangement primarily involves chip assembly and testing, representing the lower end of chip-making technology. India’s competition is not with advanced chip-producing nations like the United States, China, South Korea, or Japan, but rather with countries like Malaysia, which already excel in this sector. Approximately 13% of the global Outsourced Semiconductor Assembly and Test (OSAT) market is based in Malaysia.
Relocating the lower-end chip production processes to Malaysia and India could align with the de-risking strategy of US-based companies. However, for the development of high-end chip fabrication, exemplified by Micron’s $100 billion mega-fab in Clay, Washington, encouraging investments within the United States would be more beneficial.
Examining the financial aspects of the Micron venture in India sheds light on the investment dynamics. The estimated total cost of setting up a Micron unit in India is $2.75 billion. The central government is subsidizing 50% of this cost, with the Gujarat state government providing an additional 20%.
Surprisingly, Micron’s direct investment accounts for only 30% of the total capital, meaning Micron will have complete ownership of a plant valued at $2.75 billion despite investing only $0.825 billion.
This scenario has been termed an “extreme level of subsidy” by industry reports, implying that India is subsidizing a leading US manufacturer for a lower-level technology deal, primarily involving assembly and testing, of chips originally manufactured in high-end plants in the United States and China.
Image Credits: Chetan Patil
Why India is investing 70% on Micron ATMP facility ?
1. You got to start somewhere:
India is heavily reliant on semiconductor imports, accounting for nearly 100% of its semiconductor needs. This heavy dependence poses a significant vulnerability to supply chain disruptions and price fluctuations. To mitigate these risks and bolster domestic production of semiconductors, the Indian government has taken a strategic initiative by investing in Micron’s semiconductor plant.
By investing in Micron’s plant and fostering domestic semiconductor production, India aims to reduce its reliance on international markets for critical semiconductor components. This move is in line with the country’s broader vision of achieving self-sufficiency and enhancing its technological capabilities. By bolstering domestic semiconductor production, India can attain greater control over its supply chain, reduce exposure to geopolitical uncertainties, and ensure a more stable and consistent supply of these essential components.
A name as big as Micron creates a good start to a long journey despite a bigger share in investment.
Read More: Earn up to 40,000 for your internship at Micron, Gujarat!
2. Attract other players in Ecosystem
In response to a question posed by The Hindu, Mr. Schell, an Intel representative, emphasized that a crucial consideration for Intel when investing in a new location is the presence of semiconductor fabrication and packaging facilities in close proximity, along with suppliers and consumers.
He emphasized Intel’s investment strategy in Europe to illustrate this point, pointing out the proximity between Intel’s construction of a $32.8-billion ‘fab’ in Magdeburg, Germany, and its planned $4.6-billion assembly and test plant in Wroclaw, Poland, which is about 465 km away.
While implying that India currently lacks these necessary factors, Mr. Schell expressed optimism about India’s potential, stating, “I think that over time India will be a very interesting location.”
Micron Technology Inc. is a global leader in the semiconductor industry, known for producing memory and storage solutions crucial for various electronic devices. By investing significantly in Micron plant, India government aims to catalyze industry growth by attracting other leading semiconductor manufacturers to establish a strong semiconductor ecosystem within the country. This move is expected to amplify research and development efforts, spur innovation, and fuel the growth of ancillary industries associated with semiconductors.
In response to Micron’s investment, Ashwini Vaishnaw, Minister for Telecom, IT, and Railways, revealed Simmtech, the primary supplier for US chipmaker Micron Technology, specializing in substrates, has received approval to set up a facility near Micron’s plant in Sanand, Gujarat.
Read more: What is the Progress of Semiconductor Ecosystem in India in Last 2 years?
3. Support Companies from India by Micron investment
India currently faces challenges concerning the lack of a comprehensive semiconductor ecosystem. The investment in Micron’s plant aims to bridge gaps by creating modern infrastructure and research facilities. It will also develop a skilled semiconductor workforce. This initiative will enhance India’s capabilities in semiconductor design, manufacturing, and distribution, fostering industry growth.
Micron’s plant will help to bridge the gap in the semiconductor ecosystem in India in a number of ways:
It will attract other investments in the semiconductor sector: The Micron plant is expected to attract other investments in the semiconductor sector, as well as in other related industries. This will help to develop the Indian semiconductor ecosystem and reduce India’s dependence on foreign imports of semiconductors.
It will support the development of domestic semiconductor suppliers: The Micron plant will need to source a number of inputs from domestic suppliers. This will help to develop the domestic semiconductor supply chain and create new opportunities for Indian businesses.
It will encourage innovation in the semiconductor sector: The Micron plant will be a state-of-the-art facility that will use cutting-edge semiconductor manufacturing technologies. This will expose Indian engineers and scientists to the latest technologies and encourage innovation in the Indian semiconductor sector.
We have already started seeing signs of this when Sahasra Semiconductor has begun commercial production of Indian-made memory chips . Their strategy involves packaging basic memory products like MicroSD cards and chip-on-board initially. Production is expected to start in September or early October 2023.
Read More: Sahasra Semiconductor Beats Micron to Become First Indian Company to Produce Chips
4. Seizing the Opportunity to Compete with China:
China currently dominates a significant portion of the global semiconductor market. India’s investment in Micron’s plant is a strategic endeavor to challenge and potentially surpass China’s share. This bold step signifies India’s determination to compete with established players, reduce dependency on external sources, and strengthen its position in the semiconductor market. Additionally, it aligns with India’s broader ‘Make in India’ and ‘Atmanirbhar Bharat’ initiatives, promoting self-reliance and indigenous manufacturing.
India has a number of advantages that make it a good location for semiconductor manufacturing. A large and growing population, a skilled workforce, and a relatively low cost of labor. India also has a number of government policies that are supportive of the semiconductor industry.
China is facing a number of challenges in its semiconductor industry: China is facing a number of challenges in its semiconductor industry, including rising labor costs, increasing competition from other countries, and US sanctions. These challenges are creating an opportunity for India to step up and become a major player in the global semiconductor industry.
Read More: Where is semiconductor used in cars: Everywhere
5. Semiconductor Relies heavily on Govt. Subsidy All across the globe
India is not alone in offering subsidies to support technology and establish manufacturing plants. The United States government has allocated a substantial $52 billion fund to subsidize chip manufacturing and other critical activities.
China has a $73 billion fund, known as the Big Fund, dedicated to boosting its chip-making industry. The focus in both China and the US is on advanced chip manufacturing, devices, CAD tools, and lithographic machines. Only about 5% of the funding is for chip assembly and testing.
According to the South China Morning Post cited by Yahoo Finance, China has given $1.75 billion in subsidies to 190 Chinese firms. A substantial part of this, around 20%, has gone to their leading chip fabricator, SMIC.
6. Stimulating Job Creation and Attracting Investments:
The investment in Micron’s plant anticipates generating a substantial number of employment opportunities. It is projected to directly create 5,000 jobs and indirectly support an estimated 15,000 jobs across various sectors. This surge in job creation represents a significant boost to the Indian economy, fostering growth and sustainability. Moreover, the investment is expected to attract further investments in the semiconductor sector and related industries, propelling economic development and technological advancements.
Notably, there have been at least 10 announcements made regarding new investments, including Tata, HCLTech, and CDIL.
Conclusion:
India’s investment in Micron’s plant boosts the nation’s semiconductor industry. It addresses ecosystem gaps and attracts global semiconductor giants. This move stimulates job creation and reduces dependency on external markets. India aims to become a significant player in the global semiconductor landscape. This investment holds immense potential to reshape India’s technological future and contribute significantly to its digital transformation journey.
