This is very good news for India. Now how fast can this fab can start giving output? Next important milestone will be getting output from this fab and eventually see them making profit. Hope it should not make burden/liability to Indian tax payers.
@chanj0: Does it mean the manufacturing region is shifting from China to India? If it does, how fast will it go?
That depends on what kind of manufacturing you are talking about.
The manufacturing that moved to China was labor-intensive assembly line work, and it did so in search of lower costs.
China is in the process of boot-strapping from an agrarian third-world economy to an industrialized first world one. It's doing so the same way others did it: move the peasants off the farm to the cities, to become the basis of an industrial workforce.
China was able to achieve rapid growth as a manufacturing power because it could offer lower costs. Chinese factory workers got paid a fraction of what a comparable worker might get elsewhere, but everything is relative: it costs far less to live in China. For those peasants off the farm, the factory jobs were a step up. They had better hours, better working conditions, and paid better than being a peasant on the farm, and China found itself with infrastructure and urban development issues as peasants flocked to the cities to get those jobs.
But the pool of cheap labor is drying up, in part due to demographics and China's "One child per family" policy to reduce the population. Manufacturers are having to compete for workers, with wages increasing as a result, and China is no longer the low cost producer in that sort of manufacture. (There was a report in EETimes a while back about a major Chinese manufacturer who announced a full-scale push into robotics as a consequence.)
Vietnam is one place eyed as a possible new manufacturing center. The Philipines are another. India might well be a third, as the fundamental requirement is a pool of low cost labor for whom factory work will be an improvement over what they have. In fact, I can see Chinese manufacturers looking at outsourcing to India, funding and operating the plants. They already have the experience in dealing with corrupt and inefficient bureaucracies where the first requirement is knowing what palms to grease.
As you move up the value chain, things get more complicated. Semi-conductor fabs are highly sophisticated and capital intensive operations, and you have the question of whether the supporting infrastructure is there to support them once built. Is there transport to get raw materials in and goods out? Is there water? If there power? Is there sanitation? Is there a local work force who can operate the fab? Are there local suppliers who can provide what thee fab and its workforce need on a day to day basis? (Indian universities are certainly producing skilled engineers, but that doesn't mean any are where the fabs will be, or will want to relocate there.)
I look at India, and I see a number of formerly independant states that have become a patchwork quilt of a nation, and I sometimes wonder if all might not be better off if India dissolved into its component parts again. Certainly how well new enterprises do is strongly influenced by where they are. Some regions are simply better at supporting new development than others. If you could take the need to deal with the Indian national government and bureaucracy out of the equation, and developers could just deal with the regional authorities, all sorts of things might be possible.
I believe there are a couple manufacturing industry likely staying in China for a longer time - semi-conductor and high-end electronic manufacturing. Some others may just go elsewhere - labor intensive manufacturing. There are at least 2 reasons to support it.
1) Labor cost has been going up in China because of various reason, primarily rising cost of living.
2) Because of 1 child policy for last couple decades, China is actually an aging nation. Although it is still young compared to a lot of developed countries, the median age of China is definitely older than that of India.
I agree - manufacturing won't be leaving China in volume any time soon. The stuff where what is made is a fungible commodity with enormous pressure on price, razor thin margins, and "lowest cost producer wins" might go elsewhere, assuming the new location can maintain acceptable levels of quality at high volumes.
But Chinese manufacturing is moving up the value chain, and lots of producers are in areas of the market where higher prices and better margins exist and higher labor costs aren't as significant. For instance, O'Reilly and Associates is doing a crowd-sourced Maker Map for Shenzen, for folks interested in working with Chinese suppliers on products: https://plus.google.com/107033731246200681024/posts/B9KByP86EmU
And there is still a healthy "Buy Chinese" sentiment in China, so foreign vendors have an uphill battle penetrating the Chinese market against local competition. (I'm not making any bets on how well Apple's new lower priced iPhones will do on cracking the Chinese market, and whether the Apple brand name will carry the hoped for cachet.
But China is at a turning point. With their cost advantage dropping, they can no longer count on growth from exports. They are no looking at internal growth, servicing the needs of the expanding Chinese middle class.
We'll see how they do. The government is riding the tiger, trying to maintain their tight control as their country and economy changes. That may not be possible.
Yesterday veteran analyst Bill McClean said the semi sector is effectively closed to new entrants given the investments to get in and stay in at this point
I understand India's import balance issue. I would say these fabs don't have much chance of success were it not for partners like IBM and STM
I wonder what are their stakes and interests in the project? What are the process node targets?
Nice article. It would be great to have a semiconductor fab in India, which would take around 5 years to solidify.
In the same lines, it's worthwhile to mention about a startup in India, establishing india's first nano semiconductor fab in Gandhinagar named De Core Nano Semiconductors Ltd. It houses crystal growth, processing, fabrication & material characterizing of Gallium Nitride wafers and manufacturing LED's and high power devices.
I guess everyone was under the impression that only one fab would be set up in India but it sure came as a surprise that two were getting the in-principle approval. Not too sure of all the fine print -will keep you guys posted oncce the weekend is over - but with IBM and STMicro involved, things cannot go too wrong.
Sometimes, incredible things happen in India - like say the mobile revolution - the way people who cannot read a word of English land up downloading regional movies ( the language is sometimes the regional one but still to get a hang of the technology is still something I am amazed at.
And, like someone said, Nokia did a great job of setting up a greenfield project but then you got to keep in mind that it was labour intensive one at that. They were able to get set it up in the then-rural area and were able to get cheap labour ( young girls who were paid quite well for an 8-hour shift) but fab is a different story.. and yes, red tape is also an issue as well as power and water... but then, many things in India are an issue. So, its nothing new.
I guess, this time round, the consortia should have learnt not to make the mistakes that were made earlier and d\ work on this to get it operational on a war footing.
Will keep you posted about operations and capacity and the size as soon as I get it.
Its a big risk to set up fab companies in bangalore. The city is already struggling with infrastructure issues, almost all the roads in Bangalore have so big potholes that your cars one tire is on road and other can fall inside hole. The city already has hut the headlines in terms of mishandlingof garbage. Its called as garbage city. The city municipal authorities are still to make concrete plan and implementationof solid waste management. How the silicon waste be handled?
Problem with Indian political system or societyas whole is they hate to plan and take too much in the plate.
India is not China, where right things would be done and can be done. Just having huge population and being a big market doesn't mean you can have the semicnductor fab. It requires strict discipline and proper planning. In India everything changes for political mileage and political parties can go to any extreme fir their own benefits.
Cities like Bangalore, delhi and Mumbai are already struggling to breathe, this will be too much on plate.
Call me Cynical... I do not believe this will ever happen... What somebody should do is checkout where the JAYPEE group has land that is yet under-developed... Then you can make a bet that they would announce the fab around there... JAYPEE along with the politicians will unload their lands etc at astronomical prices , make the money and run... Checkout Fab city in Hyderabad... If you take a look at who made money - it is the politicians and the few cronies... Who holds all the land near the fab city now - mostly NRI's ( Non resident indians or No return on Investment). The JAYPEE group has one of the highest debt to equity ratios among India Inc..and they have been trying to unload all their cement factorues etc to pay down the debt. What makes somebody think that they would carry thru on a fab plant, that will run into about 200-300 million loses the first few years before ever turning a profit......pipe dream....My 2 cents.....
Who buys these chips?
If the idea is to reduce chip imports who are the systems OEMs rounding out the picture? Are they serving a significant market now?
Didn't India try this at the systems level long ago unsuccessfully?
Genuine question! Who will buy chips? But system level company are ready to buy chips and complete ecosystem will be established. Design house are functioning with profit, assembly unit are also ready to establish. Most important is market which all know about import capacity of India. Export of chips are still opportunity with lesser cost due to relatively cheaper manufacturing cost.
Whatever be the current odds, this initiative by Indian Govt will definitely benefit the Indian economy in the long run.
Like the nuclear reactor facilities which are successfully operating now for the last 40 years or so, the fabs project will also be successful and the government will be prudent enough to loacte these facilities away from the traffic conjestion zones .
Not sure if it is too late for this to happen, if we are talking about a timeline in terms of "a couple of decades" to be successful. This should have happenned a long time ago. I read somewhere about the semiconductor import bill was $8.2 Billion in 2012 and it was predicted by the Department of Electronics and Information Technology to grow by 20% every year. What those guys had been doing since last five years...did they not foresee this issue then? I had been hearing the Fab story for more than last three years. The process is frustratingly slow and unfortunately the foresight is missing (or the willingness to foresee). I don't know where the rest of the world will be in the next two decades when the Fabs in India would hopefully reap the benefits. Atleast I will retire. :)
I will say it is still worth to have the fabs even though it may be late . It is never too late to start something which have a good impact in the future . India's first nuclear submarine has come into existance almost 40 years after the project was conceived but still it is relevant in the strategic terms and benefits to the nation.
Yes, Prabhakar you are right - it is never too late to start something. Sure, India missed this bus almost 20 years back - there was a time when Seagate was exploring the viability of setting up a manufacturing unit ( time frame - something about 20-25 years ago) in the southern state of Kerala but it came to naught.
Sure, the govt officials have their own personal agenda and things do not move the way they should but at least there is a beginning... lets hope it takes off and if the multinational companies involved in the consortia put their foot down ( and accelerate) the process, we can have working fabs in a couple of years and two years will just fly... maybe processes would change but India being a huge market, there would still be demand for the older ones
3-4bil (US$ ?) buys logic tool capacity at 45nm that would fit in a small fab about 18, 000m2 cleanroom. That assumes zero cost of construction or infrastructure. Probably 2bil alone in older generation litho tools. although landmark, this doesn't seem to be even comparable commitment in terms of current generation fabs.
Making the infrastructure fab-friendly is a very big deal. That is why it is considered in fab locations. The cost of making the fab-friendly infrastructure "merely" needs to be deducted from the $4 billion. It could leave about $2-3 billion, which is just right for 65-90 nm maybe. So to get to the advanced nodes would need another round of funding.
As usual the governement thinks it can just create magic by just starting something 20 years late and with crumbling infrastructure and high levels of beuracratic inefficiency this is surely a disaster in the making. Just goes to show how foolish the government can be when it's people are mostly illetrates.
I don't know on what basis this counts as the best way to boost economy by throwing billions in an untested and uncompetitive product called siclicon. I agree it would need one small unit just to show that it can but commercially viable, that's a pipe dream. When most companies are going fabless what makes the govt think the ones on Indian soil can churn out profits?
There are much better ways to utilize these billions to shore up the suffering manufacturing sector.
ST would of course like to find new markets for their products that have become less competitive even in Europe. They have APs for Mobiles and other leading node SoCs, micro-controllers and then process for FD-SOI that could still turn out to be an alternative to FinFET.
But what does a pre-HKMG Foundry like Tower Jazz bring into the Party ( the 2 nd Fab ) ? To what extent would IBM keep supplying them with leading edge process technologies ( HKMG ) ? Would they ever do process R&D in India ?
On the other side of the Eq. the $ 8 billion per year of semiconductor import by India could be a bit of a red herring. One would suspect that much of that import bill is pre - decided by the OEM System importers ( Samsung ) and assemblers ( Nokia, local MicroMax - in bed w/ China's SpreadTurm ) in India.
But older nodes are quite adequate for new applications like ID and Smart Cards that are about to see volume application in India. So these Fabs could start even at 130 nm to keep yields high with a green crew.
Saw somewhere that both these CMOS Fabs are aiming for only 40k wafer starts per mo. To use up even that capacity India would need to develop balancing facilities ( Marketing, System Design, Assembly & Test,.. ) domestically. Otherwise these Fabs will have to turn into late node Foundries for export and we know how that goes. Won't do much to offset India's import bill for semis - the original purpose behind the generous Govt. subsidies.
Folks in India seem to be fixated on Digital Logic and are totally oblivious of Fabs for Power Electronics ( IGBTs ) & Compound semiconductors ( RF, LED, .. ) that are more relevant to an agrarian & rural economy ( not to mention that those Fabs are an order of magnitude cheaper ). Or to jump well ahead of the pack, they could focus on MEMS - especially for Medical sensors.
I think that the independent development of hardware ( and Software incl. OS & Appl. that went with it ) put India in a position to specialize and boom in Software after the home grown hardware part became unviable. Contrary to the expectations of uninformed "experts", no simple-minded linearity there !
@GSMD, thanks for sharing this history. You offer fasicnating perspectives on the industrial development in Inida -- with so many twists and turns, then, unintended consequences. We shall see how two fabs in India will change India's electronics landscape.
Great piece of history there by GSMD.... thanks. Was travelling, so missed out these past two days... but going through the interactions, apart from all the comments, one thing that struck me was the HVReddy's comment on Jaypee's real estate scenario. Everyone has a private agenda I guess but as long as it doesnt reallly mess up the overall/general "good" I think we should just go along with it. There is corruption in every stage and every step - big or small but if we can wade through it without getting deeply scarred, then things will work out.. I am pretty cynical at the way things work here in India but there are many optimistic guys out here who do try to work their way around huge obstacles.. lets just want and see how it goes
Points well made - lets see how it goes. It would really be sad if this went the SemIndia way. Am sure the fabs were/are meant to ease the situation on imports.. many expert opinions would have been taken. Lets hope for the best
There have been a lot of companies recently that have discovered what a bad idea it is to set up operations in India. The corruption and disregard for the law, will more than outweight any benefits. There are so many examples of foreign operators getting extorted by the government in India it is hard to believe they would do this.
Cheers for your optimism...Jaypee group running a F1 is a whole lot different than building a fab... It will be quite a few years before anybody makes any kind of profit from a new fab.... The losses the first few years run into 100's of million dollars... Besides that cost of a 65nm fab alone ranges in about $2 - $3 billion dollars and any geometry further down like 40 & 22 etc.. will cost even more.....I am sure infra-structure is fine in a whole lot of areas and there is tremondrous growth in auto and other sectors. For a fab, besides the infra, you need the human capital... You have to have universities training folks in wafer fabrication etc today... Right now, none of that is happenning..... I wish it would happen... But I have my suspicions, that before the May 2014 elections, this government will announce a whole lot of pie in the sky projects.... Their track record has already shown that from before.....Lastly there are doubts about the Jaypee group....
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