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Applied research and production efficiency are crucial for India to scale its semiconductor industry and achieve global competitiveness.
Image Source: Getty Images
India is set to embark on the second phase of its India Semiconductor Mission (ISM) – 2.0, aiming to contribute 5 percent to global semiconductor production by 2030. Having started with mature technologies, the next iteration will emphasise moving up the value chain. The second iteration aims to focus on market-readiness of ‘Made in India’ chips, as well as address industry requests to double the fund allocation to US$20 billion. There will also likely be added focus on supporting design-related innovation, human resource development for advanced manufacturing, and localising supply chains for materials and gases.
Semicon India 2025, the country’s flagship global exposition, organised by ISM, Semi, and industry associations, saw the signing of 12 MoUs to develop indigenous capabilities in design and production, service capabilities, and skill development. It is also focused on downstream application in areas such as clean energy, quantum, and frontier sectors through the US$1 billion Deep Tech Alliance – a consortium of venture capital and private equity firms from the US and India, aimed at building and scaling the deep tech ecosystem in the country, with initial focus on semiconductors. Mr Ashwini Vaishnaw, Union Minister for Electronics and Information Technology, has underlined the importance of both domestic and global markets for ‘Made in India’ chips, highlighting that they are 15-30 percent more cost-competitive compared to global benchmarks.
Moving towards mass production was one of the earliest innovations in the history of the semiconductor industry, leading to the downstream spurt of innovation.
India currently has 10 approved semiconductor projects along the value chain, along with initiatives for skilling, design, and talent development. These initiatives stand to be catalysed through a focus on applied research. Fabless firms have been gaining market share over the past few years, as they focus on product innovation, while their manufacturing partners focus on process innovation. Being a capital-intensive industry with a complex manufacturing process and globally sprawling supply chains, competitive advantages depend as much on efficiencies in production as on fundamental research and investments in the value chain.
Moving towards mass production was one of the earliest innovations in the history of the semiconductor industry, leading to the downstream spurt of innovation. Production engineers have played an unsung role by helping scale, standardise, and produce en masse. Morris Chang, the man who ushered in Taiwan’s semiconductor revolution through the 1990s, was instrumental in revolutionising the semiconductor production process during his time at Texas Instruments by improving efficiency and yields, i.e. the portion of workable chips emerging from the production process. Incremental innovations then helped transform radical academic breakthroughs into a globally sprawling industry powering everything from rockets to radios.
In the semiconductor industry, primary or fundamental research tends to be highly concentrated among a few flagship corporations, which have conferred on the US control over the upper end of the value chain. Beyond primary innovation, other innovations must factor in issues around production at scale, such as improving manufacturing techniques and efficiency. Some of the seminal foundations of the semiconductor industry lie in efficient manufacturing to improve yields, i.e. reducing the number of redundant chips resulting from the manufacturing process.
Unlike the pharma industry, where fundamental and applied research go hand in hand, the semiconductor industry is critically dependent on applied research, particularly in terms of market competitiveness.
Unlike the pharma industry, where fundamental and applied research go hand in hand, the semiconductor industry is critically dependent on applied research, particularly in terms of market competitiveness. Within the context of the semiconductor industry, fundamental research does not always translate into innovations for production at scale, given the extremely complex semiconductor manufacturing process, which requires an entire ecosystem to be optimised to produce a competitive chip.
In Taiwan, the publicly-funded Industrial Technology Research Institute (ITRI) provided centralised applied research and innovation support, which was instrumental in setting up the country’s semiconductor ecosystem. TSMC, the world’s leading chip manufacturing company, is a spin-off of ITRI. ITRI continues to play a key role in shaping industrial innovation by transferring processes, technology, and knowledge to new industries. Continued investment in applied innovation has allowed Taiwan to consistently reduce production costs and maintain a leadership position within the industry, both in cost and productivity terms.
Continued investment in applied innovation has allowed Taiwan to consistently reduce production costs and maintain a leadership position within the industry, both in cost and productivity terms.
While the trajectory of the semiconductor industry in Japan differs from Taiwan’s, the initial liftoff can also be attributed to applied research. In the early years of Japan’s semiconductor industry, i.e. the 1970s and 1980s, both public and private investment surged with significant allocations for R&D. The money flowed into joint public-private R&D through a consortium of private players such as Fujitsu, Hitachi, NEC, Mitsubishi Electric, NTT, and Toshiba, which managed a joint research centre. Applied research has always been the mainstay of the industry rather than universities. For example, Samsung in South Korea funded university programmes to gain access to their graduates rather than their research.
These economies have grown as much by the industrial output of critical technologies as by the assimilation of learning, research, and innovation that underpin them. As India embarks on its semiconductor journey, it is important to learn from the industrial history of these countries about the role of applied research and development in scaling semiconductor aspirations. Applied research is a critical component of competitiveness that India must incorporate going forward.
Applied research is a critical component of competitiveness that India must incorporate going forward.
The Indian government has signed an MoU with the New Age Makers Institute of Technology (NAMTECH) to work on talent development and applied research. However, as the lessons above show, it is beneficial to task a motivated and agile institution to act as an advisory and incubator for applied research that can be passed over to the industry, keeping in line with changing conditions. One of the reasons for the decline of Japan’s semiconductor industry was its overlap with the aggressive rise of Taiwan and South Korea, and its failure to adapt to industry shifts.
An individual firm’s ability to absorb fundamental research and bring it to production depends upon its individual research, development, and scientific capacity. As companies develop this internal capacity, centralised support for applied R&D will give the country’s semiconductor ecosystem a competitive edge by aligning applied research initiatives with plans already underway under the ISM.
Anulekha Nandi is a Fellow with the Centre for Security, Strategy and Technology at the Observer Research Foundation.
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Dr. Anulekha Nandi is a Fellow - Centre for Security, Strategy and Technology at ORF. Her primary area of research includes digital innovation management and ...
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