How India plans to trot out its old war horse, feeding it USD 2 billion, ET Auto


<p>SCL is the only government-owned semiconductor fabrication unit that produces chips for strategic purposes. </p>
SCL is the only government-owned semiconductor fabrication unit that produces chips for strategic purposes.

India wants to enter its own old warhorse among global biggies in its semiconductor race. While the ground has been broken for Micron‘s semiconductor plant in Gujarat, India’s first, and two other big semiconductor proposals are under process. They are expected to take shape in the coming few months, and the government is also reviving its old chip maker which has weakened over time.

The Semi-Conductor Laboratory (SCL) in Mohali, near Chandigarh, a research institute and chip maker, is on a revival course. The government has invited bids from Indian and global companies with technological and operational expertise to modernise SCL. The government has earmarked nearly USD 2 billion for its modernisation out of the USD 10 billion under the India Semiconductor Mission, ET had reported earlier. Bidders will need to onboard a commercial partner for the fabrication of chips developed by SCL.

SCL is the only government-owned semiconductor fabrication unit that produces chips for strategic purposes. It currently makes 180-nanometre chips, which have been used to power the country’s Mars Mission, but are considered legacy chips. The government wants to upgrade SCL to initially produce 28-nm chips, and then even more advanced ones.

How a tech pioneer failed to take off

The idea for an indigenous chip fabrication unit and research centre was mooted in 1976, and SCL started manufacturing in 1984 from a 51-acre facility at Mohali, Punjab. Three years before today’s global chip leader Taiwan Semiconductor Manufacturing Company (TSMC) set up shop, India had its own fabrication facility in 1984. That was a big headstart for India.

Today, TSMC makes 54% of the world’s semiconductor chips, while SCL is just managing to stay afloat. TSMC clocked USD 60 billion in revenue in 2022, and SCL just USD 5 million.

Had it not been for a mysterious fire that destroyed the SCL facility at Mohali in 1989, India would have become a global leader in semiconductors. No one knows if the fire was an accident or an act of sabotage. The fire stopped India’s progress in chip making. It took nearly a decade for SCL to start operations in 1997. In 2010, an Israeli company, Tower Semiconductors, helped SCL build a 180-nm chip. Since then, SCL has little more to boast of while the world has moved on to sub-10 nm chips, the most advanced at present.

In its nearly four decades of existence, SCL has had little to flaunt as its capabilities beyond defence and space sectors, which depend on SCL for chips meant for strategic uses. It has stuck to 180nm chips over the years due to lack of government attention. It has been facing even basic challenges a public sector unit faces in India. Innovation would have required huge investment as well as partnerships with industry leaders.

SCL has seen three management changes — from the Department of Electronics under which it started in 1984 to the Department of Space in 2006. In February 2022, it was brought under the Ministry of Electronics and Information Technology (MeitY).

The mounting losses of SCL are due to the inefficient functioning and alarmingly low levels of capacity utilisation, experts have told ET. As per the annual report for the year ended March 2022, it made operational losses to the tune of Rs 318 crore in the year.

SCL’s operational expenses stood at Rs 318 crore, while it clocked sales of only Rs 2.77 crore, according to an ET report. Rs 130 crore was spent on salary of the employees and Rs 22.7 crore on power and fuel. Only Rs 2.77 crore income was generated from sale of semiconductor chips in 2022, and barely Rs 29 lakh in 2021, during Covid. When work was halted in the facility due to Covid-induced lockdown, the force majeure clause was not invoked and SCL paid over Rs 155 crore to Israel-based Tower Semiconductor for 2021, ET has reported.

Lack of marketing efforts and non-existent customer support meant the SCL’s capacity utilisation hit an abysmal 10%, ET reported. In 2021, SCL used 9,200 raw wafers for production. In 2022, this dropped to 1,200 wafers. Industry insiders say the number of good wafers fabricated by SCL will be much lesser than even 200 wafers in 2022. In 2023, it would be even less if the government doesn’t commercialise it.

Why India wants to revive SCL

Yet, SCL is a good bet when India is gearing up to become a leading chip manufacturer, setting aside USD 10 billion for the job. Micron plant, India’s first chip unit, will be a packaging facility and not a ground-up fabrication unit, which would take a lot of money, time and effort to come up. SCL can be a good candidate for that.

Despite all its home-grown limitations, the SCL in Mohali remains the best bet for India’s semiconductor needs, a recent ET story has explained. For one, it’s a running facility. Second, it has demonstrated capabilities in space and defence, where 60% of the requirements are for 180nm chips, which SCL specializes in. “With SCL, India has achieved some capability on space technologies in semiconductors. Few semiconductor manufacturers can claim that their chip has gone to Mars or Moon, which SCL can add to its kitty.” Anshuman Tripathi, member, National Security Advisory Board (NSAB) handling semiconductors, told ET Prime recently.

Third, it can focus on 180nm, where there is sizable global demand, and parallelly aim to upgrade to lower nodes. Fourth, the global chip dynamics have changed in the last two years as semiconductors emerged as strategic assets, and India is unlikely to get a bleeding-edge fab unit anytime soon — global majors won’t part with relevant technology. Lastly, a new ground-up fab will cost around USD 4 billion and take at least four years to start making chips.

  • Published On Sep 26, 2023 at 05:02 PM IST

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