Does India really need fabs? Worth a try!

BANGALORE, INDIA: I am sometimes asked whether India really needs a fab. My answer, quick and short, at times has been no! I am aware of the fact that certain fabs are coming up in the country, though. I also pose this question to many people in the semiconductor industry.

While it would be enchanting to see India join the global "fab club" or even have Indians comment "real men own fabs" for a change, I just don't see the ecosystem -- as people like to call it -- there. Maybe, once the odd fabs come up, that would develop as well. However, it can be quite some time away.

We are running a story this week with Dr. Ananda of Synplicity, where among other things, he talks about his own experience with fabs. He says wafer fab facility is extremely intensive in terms of initial capital expenditure, running costs and demands the highest quality of infrastructure like power, water and gases. A good ecosystem consisting of firms supplying specialty gases, chemicals and special materials, many of whom have limited shelf life, need to be set up to support the fab. Setting up of this system is expensive and will be dependent on the economy of scale of operation.

India, as most of us know, are strong in embedded and SoC related work. We are strong in design services. We are good at playing to our strengths. We should continue to do so. Note that we are not yet a one-stop design shop, though many people seem to see it that way. This is not exactly software and services!

However, to move up the so-called semicon value chain, and I've been hearing this from a whole lot of people, that India needs to do high-end designs and product development. The last one, product development, is currently a problem area!

How many Indian firms are involved in semiconductor product development? Can you name them? Are those aimed for captive consumption (within the country) or are those serving the global markets? What are the product differentiators? As for fabs, are people aware of the kind of investment required for a fab. How long would it take for a fab to break even?

First, the investment. A fab is not going to be a small building built on some piece of land. If it's going to be a 300mm fab, the expenses are going to be huge. For starters, there is going to be a fixed cost for maintaining the day-to-day running of a fab. That itself would to be enormous!

Two, most of the fab work could well be automated. A fab won't exactly be hiring numbers running well over thousands. Even if huge numbers were hired, do we have people in the country with experience of working in green rooms? Let's assume there are!

Next, there are several other processes involved in developing wafer out of silicon. Do we have people with that kind of experience? Let's again assume that there are. Again, the operating costs for maintaining such personnel would be quite high. Let's assume those will be met.

Three, let's get down to the equipment required for a fab. That's going to be really expensive. All of it has to be in place, running, before the fab actually goes live. Next, a fab can't survive for long if it rests on using certain technologies. It has to use all possible latest technologies. Again, getting those would be expensive. Let's assume we will have all of those.

Finally, the wafers coming out have to be world-class and the yield, high, rather, very high. Those should be able to serve multiple product needs as well -- niche and vogue. Oh yes, the fab has to serve the global market. So, do add the marketing costs as well. Yield is a tough nut to crack, so I don't know how a fab in India would have high yield, and how different it would be from the global, fully-functional fabs.

How long will it take for such a fab to break-even? Maybe, three to five years. Add the fact that technologies and process geometries would have also progressed a lot by that time. Which means, all of those need to be added on to the fab.

Enough of assumptions! Enough of ifs and buts. It's worth a challenge. India is betting big on semicon. Let's have those fabs along with the fabless folks. We'll know who stands where, and whether India really has the capability to move up the semiconductor value chain.