India is steadily on track to achieve a $5 trillion economy with sustainable growth, as the IMF recently laid out in its report. “Reform, Execute and Transform” – a mantra given by the Honorable Prime Minister is an apt summary of what needs to be done in the ESDM space in India. The challenge is to connect to global supply chains while forming and setting up manufacturing plants in the country. And it’s a work in progress.
Chips may be the new oil, but global supply chains are the backbone of this ecosystem. To this end, global semiconductor manufacturing rests on three pillars: equipment, materials and services. This troika inherently powers the global chip ecosystem. Equipment includes precision equipment for manufacturing in manufacturing facilities / foundries to include assembly, testing, marking and packaging (ATMP) / outsourced semiconductor assembly and testing ( OSAT). Materials include chemicals, minerals, and gases, all of which are essential to manufacturing. And services means the overall value chain of logistics, packaging and distribution
Although manufacturing is capital and talent intensive, it is currently limited to a small set of global players with the materials. This “materials market” essentially uses more than 150 varieties of chemicals and more than 30 variants of gases and minerals, making it the backbone of the entire process chain for any established or emerging semiconductor entity. grass.
India’s prowess in the chemical industry is well known for its significant contribution of 7% to the overall Gross Domestic Product (GDP). The Indian chemical industry is statistically the sixth in the world and the third in Asia. According to available data, the market size of this industry in India is $178 billion and is expected to reach $300 billion by 2025.
Moreover, according to the latest trends, there is a significant change in production and consumption, as seen in Asia, leading to a higher demand statistic. Government programs such as the Production Linked Scheme (PLI) can further strengthen this process.
There is a strong chemical manufacturing capability, talent pool and skills in this crucial area. Now is the time for established chemical conglomerates in the country to study, align and then aim to produce selected chemicals used in semiconductor manufacturing and photolithography, including polymers, solvents, sensitizers and additives. Accordingly, this can be done through the diversification of the existing product line, a targeted boost to R&D with realistic budget support, the improvement of quality and purity in line with global standards and consideration of the current geopolitics for the shortening of supply chains.
This process can be further completed by two arguments. First, the world’s leading chemical manufacturing companies already have a presence in India and could leverage the capabilities of Indian suppliers to create products for a global supply chain. Second, semiconductor manufacturing is a long and complex process with little potential for manufacturing entities to switch suppliers due to technical and process considerations.
These two arguments are aligned for India to enter this space and connect to global supply chains. The government could further augment the process through corresponding policies on regulatory administration and establishment of qualification laboratories, which would certify these products for evaluation to global standards and reduce the monopoly of a few in this space. In addition, improving infrastructure and further simplifying customs duties and tax procedures within the framework of the stipulated guidelines will help make doing business easier.
This process will likely secure substantial value and competitiveness if local chemical industries can be incentivized. This will require us to supply these chemicals to our own mills/smelters in the future with in-house certification facilities to global standards. Furthermore, it would reduce reliance on global supply chains of essential chemicals as well as reduce the logistics, warehousing and availability dynamics that tend to become turbulent for various reasons. , as seen in the current context.
Some states with a strong base in the chemical industry and the required talent pool could be incorporated to diversify existing chemicals. Global semiconductor policies of various states and future roadmaps could incorporate this requirement to meet the global strategy.
Although no country today can claim self-sufficiency in the troika of equipment, materials and services, a “system of systems” approach to this with a synergistic intersection of technology, politics and economics as the three cornerstones will go a long way. As we strive to achieve self-sufficiency in designing, manufacturing, packaging semiconductors and becoming credible players in global value chains (GVCs), self-sufficiency in the value chain and products chemicals could well be the harbinger of an unprecedented growth trajectory.
The opinions expressed above are those of the author.
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