India's semiconductor ambitions take wing but water, talent issues remain

Semiconductor manufacturing requires extremely large volumes of pure and cold water, which only some states have; attracting the right talent also a challenge

It is not a coincidence that it was the government of India’s water resources minister, CR Paatil, who inaugurated Gujarat’s first semiconductor plant in Palsana, Surat this week. 

The plant of Suchi Semicon targets a production capacity of 3 lakh chips per day, built at an investment of Rs 840 crore. At all the semiconductor hubs being set up in India, the two critical shortages identified are skills among the potential labour force and that of water. Paatil, of course, represents the Navsaari constituency, next door to Surat. 

There are other issues, too, but none as critical as these for the semiconductor ambitions of India. Which is why it is not surprising that the plans for clusters or hubs are getting focussed on two geographies, Assam and Gujarat. The former has water, the only region in India where it is in abundance, whereas the other is water-scarce but has emerged as the draw for talent spotting. 

The scope of connections envisaged is ambitious. Drawing a map of geographies in India where the projects are likely to come up, Kristy Tsun-Tzu Hsu, Adjunct Senior Research Fellow, Program Director at the Taiwan Asean Studies Center at Chung-Hua Institution Of Economic Research, said this was the most ambitious yet. She made the comments at an industry presentation in Mumbai in September this year. 

Through the India Semiconductor Mission launched in 2021, the government estimates it  has already managed to attract investment of over $1 trillion and incentivise local production. Launched in December 2021 with an outlay of $9.5 billion, the scheme offers production- and design-linked incentives for firms to establish semiconductor fabrication units, testing facilities, and design centres within the country. The scheme is slated for further expansion, possibly in Budget 2025. 

Speaking off the record at another event in Delhi, a high ranking official from the ministry of electronics and information technology said water availability will remain a challenge for the industry. Semiconductor manufacturing requires extremely large volumes of pure and cold water. The water can be recycled but requires a fresh supply of highly purified water. According to an estimate by IDE Technologies, a globally leading company in the water space, generating just 1,000 gallons of such ultra pure water consumes about 1,500 gallons of municipal water. A large semiconductor fabrication facility processing around 40,000 wafers monthly could consume up to 4.8 million gallons of water in a single day, the equivalent of a whole year's water consumption of a city inhabited by 60,000 people. 

Not surprisingly, both states are scouting for private sector solutions to this challenge on a war footing. Meity reckons that despite those efforts, solutions will take more than a year to be in place. 

Instead, the states have fast forwarded on-ground ecosystems from as mundane as setting up golf parks to schools for the children of the huge expatriate population who will be needed to staff the plants. “You will not believe the amount of discussions and plans on food parks, shopping and even hospital chains that we are getting involved now in setting up these hubs”, the government official quoted earlier said. Having gotten the go ahead from these companies these are the big tasks the officials from the state and the central government are trying to steer through. Dholera Smart City project in Gujarat has come as a boon in this context as it is being engineered with this perspective.  

Scheme	Applicant	Total Project Cost (Rs billion)	Eligible Project Cost (Rs billion)	Incentive Approved (Rs billion)
Modified scheme for setting up of semicon fabs in India	TEPL (commercial fab)	915.26	679.56	339.78
Modified scheme for setting up of compound semicon/silicon photonics/sensors fab and semicon/ATMP/OSAT facilities in India

Micron Techonology Inc. (ATMP) 225.16 225.16 112.58 TEPL (OSAT) 271.2 204.49 102.25 CG Power & Industrial Solutions Ltd. (ATMP) 75.84 70.02 35.01 Total   1487.46 1179.23 589.62

Source: India Briefing and PIB