Then, earlier this year, came the big announcement. In February 2024, the Union Cabinet cleared a $11 billion fabrication plant to be set up in Gujarat by the Tata Group with help from technology by Taiwan’s Powerchip, and a chip assembly and packaging plant also being set up by the Tatas in Assam, along with another project.

“Today, the state government of Assam in partnership with the Tata group will make Assam a major player in sophisticated semiconductors. This new development will put Assam on the global map,” Ratan Tata, chairman emeritus of Tata Sons who passed away on Wednesday, said in a post on X at the time. His imprint was there on the way the deal shaped up.

These projects, alongside the others – assembly plants announced by Micron Technology, CG Power and Kaynes Semicon – hold the key to establishing India as a viable ground for making chips. But the real breakthrough, and the crown jewel in many ways, is the chip fabrication plant that the Tatas are setting up as it signifies a big step up in India’s production capabilities.

Cutting edge tech, strategic imperative

Most modern-day semiconductors are integrated circuits, also referred to as ‘chips’ — essentially a set of minute electronic circuits comprising transistors and diodes, as well as capacitors and resistors, and the myriad interconnections between them, layered on a wafer sheet of silicon. Fabs are the highly specialised semiconductor manufacturing facilities that print the miniaturised integrated circuits from the chip design into the silicon wafers.

The fabrication process is intricate and requires clean rooms designed to maintain sterile conditions to prevent contamination by air particles. There could be between 500 and 1,500 steps in the overall manufacturing process of semiconductor wafers, requiring multiple inputs that include silicon wafers, commodity chemicals, speciality chemicals, and other infrastructural prerequisites such as clean water supply and uninterrupted power supply.

But, more than the complexity of the manufacturing process itself, having a domestic fabrication plant is a big boost for India’s economic and strategic imperatives given that these chips are used in practically all downstream industries — from rockets to power steering in a car and toasters in the kitchen.

The development is also significant given its timing: the world faces geopolitical tensions, the relationship between the US and China – two of the most influential countries in the technology value chain – is at an all-time low, and India hopes to assume an ever growing role in the space, with help primarily from government-funded schemes to boost the local industry.

Closed ecosystem

The global semiconductor chip industry is dominated by some countries and a handful of companies — Taiwan and South Korea make up about 80% of the global foundry base for chips; and only one company, the Netherlands-based ASML, produces EUV (extreme ultraviolet lithography) devices, without which it is not possible to make an advanced chip.

Cambridge, UK-based chip designer Arm, where Nvidia is a stakeholder, is the world’s biggest supplier of chip design elements used in products from smartphones to games consoles.

It’s a nearly closed manufacturing ecosystem with very high entry barriers, as China’s SMIC, a national semiconductor champion that is now reportedly struggling to procure advanced chip-making equipment after a US-led blockade, is finding out. In this market, Nvidia, which comprehensively dominates the chips used for high-end graphics-based applications, has come to dominate multiple end-use sectors including gaming, crypto mining, and now AI.