Vedanta of Agrawal, and Taiwan’s Foxconn jointly wants to set up a first silicon fabrication plant in India investing $20 billion or Rs.1.6 trillion. The plant will be located in Gujarat, though initially Maharashtra too was vying for it. Silicon from this project will be sliced into wafers. In stages, these wafers will be converted into microprocessors or computers. on a chip. There will be a display glass unit as a part of this project.

Vedanta may or may not do the processing. It can restrict itself to producing raw materials only, and processing will be left to other firms. A silicon fab is the starting print. In the chain ahead, lacs of jobs will be created. By itself, the costly fab business may not create many direct jobs. Fab manufacturing is automated.

The government proposes to give huge subsidy for silicon fabs say to the extant of 50 per cent. If one single plant eats up massive subsidy of billions of dollars, what if more such plants are set up. Do we have this kind of money? Will it not be prudent to import silicon wafers?

India does not have comparative advantage in fabs. However, India is good at chip design. It also generates jobs.

Silicon plants will become viable when the domestic market for fabs expands.

There are integrated plants abroad — these produce silicon as well as computer chips. However, all big fab makers sell major part of their production to processing facilities across the world.

American companies do not use their own fabs, e.g., Nividia, Qualcomm and Broadcom. They produce advanced chips. Maharashtra can invite processing units. It can create jobs here.

America is ahead in IC design. The plants are sophisticated. Design and patents are their forte. Producing silicon fabs and chips are being outsourced. Its share of chip production globally is 12 per cent. China and Taiwan are producers of silicon and chips.

America to wants to attract investment in fabs and semiconductors. Though not immediately but in future, India too must produce its own fabs. Right now, India will have to incur a huge subsidy bill.