It will take some time to have large fabs in India. However, India is witnessing startups who are building up on what they can in the semiconductor eco-system. India’s startups are fabless units. There are companies which build in-house intellectual properties (IPs). Again there are companies that aggregate the IPs into what is called SoCs — systems on chips. SoC companies source IPs from various players, connect them into a combination that address a particular feature or a problem or a particular application.

There are physical design teams that enable the designs to be taken to fabs for manufacturing chips. The chips are designed across geographies like the US, Europe, Israel and India. These are utilised by the foundries located in Taiwan, Korea, Germany, US, Japan, Singapore and China. Indian startups can use outside foundries partners, and after production the chips can be brought back to India.

Fabless startups add a significant value to the total supply chain. The owners of the chips are essentially those who design the chips.

There is a growing automobile and electronics industry in India. It is an incentive for setting up fabless startups. Today, a car has electronic components of almost 50 per cent of its cost, as against 20 per cent a few years back — ranging from power windows to cruise control.

There is also a growing market for fabless startups consisting of IoTs, energy meters, toy controllers, embedded systems and others. It is a high volume but low margin market.

As generative AI has appeared as a disruptor , the computational requirements would increase — both on the cloud and edge computing. The same would require robust designs for future requirements. Moore’s law has reached its limits and further miniaturization to accomodate transistors is not possible. Here the accelerators are required to speed up the power of transistors.

VCs are funding these startups in India. Fabless startups have a long gestation period. The government too is supportive. There is design-linked-incentive (DLI). It is 50% of the eligible expenditure subject to a ceiling of Rs.15 crore per application. There is deployment-linked-incentive of 6-4% of net sales turnover over five years, subject to a ceiling of Rs.30 crore per application.

The challenge is to attract skilled talent. There is a talent dearth. Startups must be ready to face problems of funding. There should be assembling teams with the necessary expertise.

Established semiconductor giants outbid the startups in paying compensation to the manpower.

The other side of supply chain belongs to foundries and ATMPs — Assembly, Testing, Marking and Packaging.