TSMC — Taiwan Semiconductor Manufacturing Company — was established in 1987. In those days, they did not have a strong talent pool and established R&D. There was no capital to produce VLSI or very-large-scale-integration semiconductor system. Still TSMC has emerged as a leading company making world-class fab for semiconductor chips by the late 1990s.
TSMC focused on ‘fab alone’ approach. It integrated with the needs of fab-less chip designers. It evolved a good supply chain. It sourced silicon wafers from Japan and S. Korea. It sourced chip designs and lithographic machines from the USA. and Netherlands. It sourced engineering talent from India. The shipping costs were higher, but were compensated by high purity of silicon wafers, novel chip designs and error-free chip fabrication processes. It was an international sourcing strategy that worked for over four decades.
The recent legislations in the US has changed the supply chains. Chip design and fabrication has moved back to the USA. Post-fab operations (assembly, testing, packaging) are friendshored to strategic partners.
TSMC has set up a unit in Ohio, US to adopt the onshoring policy on fabs. It has included India as a service provider for outsourced semiconductor and assembly test (OSAT).
In Indian Semiconductor Mission (ISM), there is emphasis on electronic design automation (EDA) tools and GPUs.
ISM also incentivises production by production linked incentives (PLI) schemes.
India’s R&D work for high precision fabs makes it suitable to nearshore operations to India.
IPR may have challenges as India emerges as a nearshoring destination for advanced fabs from abroad. There should be strengthening of patent laws and contract laws.
In semiconductor ecosystem, there are chip yield related risks as the firms upgrade to advanced nodes. There should be revolving financing facility to cushion risks of capital loss.
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