Is India’s ambition for 5G a joke, compared to China?

While the gap between India and China in the semiconductor industry is still very obvious now, and there is an imbalance in India, China has a lot to learn from India, especially in chip design.

While the gap between India and China in the semiconductor industry is still very obvious now, and there is an imbalance in India, China has a lot to learn from India, especially in chip design.

Here is a comparison between India and China in 5G.

Recently, India’s Reliance Industries announced the development of 100% local 5G equipment and also announced that it will be exported to the world in the future.

First of all, the most puzzling thing is about 5G patent. Just a week before the announcement, there was a very important event in the communications field. That is, the 3rd Generation Partnership Project (3GPP) standard has become the only recognized 5g standard.

In the distribution of 5g patents in 3GPP, we see the percentage of patents in China and the United States, but not India. So, where did the 100% self-developed 5G that they claimed before come from?

If we look at a video at the Reliance press conference on July 15 again, we find that it is actually a text game played by Reliance Industries. The conference speaker mentioned that it is a 5G solution.

This term is very interesting. Let’s suppose that if we use Samsung and Ericsson’s hardware equipment, and then use part of Huawei’s base station antennas, this combination can also be called a solution, if no one has combined these devices in this way.

Indeed, this can be 100% domestically-developed 5G, but this has become a joke of self-promotion and self-deception.

But from another perspective, we also need to see India’s positive attitude and determination to develop 5G, ICT, and semiconductor industries.

In fact, in recent years, Samsung, Foxconn, Xiaomi, Vivo, and Oppo have built factories in India. Recently, the US storage chip giant Micron has also expressed that it is considering building factories in India. The southern city of Bangalore in India has always been called the Silicon Valley of India. Major manufacturers such as Intel, IBM, Microsoft, and Google have established R&D bases in Bangalore.

The Indian government issued a policy plan as early as 2012, when its goal was to achieve a turnover of US$400 billion in domestic manufacturing in 2025, a growth rate of 32%. In 2019, the Indian government issued a national policy for the electronics industry in 2019, which clearly stated that it must vigorously develop the ICT industry to achieve Make in India and Digital India.

So, what is the development of the Indian semiconductor industry? Compared with China, is there any competitive advantage? What can China learn from India?

China vs. India: 5G development comparison

First of all, the Indian economy has developed very well in recent years. The average growth rate of the Indian economy is about 7%. Its growth rate has been the highest in the world for five consecutive years, and has surpassed the United Kingdom and France, ranking the fifth largest economy in the world.

At the same time, the development of the IC industry in India is also very early. Since the 1980s, the information technology industry in Bangalore has started. Later, it became well-known in the computer software industry. The world’s top software companies, such as Microsoft, Siemens, Sony, Toshiba, Philips, etc., began to settle in Bangalore. China’s Huawei also established a research and development center in India in 1999.

In the past 20 years, Bangalore of India has become a global software outsourcing base. At the same time, Bangalore is also one of the largest chip design centers in the world. The top ten fabless semiconductor design companies in the world all have a large number of operations in India. Recently, Apple acquired the Intel smart phone business units. It is said that a large part of the employees are from the Bangalore team.

In the past, due to long-term work for European and American companies, India has indeed cultivated a large number of talents in the field of chip development. In terms of Very Large Scale Integration Circuit (Very Large Scale Integration Circuit) and chip design, India’s R&D strength and talent pool are both remarkable.

But on the other hand, there are two directions in the field of semiconductor manufacturing, one is semiconductor design and the other is semiconductor manufacturing.

In the field of design, as just mentioned, India’s achievements can be said to be very outstanding. In the fields of network microprocessor design, analog chip design, and processor subsystems, India has many multinational companies.

But in terms of semiconductor manufacturing and chip manufacturing, India is much weaker. There are few companies that can handle materials, machinery manufacturing, testing, and packaging.

When we look at the list of the top ten most promising semiconductor companies in India, we can find that most of the factories are companies focused on IC design.

We can compare the ecology of China’s chip industry. The chip company SMIC recently went public on the China Science and Technology Innovation Board (Star Market). This shows that China has gradually established its own chip industry ecology to varying degrees in fields ranging from IP authorization to chip design to fab foundry, packaging and testing equipment, and materials.

In terms of the semiconductor industry, India’s industrial chain development is very imbalanced, especially in the upstream industrial chain. It can be said that there is no clear layout.

Although there is still a certain gap between China and Japan and the United States in terms of semiconductor materials for semiconductor equipment, more and more companies and products with international competitiveness have gradually emerged. In many areas, China is also accelerating the use of domestic products to replace imported products, breaking the monopoly of foreign manufacturers, and has gradually formed a relatively complete upstream and downstream industrial chain.

In this regard, India is inferior to China. If India wants the semiconductor industry to break through the current predicament, it urgently needs to solve some major problems.

The first question is about funding. First of all, we must know that building a semiconductor manufacturing plant requires a large amount of capital investment. Samsung’s new factory in Pyeongtaek City in 2017 is mainly responsible for the production of the fourth-gene
ration Samsung triple-D memory chips. Its investment amount is just 18.63 billion US dollars.

A relatively small-scale semiconductor project, such as Sony’s long-term new semiconductor project in 2019, mainly produces chips for smartphone cameras and image sensors, and its investment is also around US$900 million.

Generally speaking, the construction of a large chip manufacturing plant requires an average investment of US$8-10 billion.

In contrast, the Indian government restarted investment and support for the semiconductor industry in 2012. Let’s take a look at India’s largest semiconductor industry fund, the EDF Fund (Electronics Development Fund), which is similar to the second phase of China’s National Integrated Circuit Fund. According to reports, India’s EDF fund announced that it plans to invest in 13 sub-funds within 4 to 5 years, with a total commitment of 8.57 billion rupees, or about 117 million US dollars.

However, on May 17 this year, Chinese funds registered US$1.5 billion and US$750 million with Semiconductor Manufacturing South China, a subsidiary of SMIC, for a total of US$2.25 billion. Semiconductor Manufacturing South China’s registered capital increased from 3.5 billion US dollars to 6.5 billion US dollars.

It can be seen that India’s national-level support is still obviously weak. It wants to invest in every field, but the result is that many fields are very weak. And chip manufacturing is a very expensive industry.

Reliance Industries, India’s largest company by market value, has a total profit of US$1.9 billion in 2019, which requires Indian private companies to invest at all costs. For the time being, it seems that no Indian company has such strength and determination.

Is India's ambition for 5G a joke, compared to China?

The second point is that India’s infrastructure is still very backward for 5G.

Its industrial environment is temporarily unable to meet a requirement of a large wafer manufacturing plant. This is one of the main reasons why India has long lacked powerful fabs.

Take the cleanliness requirements of the wafer manufacturing plant, the particle size in the air is required to be controlled within 0.1 microns, which is much smaller than the diameter of a single virus or bacteria. There are strict requirements for humidity, ACM pollutant control, light, structural vibration, and noise, while the power supply and water treatment are more stringent. At this stage, it can be said that there are still huge challenges in India’s infrastructure. Let’s compare China again. China Electronics System Engineering No. 2 Construction Company (CESE2) has dozens of semiconductor engineering projects under construction in 2019.

Third, India has a huge talent gap in the field of semiconductor manufacturing.

Although India is a developing country like China, with a population of 1.32 billion people, India’s education is considered a very big problem. The education level of the high caste is very good, but the low caste can be said to be terrible, or basically it can be said that there is almost no education for the low caste.

Statistics show that the average number of years of education for Indians in 2010 was 4.4 years, compared with 7.5 years in China. At the same time, the female literacy rate in China is as high as 99%, while in India it is not more than 50%. The dropout rate in fifth to eighth grade is even higher. Up to half the number. The Indian Institute of Technology, the highest university in India, ranks about 172 in QS, and there are more than ten universities in the top 100 in China.

Not only that, India’s elite education has also led to a very low acceptance rate in Indian institutions of higher learning. On the other hand, the proportion of Indian graduates studying abroad or working abroad is very high.

Over the years, a huge number of Indian students have rushed to Silicon Valley in the United States, which has also caused a serious loss of science and engineering talents in India each year. The latest data in June 2009 shows that more than 50% of Silicon Valley engineers are of Indian descent, which is much higher than the proportion of students from leading Chinese universities studying in the United States.

The local IC industry actually needs a large number of engineering talents. For example, the underlying materials and equipment require a large pool of talents. And China also has a talent gap.

A report in 2018 pointed out that the number of employees in China’s integrated circuit industry is approximately 461,000. By 2021, the demand for talents in the industry will be around 722,000. However, there are 200,000 integrated circuit-related graduates graduating from colleges and universities in China every year, and with the increase in salary in recent years, more and more graduates enter the semiconductor industry.

If India does not want to retain the elite group, it is empty talk about semiconductor manufacturing without having enough talents.

Fourth, the impact of the Covid-19 epidemic on India’s semiconductor manufacturing can be said to be very huge.

Just recently, the number of people infected with Covid-19 in India has exceeded 1 million. The latest data shows that the overall smartphone shipments in India in the second quarter of this year were only 17.3 million units, compared to the second quarter of 2019 ( 33 million mobile phones), a decrease of 48% year-on-year.

Let us not underestimate the Indian mobile phone manufacturing industry. For India at this stage, mobile phone manufacturing is a benchmark industry for the future development of Indian manufacturing, and it is also a very important step in the layout of the integrated circuit industry chain. If there is a problem with this foundation, it will be a huge blow to India’s integrated circuit industry.

Therefore, in the future development, we still need to continue to observe how India emerged from the quagmire of the Covid-19 epidemic.

Finally, India and China have much in common in the development of semiconductors, and they are both large import countries of semiconductors, and both are also seeking to reduce their dependence on chip imports.

Is India's ambition for 5G a joke, compared to China?

While the gap between India and China in the semiconductor industry is still very obvious now, and there is an imbalance in
India, China has a lot to learn from India, especially in chip design.

In the future, with the development of India’s economy and its emphasis on the semiconductor industry, its follow-up momentum cannot be underestimated by its Chinese counterparts, and it will inevitably form a very big competition with China in low-end semiconductor manufacturing.

In the face of competitors, China needs to have a clear understanding of competitors and cannot relax. It needs to accelerate industrial upgrading, steadily promote the domestic substitution of the semiconductor industry, and let China’s semiconductor industry rise.

Disclaimer: This is an article created by Michael Liang for Chinasdg.org. You can find the original article here: https://chinasdg.org/2020/07/25/is-india-s-ambition-for-5g-a-joke-compared-to-china/.

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