Vedanta has hired a Texas Instruments and NXP Semiconductor vet, David Reed, as CEO of is semiconductor business. Last year, Vedanta and Foxconn announced a joint venture to build a $20 billion fab for semiconductor and display fabrication in Gujarat, India. The expectation was that the fab would break even within 4 years, according to both companies. Akarsh Hebbar, is the managing director of Vedanta’s subsidiary, AvanStrate, an LCD manufacturer, and heads up the semiconductor and display business for Vedanta.
At face value, this says the pieces are falling into place for Vedanta. However, in light of the recent negative press that hit one of India’s richest men, a former world’s second richest man, and powerful industrialist, Gutam Adani, you might want to pull back and get a look at the big picture in semiconductor industry investment in India. For the record, Adani’s company received a scathing review by short seller, Hindenburg Research, accusing the company of fraud and stock manipulation, leading to a huge drop in the company’s stock price and no more, I am super-duper rich bragging rights (in some heady world’s richest strata, tens of billions matter).
Which leads us into the doom and gloom prognosis of what is officially dubbed the India Semiconductor Mission (ISM), part of the Made in India push by the government of Prime Minister Narendra Modi. And we are not even going to dig into the Foxconn dream crushing agenda of building manufacturing in other countries. The reality of India’s desire to make its own displays, as well as semiconductors, is that there is a lot missing other than hype and enthusiasm and some money. Let’s start with fabs need water and electricity. Lots of both in reliable, consistent supply. That’s a tall order in a country that has issues with delivering both to its population.
There is the issue of Indian bureaucracy which, famously, thwarted Intel’s attempts to build a fab in India back in 2007 when the government was too slow to provide an investment policy. Not to mention the fact that even with a functional investment strategy, the numbers that India is talking about pale in comparison to what Europe, the US, and Asian countries are doing for their local semiconductor industries. And yes, the bureaucracy isn’t necessarily any better now than it was when Intel was looking to invest in its plant in India.
Finally, you get over all those humps and you build a fab, and you are going to need full capacity from day one. Making chips is about making chips 24/7. Anything less and you yields drop, prices go up, and it’s just an ugly cycle that means someone can come from the outside with cheaper product and take your business easily. Politically, India needs a semiconductor industry, don’t we all, but in reality, the infrastructure to support one may be some way off. Let’s get real, China took three decades to get to its position of dominance in the industry. It started off with agrarian reform and heavy industry post-Mao, and it was touch and go in the 80s, but the country adapted its policies to balance central control with the need to encourage entrepreneurship, foreign investment, and trade. With the wealth of technical talent that India possesses and its massive home market, it should be doing more but, again, it may not have the infrastructure to do so.
