The Hindu Business Line : Scene of action

The semiconductor boom is on and India is eagerly awaiting the fabricators to make investments here. Sem India has announced a major fab project. Intel, it appears, prefers Vietnam to India. Dell says it is awaiting the national policy on semi conductors to evolve for taking an investment decision. Presumably, other fabs are thinking like Dell, waiting to see if the Government of India would come up with a viability gap funding for fab projects.

But the downstream part of the industry is in no mood to wait. Investments in Assembly and Testing (A&T) are happening. Tessolve Services has announced a $200-million investment in this area. The home-grown SPEL Semiconductors Ltd has said it would invest $250 million over the next five years. The Singapore-based United Test and Assembly Centre (UTAC) is said to be mulling setting up shop in India.

Dr Sam Verghese, Chief Executive Officer, SPEL Semiconductor Ltd, estimates that $1 billion of investments could happen in the next few years.

So it does appear that, Fab or no Fab, India could become an A&T hub. Truly all you need to get into the business is a quarter million dollars and a dream. Sure, A&T is a high-precision job, but it is routine, machine-done.

Compared to chip-design, where engineers develop an integrated circuit for a function and Fab, where the circuit is etched on a wafer of silicon (which could sometimes be as small as a grain of sugar), A&T is a fairly simple job.

The A&T plant receives 4 or 8 inch wafer discs containing thousands of circuit-bearing silicon dies. The wafer is cut into individual dies, which are then attached to a substrate with extremely thin gold wires. Plastic moulds are put on them to protect the circuit, after which they are tested for design, fabrication or assembly design defects. A sample is also tested for durability under high temperature and pressures. High-precision, but routine.

Why then, you may ask, did investments in A&T not come into the country earlier? The answer is a combination of two factors — perception of India and growing mistrust of China. The world began to recognise India's mettle in Information Technology a decade ago, but it took longer to accept the country's strengths in manufacturing. It is only now that Indian companies are being trusted with manufacturing outsourcing.

Second, the industry is getting wary of IPR protection in China. Designing an integrated circuit is a high-value (and high-margin) job that calls for a good deal of cerebral work. But it is not too difficult to copy it (see box). This is translating into gains for India.

When these A&T companies set up shop here, the suppliers will follow. As of now, most of the raw material is imported, including a range of implements used to prevent static electricity — shop-floor attire, flooring, wrist-straps. In this industry, static electricity is the first enemy — it could spoil the circuits and therefore the products into which the IC goes. Importantly, the presence of an A&T industry will spur the fabs to come, because customers will want fabs and assembly and testing close-by to cut down on lead time. Today, many fab companies already have design centres in India. A&T companies are coming. The mid-segment, fab, cannot but follow suit. The chicken will lay an egg — a golden egg.

An industry based on trust

A chip contains several layers of extremely thin silicon wafers, each of which has a part of the circuit etched on it. When a fab gives a chip to another company for assembly and test, it does so on the basis of trust.

There is no way to tamper-proof it. The assembly and test company can peel off the layers and with the help of machines copy the circuits, and `hip-hip-hurray!' it's got itself a full integrated circuit for a new cell-phone application.

You break the trust and you are out of business.

But how does an assembly and test company prevent IP violations from a rogue employee? First of all, it is only the top-end engineers who would know what to do, points out Dr Sam Verghese, Chief Executive Officer, SPEL Semiconductor Ltd.

Second, even the engineer would have no means of knowing for what application the IC is meant, although he may know for which customer. Nor can he walk away with a pocketful of chips for deciphering elsewhere, because every single chip, including the rejects, has to be accounted for. And above all, a lot of screening happens at the time of recruitment.

ramesh@thehindu.co.in

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