India's $10B microchip dream: Golden opportunity or environmental risk?

NEW DELHI, INDIA — As India aims to position itself as a major chip manufacturing hub, experts are sounding alarms about the potential strain on the country's already precarious water resources. With large swaths of the nation grappling with acute water scarcity during the grueling summer months, the water-intensive nature of semiconductor manufacturing plants has raised concerns. Semiconductor chips are used in almost all kinds of electronic devices, from smartphones and televisions to cars, missiles, rockets, and other military weapons. With approximately 2,000 chips designed every year and over 20,000 professionals working on various elements of chip design and verification, India is fast becoming a semiconductor design hot spot. With an ambitious $10 billion incentive plan to attract semiconductor manufacturers, which will create at least 1.2 million jobs and create a $55 billion market value by 2026, and brand itself as an electronics hub, India is working hard toward becoming the next chip destination. But water is a critical component in multiple stages of the chipmaking process, from the initial cleaning and etching to the final rinsing and cooling, and experts are concerned that the already water-stressed country will be pushed into drought-like conditions. Creating a semiconductor hub Addressing the second edition of the country’s semiconductor summit, Semicon India, last year, Indian Prime Minister Narendra Modi stressed that “electronics is an important pillar of growth,” and India is focused on facilitating a semiconductor manufacturing ecosystem. Strengthening the country's vision of “atma nirbhar Bharat,” or self-reliant India, and “Make in India,” Modi said the country aims to become the next global hub for semiconductor design and manufacturing. To facilitate its standing as the world’s leading chip manufacturer, India is laying down the red carpet for the semiconductor industry. Modi confirmed that technology firms will be given 50% of the startup costs to set up chip manufacturing facilities in India. The government is also carrying out policy reforms to accelerate the growth of the country's chip sector and is offering tax exemptions for the new manufacturing industry. He also added that courses on semiconductor manufacturing will be made available at more than 300 major colleges in India. The government of India estimates that in the next five years, the country will produce at least 100,000 chip design engineers. “Everything depends heavily on electronics and semiconductors, and thus focusing on this will put us in an advantageous position as future wars will be fought via chip intelligence,” said Satya Gupta, former chairman of India Energy Storage Alliance and president of Very Large Scale Integration India, a society of the chip manufacturing ecosystem. Gupta projects that in the next three or four years, India will have proficiency in chip design and manufacturing — a strategic requirement in the future. “If we have two packaging/assembling units, two silicon [fabrication units], and two compound silicon fabs in the next five years, we will be on the right path to become the next hub,” he said. However, he also acknowledged the scarce availability of both chemical and natural resources and the fact that the industry leaves a heavy carbon footprint while adding that studies on how to minimize the use of water in chipmaking are being carried out in India. “One of the most important criteria in setting up a chipmaking plant is the availability of water. This is a water-intensive industry and requires thousands of liters of ultra-pure water each day. Thus infrastructure and availability of natural resources, including knowing the seismic hazard of the area, are highly important,” he said. India’s water shortages According to a 2019 Central Water Commission of India report, the country is already experiencing water stress, with a per capita water availability of 1,486 cubic meters per year. An annual per capita water availability of less than 1,700 cubic meters is considered a water-stressed condition. Thus, there is already a scarcity of potable water in the country and the high dependence on agriculture on groundwater reserves puts further stress on accessibility. About 54% of India faces high to extremely high water stress leaving 600 million people at higher risk of surface-water supply disruptions. Climate change-induced water shortages are already causing food shortages in the country. Experts believe that the added stress on water resources may cause drought-like situations in India, similar to Taiwan which has been the chipmaking hub of the world so far and has been facing acute droughts since 2021. Its biggest company, Taiwan Semiconductor Manufacturing Co., or TSMC, uses at least 99,000 tonnes of water per day. In 2021, Taiwan had to cut water supply to Taichung, its chipmaking hub, to ensure continuous water supply to local people. “Chipmaking is economy-driven and has a big market globally and in India. The industry is known to pump in energy and money but it is also water-intensive and can disrupt water usage and availability. Thus, it is crucial to have a strong compliance framework in place,” said Ashok Keshari, a professor and expert in hydrology and groundwater in the department of civil engineering at the Indian Institute of Technology Delhi. He is also a consultant evaluator for the government’s technical reports on water-stressed regions in the country. Keshari emphasized that the semiconductor industry should not be allowed to overexploit water resources, as they not only use large amounts of pure water but also release wastewater thus putting more hydraulic load on the water treatment facilities. Greenpeace’s “Invisible Emissions” report published in April last year included detailed emissions profile of 13 semiconductor companies and revealed that none of their “ existing climate commitments are aligned with the Intergovernmental Panel on Climate Change (IPCC)’s recommended emissions cuts to limit global warming to 1.5 degrees Celsius in relation to the reference period.” These companies include TSMC, Samsung, Micron, Intel, and SK Hynix. The report highlighted that East Asia, which is home to most semiconductor companies, “is particularly susceptible to climate change-related disasters, as well as economic and financial risk” and urged countries and companies to achieve neutral emissions by adopting 100% renewable energy by 2030. Agreeing with the report, environmentalist Bhargavi Rao said many parts of the country, especially those that are being considered for this semiconductor revolution such as Bengaluru, are already reeling under acute water shortages and erratic monsoons. “If the chip companies do not commit to zero supply chain emissions, Bengaluru will see droughts worse than Taiwan in the coming years,” she adds. Referring to a groundwater report released by the water ministry, Keshari said that the majority of locations in the south Indian state of Karnataka are marked as critical water stress regions. The report reveals that of 234 units assessed, 49 units, or 20.94 %, have been categorized as over-exploited; 11 units, or 4.70 %, as critical; and 35 units, or 14.96 %, as semi-critical. Most of the over-exploited and critical units are in the industrial hub of Bengaluru. India’s semiconductor journey During the COVID-19 pandemic, the world’s semiconductor supply slowed down and there was a serious shortage, which led countries to think of alternatives for the future. Despite all the environmental concerns, technology experts see this as a time of great advantage for India. With the geopolitical situation changing and the global demand for semiconductor chips increasing to an all-time high, this is a golden opportunity up for grabs. During Modi’s June visit to the United States, the two countries signed a memorandum of understanding on Semiconductor Supply Chain and Innovation Partnership in line with each country’s semiconductor incentive programs. The two leaders welcomed an announcement by Micron Technology, Inc., a U.S.-based semiconductor giant, to invest up to $825 million in India’s western state of Gujarat to open a new facility that will enable assembly and test manufacturing with support from the Indian government. This is the first major semiconductor investment in India. This is the first setup that has been announced but India is not new to semiconductor manufacturing and designing. Continental Device India Ltd. has been manufacturing silicon semiconductor chips since 1964. Speaking to Devex, its executive vice president and chief operations officer, Pankaj Gulati, said there is a lot of money in chipmaking and India should make use of this right set of circumstances. “There is a lot of confusion around semiconductor manufacturing and its carbon footprint. There are two sides to the industry: front-end [wafer manufacturing], and back-end [assembly]. While manufacturing does require ultra-pure water of high resistivity, I do not see a manufacturing fab opening in India in the next five years,” he said. Gulati agreed that water availability will be an important criterion in setting up any of these industries. A semiconductor fab, for instance, requires 6,000-8,000 gallons of ultra-pure water a day and thus needs to be near a freshwater source, according to Gulati. He stressed that until there is not enough back-end capacity, there is no point in bringing a fabrication facility to India. And since water studies are being conducted for the electronic industry, by the time a fab opens up, there will be options to recycle almost 80% of the water used, adding that 60% of the water used in the electronic industry gets recycled already. “Our focus instead should be on setting up infrastructure to run these fabs. We have been relying on imports of the raw materials required to build a chip, including gasses and chemicals. The ideal thing would be to first focus on getting these facilities in India and then worry about its effect on everything else,” Gulati said.