Siddhartha Ahluwalia 1:28

Hi, this is Siddhartha Ahluwalia, your host at Neon Show and also managing partner of Neon Fund, a fund that invests in best of enterprise AI companies starting out of India, building for the globe. Today, I have with me Raja Manickam, sir. You are coming on a podcast second time.

Your first podcast was very successful on Neon Show, sir. So thank you for coming again and welcome again.

Raja Manickam 1:51

Thank you.

Thank you.

Siddhartha Ahluwalia 1:52

In our last episode, we explored the basics of semiconductor industry, what are semiconductors, how they are made, why they matter. But the world has changed a lot since we did our last episode.

You know, there’s a new president in the US, you know, and it has changed the global macro on where to produce semiconductor. And as AMD CEO Lisa Su points out, you know, like semiconductors has become central to national strategy and not just business. And she’s saying five years ago, nobody even thought about where chips were made or where you get your next chip from.

That’s what has majorly changed for this industry. Now it matters where any country is getting their chips from, where are they made, where even the raw material is coming from. So, you know, to start with, what has changed and why are some semiconductors suddenly at the center of global strategy, global national politics?

Raja Manickam 2:56

Yeah, I think, you know, it’s a good question. But let me go a little bit deeper, right? You know, and so I’ll explain, you know, what semiconductor is, right?

Then that will, you know, drive towards why semiconductor, right? So, if you look at, you know, very basic science, right? You got physics, you got chemistry, you got biology, right?

And each of them, right, you know, your formulas, mathematical formula, which you can use to describe those, right? Physics, let’s say, you know, motion or light or a chemical interaction or biological or biology, you know, how colors are formed and so forth, right? Now, each of them can be articulated in a mathematics formula, right?

Now, the formulas, once you have a formula, you could make that into a semiconductor, right? So, if you look at it, a basic transistor, for example, right? So, once you have, you know, how a transistor works, you know, theoretically, then we were able to make a transistor physically, right?

And that is a semiconductor process, right? So, over time, what has happened is all these formulas and, you know, whether you look at quantum physics, right? Now, you can create a quantum computer, right?

So, a lot of these are whatever you learn in theory and whatever new you are discovering, now you can put it in real use, right, through the semiconductor process and so on. I mean, semiconductor is a very wide term, right? When you say, you know, it’s not just chips, right?

Even LED is considered as a, you know, semiconductor. Photonics, you know, is considered, so it’s pretty wide in that sense. So, I think, you know, fundamentally, right, now products from, you know, theoretical things, right?

So, whoever, you know, is able to master this is going to rule the world, right? I mean, this, I think, fundamentally that has come to, you know, believe, right? So, now, once, you know, they’ve seen this, where they’ve become really good at this, they feel that they have a huge advantage, right?

I mean, you know, drones is a, you know, a classic example, right? You know, whoever is in control of, you know, how to make a better drone and so on, right? This has an advantage, right?

Whether for good or bad reasons, right? So, I think, you know, so the what of semiconductor I explained to you, and now you see why, you know, each country is trying to have an edge, you know, to make it their properties and so forth, or, you know, has a better product. So, this is the why of it, right?

And to me, it has become a very fundamental thing that you need in a country, like, just like roads, right? Right, you know, and especially now we’re looking at a digitizing, digitized world, right? So, you need a road for these digits to move, right?

If you think about it, right? So, semiconductor, you could, you know, as an analogy, right? Is a road, is a warehouse, you know, is a digital warehouse, right?

It’s where people come to interact, right? It’s a temple, right? Or the mall that, you know, you want to…

So, if you look at it from that analogy, right? It is a very fundamental infrastructure that is required by the country, right? So, that is why governments are now involved.

So, they are, you know, instead of, you know, just building roads, now you have to build, you know, highways of, you know, where electrons can move, right? Electrons can be stored. So, this has become a basic infrastructure.

So, that is why you see all the countries are very keen on investing in it, creating products that they can have an edge over others. And it’s going to become very, very competitive. So, that’s what I think, you know, Lisa is talking about, you know, there is a lot of interest.

And the other thing is, you know, semiconductor, just like a road, right? Nobody, you know, thinks about how a road is made or, you know, we just take it for granted. So, semiconductor was inside the system, right?

Nobody cared about what was inside the system and, you know, how it works and so on, right? Because we were operating it on the software side of things, right? That was the connection to the hardware, right?

So, nobody cared about it. But now, because of all the reasons I told you where, you know, you have quantum, you’ve got photonics, so many different sensors, right? You know, that are being incorporated into a basic chip, you know, in a system.

It has become, you know, people are aware of it now, right? There’s a lot more awareness. And they want to have a good product and so forth, right?

So now, instead of semiconductor inside, now semiconductor is on the outside, you know, getting the limelight.

Siddhartha Ahluwalia 8:23

And, you know, let’s rewind it to the origins of semiconductor. US invented the semiconductor industry with Bell Labs, Fairchild and DARPA, laying the foundation in 50 and 60s. And despite leading in design, US became dependent on Asia for their most advanced chip making.

So, why did US, you know, despite having a head start and leading in design, allow itself to lose dominance in fabrication and packaging? Was it just cost like outsourcing manufacturing to Asia or a failure in foresight because now they’re trying to get it back?

Raja Manickam 8:59

Yeah, I think certainly, you know, cost drove a lot of this, right? They started with packaging being outsourced and all that. And then slowly, you know, other areas, you know, the fab, wafer fabs being outsourced and so on, right?

And what they didn’t realize is that, especially on, you know, wafer fab at the time, there is a significant amount of interaction that happens between design and the fab, right? So, you know, a feedback loop that exists, you push the design, which means that, you know, you’re pushing the process, right? So, the process is what happens in the fab.

So, these two people have to work together, right, in order to create better and better products. Now, once you lose that, you know, the making of it, right? And you focus only on the design, design, design, design, right?

So, what happened was, you know, now they realize that this technology, you know, on the making of it needs to work, you know, together with this. So, I think they felt that, hey, you know, the dependency is becoming more and more, and our innovation is not happening as much as we should. So, now there is a, you know, scramble for, you know, and in this last, I would say, 30, 40 years, right, we’ve lost, I mean, when I say we, meaning, you know, U.S., U.S. has lost the expertise, the capabilities of process, right? And there’s so much of, you know, concentration in Taiwan, especially in DSMC. They have really mastered it, right? So, it was not very, you know, sexy to work in a fab in the U.S., right? Everybody wanted to, you know, work as a designer or in software or something, right? Nobody actually wanted to do the hard work of working inside a fab developing processes. So, that generation is gone, right?

So, now you have to start from scratch again, you know, motivate the youngsters to go back to work in fabs and processes and all that. So, it’s going to take some time, but I think it’s the right move, right, to bring at least a higher, you know, processes back to closer to the design capability.

Siddhartha Ahluwalia 11:22

And do you think U.S. now has the right manpower? Obviously, it has all the money in the world to do it, but right manpower to make it happen now?

Raja Manickam 11:33

No, that is why I think, you know, they will go through a phase where, you know, they will have to come up to speed, right? And also, you know, the working conditions, you know, how they work, you know, all of those have changed, right? So, when you bring, you know, Taiwanese workers, right, to teach and develop process engineers or technicians in the U.S., you know, the working conditions are different, right? A Korean engineer or Taiwanese engineer, you know, will work seven days a week, right, to get the process done and so on, right? Whereas in the U.S., you know, there is, you know, much more restrictions on labor and stuff like that. So, I think it will take time, but certainly, you know, they have the capability to bring it up, you know, and, you know, money-wise, right, obviously, you know, a semiconductor pays really well.

So, I’m sure, you know, being a very capitalist society, people will eventually get into it. It’s going to take some time to do it.

Siddhartha Ahluwalia 12:44

So, people who are losing their jobs because of AI will go back into semiconductor?

Raja Manickam 12:48

Yeah, that is, you know, a good possibility, yeah.

Siddhartha Ahluwalia 12:54

One thing, you know, and we covered some part of it in the last podcast, but I want to dive deep into it again because it’s such important for this conversation as well, that how did Taiwan become so important in the semiconductor industry? Can you go back to the history?

Raja Manickam 13:09

Yeah, I think, you know, see, historically, you know, Taiwan, I mean, politically, geopolitically, right, it was outside of China, right, you know, while China claims that and so forth. And Taiwan was first identified, I believe, you know, by the U.S. and say, you know, look, we got to make them economically, you know, meaningful for us, right. So, TI was one of the first companies which, you know, I worked for TI, my first job was TI, but, you know, TI was one of the first companies that moved some of the manufacturing there or looked for manufacturing, you know, on the back end and so on.

And then, you know, Philips had Fab and so on. So, I think that was, you know, to make them economically strong enough, right. I think, you know, geopolitically, it made sense that if you want to protect something, right, it must be meaningful, right?

You need to have a reason to protect something, right? Like you have an oil field, right? You want to protect oil supply, you know, you will protect it, right?

So, you know, there must be some dependence and, you know, paid economically. So, I think a lot more companies went there, right? And also, I think, you know, the, you see, one of the things is, it’s a small island, right?

And so, they focused on one thing, right? See, whereas in India, for example, right, we have many things, right? We have steel making, we have car making, we have, you know, all kind of, we make textiles or, you know, I mean, so we have many, many things that we could focus on, right?

So, they picked this, right? And Morris Chang was probably one of those guys that, you know, identified this as, you know, a major role. So, I think, you know, there was very focused attention to be really good at something.

And, you know, they really worked on it and got the formula right.

Siddhartha Ahluwalia 15:14

And what’s the history of TSMC?

Raja Manickam 15:16

So, TSMC, I think Morris Chang was involved, you know, in the early stages.

And Morris Chang was used to run the fabs in TI. And he’s got a, you know, very good history of, you know, running fabs and yield and processes and all that. And then when he left TI, he went to another company, I believe, General Dynamics or something in Boston area.

And then that is when I think, you know, this whole idea about the US and Taiwan started to take shape. And then so he moved to Taiwan and, you know, basically the Taiwan government, you know, asked him to see, you know, how we can do this. So, there was, I think initially he worked at a research thing, but his idea was to, you know, build very large companies.

And so that’s how I think he started in the fab. He’s a fab guy, right? No one better to do it.

He was a very visionary person, because at that time, people did not believe that, you know, a country like Taiwan, which was, you know, a lot back at that time was actually maybe, you know, as backward as India, maybe, or maybe slightly better, maybe, but not far off, right? We had SEL Chandigarh, you know, before TSMC. And TSMC has become world class and here we are struggling, right?

So, I think, you know, so that is how he got into, you know, and so he got the right person, right? So, I’m a big believer in that, that one person can make a difference. And he surely did.

And he had a huge backing from the government. And, you know, the, I think American and European companies were more than happy to do it. And he was also a very good businessman, was very good businessman.

There’s a lot of good stories about him, how he built the business, where he had to take a lot of losses, but he still persevered and built the business.

Siddhartha Ahluwalia 17:26

Any particular story that you remember or are fond of?

Raja Manickam 17:31

I think in one instance, he said, you know, he had to work with Philips. And Philips did not give him enough business or something like that. And then he had to go out and find, the foundry model was something new at that time.

And, you know, so he had to basically beg business from other guys, because foundries used to, wafer fabs used to be owned by the product companies themselves. Like TI had their own fabs and, you know, AMD had their own fabs and so on, right? So, it was a different, you know, time at that time.

So, he had to really beg for, you know, business, you know, just give me a few wafers, you know, business so that, you know, I can just keep running and so on. So, I think his perseverance was, you know, kept on. And I think he believed that ultimately, right, he can create a differentiation, even competing with their, you know, internal fabs.

So, I think that was, you know, for someone like that, right, at that time, where this whole model was new, he could persevere and do it. I think that was amazing. He had the foresight.

Siddhartha Ahluwalia 18:51

Yeah. And obviously, I believe US supported Taiwan, as you said, right? Companies like TI, Philips started putting up their fab plants in Taiwan, and so the support of US government.

So, at what point in time, you know, did Taiwan become more closer to China than to the US?

Raja Manickam 19:15

No, I think, you know, see, US was a very open, you know, society in that sense, right? You know, when I went to the US and all that, you know, it was really a land of opportunities, right? Nobody cared about, you know, how you, you know, there was no restrictions at all, whether it’s technology or, you know.

So, it was, and Taiwan, right, you know, culturally, right, you know, being, they’re very similar, right? So, there was, you know, and it was in their backyard, right? Less than one hour flight, you know, you get there, right?

And there was, you know, so doing business for Taiwan and Taiwan, you know, you got to remember, right, was at a much, much higher level of technology and GDP and all that as compared to China, right? Until the late 80s or so, right?

Siddhartha Ahluwalia 20:01

Yeah.

Raja Manickam 20:02

70s, 80s, when China was much, much lower, right? So, it was easy for them to, you know, culturally, you know, there was no difference, right? And these guys, you know, Taiwanese guys were ahead.

So, for them to sell into China was very easy, right? And a lot of people went there, you know, made a lot of money. In fact, I think Taiwan was the biggest investor in China for a long time.

I think next only to Japan, right? So, a lot of guys, you know, just, you know, it was second nature to, you know, for them to do that, right? So, it was very easy, easy, easy.

But on the downside today, right? I mean, I was in Taiwan about three weeks ago.

Siddhartha Ahluwalia 20:45

Yeah.

Raja Manickam 20:47

And, you know, most of the business, Taiwanese companies is in China. So, now they have this problem. How do they need to quickly diversify?

And the Chinese companies want to build their own companies now, right? And they’re saying, hey, you know, thank you, Taiwan, you know, but we want to build our own. So, Taiwan is in a dilemma.

Siddhartha Ahluwalia 21:09

Okay.

Raja Manickam 21:09

Right? They need to.

So, where are they going to go, right? The next big country market available to them is India.

Siddhartha Ahluwalia 21:17

Yeah.

Why not US?

Raja Manickam 21:19

Well, US, they’re also trying, right? Obviously, you know, for obvious reasons.

They are quite successful in there, right? But, you know, for a large market, right? You know, they cannot ignore.

And, you know, another thing very strange or rather, you know, unique about Taiwan. They’re very, maybe they’re a small country and so on, right? Doing business for them outside of their own culture is not that easy.

See, culturally, right? And they’ve not attempted it like unlike Koreans, for example, right?

Koreans have moved to, you know, India and, you know, Samsung and all that, right? But, you know, Taiwan, they were very happy with China for a very long time, right? So, I think, you know, certainly US, you know, benefiting like you can see all the servers and all that AI, NVIDIA is very big with Taiwanese companies, you know, supplying to US and so forth.

But I think India is a very big market that they’re attempting to come.

Siddhartha Ahluwalia 22:21

And, you know, China’s rise wasn’t accidental, it was strategic. Starting in the early 2000s, China pumped billions of dollars into semiconductors through the National IC Fund, build champions like SIMC and then aggressively recruited talent. Also, a lot of help from the US during that time.

And China has been putting investments and subsidies to shift the supply chain of semiconductors more favorable to them. What has happened recently is like the US has blocked China’s access to some of the world’s most advanced chip making tools. But companies like Huawei are still managed to surprise the world with new chips, right?

And they are being more indigenous, you know, making it, you know, completely independent now. And are these restrictions really working with the US to China? And how are they pushing China to become more self-learned?

Or you can also go back into the history, how China became such a powerful force in semiconductor. Now we talked about US in 50s, 60s, then after that Taiwan in 60s to 80s. But suddenly in 2000 to till now, like China has become the world’s largest superpower in semiconductor.

Raja Manickam 23:38

Yeah. See, I opened this podcast with you saying about the what and why, right? Yeah.

So they realized this, you know, 25, 30 years ago, right? So they’re very focused on, like you said, on this strategic impact of semiconductors, right? So they invested in that.

And I would say, you know, American companies went for the ride, right? They said, hey, you know, there’s a market, you know, we need to be in the market, right? I mean, I was with Fairchild at that time, you know, Fairchild was dying to go to, you know, to China, right?

Motorola went there. Everybody, you know, wanted to go there. And whatever terms, right, you know, these Chinese companies wanted, they gave the terms, right?

Transfer technology and setting up manufacturing there and so on, right? And, you know, they were very, like you said, very strategic. Sometimes, you know, we may consider not so ethical, but, you know, it’s what it is, right?

Formally, we transferred, you know, American companies or, you know, transferred technology. And sometimes informally, you know, they managed to go through the back door and get some technology as well. So I think this was going on.

And, you know, US Big M is very capitalistic in that sense, right? It was managed by quarter by quarter. And, you know, so, you know, as long as, you know, they get paid, you know, and the market was growing, you know, so technology transfer was not an issue, right?

And they quickly grabbed it, right? Every deal that China had, it had to have a technology transfer, right? I mean, you look at even trains, for example, right?

You know, Siemens had made all the trains and then now they compete with Siemens, right? You know, fiercely.

Siddhartha Ahluwalia 25:23

The world was too short-sighted to realize how China could go so powerful.

Raja Manickam 25:29

Yeah. So, you know, so they, like you said, it is a very strategic movement. They said, you know, if you control semiconductor, you can control, you know, all the products further down the food chain, right?

So I think, you know, this was one of their, you know, they had that foresight to do it. We are doing it now, right?

Siddhartha Ahluwalia 25:47

Are we getting the transfer of technology when we are working with a outside India firm?

Raja Manickam 25:54

Not really, not really. I mean, you know, we are getting some old technology in that sense, but, you know, it’s okay, right? I’ll tell you about, you know, later a little bit about, you know, how India is going to do this, right?

Because, you know, a lot of water is flowing down the river, you know, under the bridge. So we are in 2025, so the approach can be different. So China, I think, you know, one was, you know, there’s a lot of this transfer of technology and so forth, but also I think, you know, they had a huge advantage of their own market, right?

So they developed a lot of products. Let’s say Huawei, for example, right? They developed products for their own market, telecom market, you know, because it was booming for them, right?

They have a huge population. And as you know, right, you know, from 1989 or 89, Deng Xiaoping, right, made that, you know, famous thing that, you know, money should be not considered as guilt, you know, people should be happy to make more money or something like that, from a communist guy coming there, right? So he kind of changed the narrative.

And so, you know, then, you know, people making money and building businesses became a huge impact, right? So I think what has happened is now, Huawei, for example, right? So they build products for the local market, and they learned how to sell, how to build, how to get the feedback and all that, right?

And the scale was also big, right? So they could reduce the cost. And then now, after they build, you know, their local market, they moved out to the foreign markets.

So the foreign market was icing on the cake, right? They already have a good business. Now they say, okay, let me sell a few, you know, more, right?

So, you know, so that is how they build, right? So coming to India, we should have the same, you know, in a way, you know, very similar strategy. We have an Indian market, right?

Which is basically owned by foreign companies today, right? It’s all 100% imported from a semiconductor standpoint. We have an opportunity to create Indian companies, and the Indian companies should focus on the Indian market first, right?

Because this is where you learn. You learn how to build products, you learn how to improve on a product, right? You know, quality, performance, how to sell, how to get the supply chain done, right?

Because, you know, you’re Indian, you know, you’re selling to an Indian company, you’re in their backyard, right? They will give you those opportunities as well. Then once you learn this and build it, then you go global, which is what, you know, China did.

I think, you know, the problem that I see for India could be that because of the GCCs and, you know, because we did a lot of software, IT and all that, right, for foreign companies, right? I hope the semiconductor doesn’t take that path, right, of, you know, just supporting, you know, other companies and foreign companies and saying that, look, we have semiconductor, which really is not.

Siddhartha Ahluwalia 29:11

And you have hope that India will not become again an outsourcing, let’s say, arm to the global companies for their semiconductor requirements.

Raja Manickam 29:24

Yeah, I hope, you know, you, if the foreign companies come into, you know, just like GCCs, right? You have GCCs for services, right? Design and all that.

Siddhartha Ahluwalia 29:34

Global capability centers.

Raja Manickam 29:35

Yeah. And you can also have manufacturing for these companies, right? You know, like what they have in Malaysia and so on.

But I think the focus should be on, you know, developing our own, you know, Indian companies, Indian products over time, right? So that, you know, you can have Infineon for India or, you know, hopefully 10, 15 years, maybe an NVIDIA. And it will be different, right?

I always say that when you, a solution coming out of India will be completely different for the same problem. Let’s say you give a problem to, you know, to NVIDIA and to a local company, right? The solution will be different, right?

And I think our solution would be a lot more practical and frugal in that sense and could become a global solution. Yeah.

Siddhartha Ahluwalia 30:30

And do you think India has mastered this art in other areas? Like, for example, Chandrayaan, right? We were able to launch a rocket to the moon with, let’s say, less than 600 crores, less than 100 million dollars.

So did India capture on that and started exporting that kind of technology and hardware also?

Raja Manickam 30:53

Absolutely. I think, you know, we already, you know, have some green shoots in my opinion, right? Because like I said, right, you know, the solution coming out of India will be very practical, right?

And, you know, you’ve got to also remember from a business standpoint, right? You know, I just this morning, I was in a company called Ambient Scientific, right, which makes edge processors, right? What a 40, 50 people team here, small office, right? You know, it’s actually in a house, right? Two floors in a house. And excellent engineers, right? All young people, right, probably the average age is about 30 or 35, and they showed me the layout of the chip that they’ve done, and I looked at the terminal, the display and all that they have, it’s very basic stuff that they’re using. The same thing was in the U.S., right? You will see these huge displays and all kinds of very fancy stuff and so on, and the cost obviously will be much higher, right?

So I think we have an inherent advantage in that we have a young population, smart people, and now a lot of these diaspora are also coming in to hit some of this, right? Like this particular company, it’s based in the U.S., but the entire chip is being developed here, right? So there are five, six guys from the U.S. guiding them, right? So I think we are at a good timing in that sense. We can make world-class product, there’s no question. It’s only a question of whether we want to make it for ourselves, or we want to make for somebody else.

Siddhartha Ahluwalia 32:42

And one thing that I want to discuss more about China is, now there was a CHIPS Act that President Trump in the U.S. wants to kill the CHIPS Act. So can you throw more light on what was the CHIPS Act?

Raja Manickam 32:57

I think the CHIPS Act was part of the strategy where they felt that the dependence on manufacturing has gone out of control, and they want to basically bring it back and all that. So the CHIPS Act was supposed to facilitate that, right? Give companies like Intel or other companies support in order to bring some of this to India, I mean to the U.S. But again, politics, right? Because Biden did it, Trump will say, oh, let me take a look at it, right? It never happened in the U.S. before like this, but now it’s like, because my predecessor did something I want to do, I want to take a look at it, and I want to do it differently and so on. But I think ultimately, a lot of these companies, if they have to do it in the U.S. completely, they will need this. In India, we call it viability gap funding.

Siddhartha Ahluwalia 34:01

Yeah.

Raja Manickam 34:02

Right? So that CHIPS Act is basically a viability gap funding.

Siddhartha Ahluwalia 34:07

Got it. Because right now what is happening globally is like there’s the giant U.S., then there’s like the giant China, and both countries are pouring endless amount of money into manufacturing, right? And the U.S. I think sanctioned like $52 billion just to put back manufacturing on track in the U.S. And Americans have this, you know, the public and private have to work together to bring fabs back home. And China is saying, we want to be completely self-sufficient. We don’t want anything because U.S. imposed tariff ban and other bans on China. And China is saying, you know, we want to be completely self-sufficient.

So where’s the world going right now? It’s become very polar.

Raja Manickam 34:53

Yes.

Yes.

So I think, you know, see, no matter how you look at it, U.S. will not be able to make everything. Yeah. And it doesn’t make sense.

Right? So there will be some amount of technology, even the CHIPS Act, right? They try to identify what we need for the future.

Right? So if you’re bringing some legacy stuff and all that, you’re not going to get funded. Right?

So they’re very, very particular about, you know, having some lead in terms of technology. Right? So that’s their focus.

I think China will be, you know, self-sufficient or at least, you know, make sure that they’re not importing from U.S. Yeah. Right? So I think that is going to accelerate now.

Right? Now, I think there’s going to be a time when there is going to be, you know, some balancing in that sense. Right?

Already, you know, you saw NVIDIA’s Jensen, you know, saying, hey, you know, I have to sell to China because, you know, it’s a huge market.

Siddhartha Ahluwalia 36:02

Right? NVIDIA’s more than one third of the revenue comes from China or Singapore.

Raja Manickam 36:07

Yes. So if they don’t give that money, right, or if they don’t get that market, you know, NVIDIA will lose and someone else will fill up that market. Yeah.

Right? So that’s what, you know, they have to make sure.

Siddhartha Ahluwalia 36:24

But then the doubt there was that China is building its capability in AI using NVIDIA chips, and those are routed through Singapore.

Raja Manickam 36:37

There’s all, you know, things will happen, right? You know, because once you put some restrictions, right, somebody will try to, you know. But those are all not big.

I mean, it’s all very easy to control these days. Right? Because the moment you power up a chip, you can identify where it is.

You can build code into that, right, which will say, you know, and you can, you know, shut it down. Right? There are all those possibilities.

But I think the real problem, right, or the real success I see is that innovation is going to become not just concentrated in one country anymore. Okay. Okay?

It is going to be India, is going to be China, is going to be Europe, is going to be Japan. Right? So there’s going to be a lot more fragmented innovation that’s going to happen.

Siddhartha Ahluwalia 37:23

Do you think that the world is entering into a new era of prosperity or a recession because of what is happening?

Raja Manickam 37:31

My personal opinion is this, right? It has become so concentrated where, you know, you have these mega factories, you know, in one location supplying to the world, right? The communities were all bypassed.

Siddhartha Ahluwalia 37:43

Yeah.

Raja Manickam 37:43

Right? The community’s involvement was nothing. Right?

I think we are going back to the roots where there’s a lot more distributed manufacturing, distributed usage of, you know, how these things are developed. So I think there will be more community-based push, right? You know, so, you know, I have this feeling that all this, you know, concentration of this, you know, whether it’s a mega factory or mega banks, you know, everything mega, mega, right?

I think it’s going to become more distributed in the next 10 to 20 years.

Siddhartha Ahluwalia 38:22

So just covering the things again that you just mentioned, India can dominate in microcontrollers which are like less than $5 a chip, which are placed inside washing machines, inside all electronic gadgets, inside a microwave, right? And you are saying this is because US and China won’t be interested in selling so low-cost chips.

Raja Manickam 38:49

Yeah, absolutely. Right? Right?

See, I don’t know about China, right? I mean, China will take anything, even if they lose money, sometimes they try to sell. But, you know, you look at, you know, US or European countries or even Japanese companies for that matter, right?

They need to have, you know, 55% gross margin and net margins about 40% or so, right? They have certain criteria, right? And they will not be interested in, you know, in this kind of products, right?

So we could pick a lot of these, you know, products and the scale is also big. And this is where we cut our teeth, right? You build microcontrollers first before you go to microprocessor, right?

So there are markets like that that we can dominate, you know. And by the way, you know, this is no different from, you know, what China did. Big advantage we have is, you know, we have a good, you know, language advantage for sure, right?

And for us to articulate a problem and create a solution is easier, right? I mean, you know, the world’s problem in that sense, right? So we have certain advantages, you know, and a lot of our people are already trained and built on this.

In the last 10 years, we have started doing some amount of manufacturing, at least on the system side, right? So the Vividians of the world, Dixons of the world, and so on, right? So I think, you know, slowly, you know, the roadmap is being built.

Siddhartha Ahluwalia 40:15

Okay. And how do you see the next decade would play like? Because you are saying things will get more democratized, right?

Across many nations, it will not be concentration of power. But how will the next decade, because semiconductors become so important to political, economic importance, will relate to the rise of your national GDP? Let’s say, for example, India, if India puts a lot of resources in the next 10 years in this, right?

How will it help India become, let’s say, a $10 trillion economy?

Raja Manickam 40:59

No, as I said, right, you know, it’s like infrastructure, right? Semiconductors should be looked at as an infrastructure play. It needs a lot of public financing, okay?

If you look at all the, you know, basically, if you look at roads, airports, or railways, or, you know, power plants, right? I mean, these are all, you know, a lot of it starts with public financing, public, you know, governmental push in that. Semiconductor is no different, right?

With the digitizing world, and so forth, right? So, it is becoming actually a public financing. And I think, you know, the only thing I have is that the government should also take an equity, you know, in this, right?

In the private sector. And, you know, because you are building this, right?

Siddhartha Ahluwalia 41:50

So, you’re saying stop giving grants, take equities in the company.

Raja Manickam 41:53

I said, you know, you give part of it, maybe a grant or something, or, you know, you may lower your part of the valuation so that, you know, you get a smaller equity in terms of, you know, what a private sector will get, right? And you can become a minority, so, but, you know.

Siddhartha Ahluwalia 42:11

But what can India, Indian government learn from the global counterparts, how they developed it? Did Chinese government take an equity in development of Hawaii?

Raja Manickam 42:21

Yeah, I think that the Chinese model is a little bit different, right? You know, most of these companies are controlled by the Chinese government anyway, right? Whether they take an equity or not, you know, it’s questionable, right?

But certainly, they play a major role in, you know, how their companies run, you know, what they should focus on, you know, the roadmaps and all that, right? So, they have a strategic play in this, right? Whether through an equity model or not, right?

But in India, right, you know, I think it should be more of, because you should let the private sector decide, right, you know, how to run the company and, you know, which direction to go. But they should have a say in, you know, the roadmap. The other thing is, you know, take an equity because when these companies become successful, they are going to give you some returns, right?

You take the returns and invest in the next frontier, right? Maybe next one should be quantum, you know, quantum computing or, you know, whatever is the next, right? So, you know, government needs their money, right?

You can’t keep on, you know, taking, you know, tax money, right?

Siddhartha Ahluwalia 43:31

The 70% of Indian government, as you mentioned, $15 billion is going to be allocated more. $10 billion has already been allocated. 70% plus of it is taxpayers’ money.

So, as a taxpayer, I should have some equity in the company.

Raja Manickam 43:45

Yeah, yeah. I think so. I think so.

And I think, you know, the argument is, hey, you know, it’s going to create jobs and all this, right? But again, you know, I’ll say this. Semiconductor doesn’t create, you know, many, many jobs, right?

Because it’s very highly automated, especially manufacturing is very highly automated and so on, right? But, you know, it’s an essential thing that you need to have. And also, I think once you have the manufacturing, you know, it will lead to, you know, equipment making and all this.

That’s where the innovation in a lot of this happens, chemicals and other things, right? So, I certainly believe, right, that, you know, if you’re giving some money, take some equity, you know, you don’t need a controlling stake or something like that because a lot of private companies say, you know, the government interferes in our running, we don’t want to take the money, right? Which, rightfully, you know, that’s a good argument to have.

But, you know, at least when you’re successful, you get some returns, right? And, you know, and then you plow it back into the next technology and so forth. So, I think the government needs to be a little bit more aggressive in this.

And a lot of private companies will say, oh, you know, if you’re asking for equity, we don’t want the equity. So, call the bluff, right? When you’re giving, you know, say 10,000 crores and if the government say, you know, give me 5% equity and you think the private sector will not give you 5% to get 10,000 crores?

Siddhartha Ahluwalia 45:18

Yeah.

Raja Manickam 45:18

Right? I think it’s a very simple argument, right? They will take it, right?

So, don’t, you know, get scared of these private companies saying, oh, you know, we will not come.

Siddhartha Ahluwalia 45:28

We will leave India. Yeah. But, you know, just coming back to some stats, like India should have its own semiconductor fab decade ago.

In 1987, India was just two years behind the latest chip manufacturing technology. Today, we are 12 generations behind. And, you know, let’s rewind to some facts about the 80s.

India had a shot. We had engineers, public sector fabs, even interest from global firms. What really happened?

Was it bureaucracy? Lack of vision? Where did we lose the plot?

Raja Manickam 46:24

No, so I’ll tell you, you know, see, I think politically we had this self-sufficiency and all that. So there was a little bit of reluctance to bring joint ventures or technology transfers, you know, from other countries, right? So there was this mindset about, you know, very socialistic within the country, right?

We, you know, there are good examples of chasing IBM out and so on, right? So there was, you know, that era, right? And, you know, another thing, if you notice, right, after independence, right, we created great institutions, right?

You know, I’m an IIT graduate, right? It’s a great institution, right? But after the 60s, 70s, right, you know, it’s kind of stopped, right?

We stopped making those institutions, you know, great institutions. So those are the, what do you call, the crucibles for, you know, the future, right? Why is, you know, he’s got an MIT, he’s got a Harvard, he’s got a Stanford, he’s got, you know, these are the guys, you know, who start somewhere, right?

There’s a huge amount of research that goes on and so forth, right? So I think, you know, we kind of, you know, stopped on that. And we were, you know, also, you know, very socialistic mindset, you know, we say, hey, these are stuff that Western countries read, and so on.

So I think there was a lot of mindshare issues that we had, right? And then, you know, also, again, politics, you know, interfered, you know, like SEL, you know, a lot of my, you know, colleagues joined SEL or, you know, BEL and so forth, with the hope that, you know, this is going to be, you know, huge for them, right? And they were all disillusioned, right?

We kind of, politics came into play. And, you know, there’s, you know, should we invest in technology or should we invest in building toilets or something, right? So, you know, there was all this forces that, you know, where the money need to go and all that.

And, you know, let’s be very frank, right? You know, we were a poor country, right? We were starting from nothing, right?

So I think, you know, all of those played a very major role. And, you know, there was less and less of funding that went into all this. And also, I think, you know, the government system that we had, right?

Like BEL, for example, right, had a great opportunity, you know, I mean, as a student, I went to BEL.

Siddhartha Ahluwalia 48:53

For internship?

Raja Manickam 48:54

Yeah, no, I mean, we had a tour, right?

Yeah. To see, and, you know, I would have loved to work for BEL, right? As, you know, so because it was a, what is it, like a Navaratna, right?

You know, you want to work there, right? But today, you know, it’s far, far behind, right? You know, technology.

Siddhartha Ahluwalia 49:12

Nobody wants, no IIT wants to work for BEL.

Raja Manickam 49:16

Yeah, so, you know, so things have changed, right? So, I think, you know, we had some, you know, good opportunities. We didn’t capitalize on it, mainly because the system we were in.

Siddhartha Ahluwalia 49:51

Yeah.

Raja Manickam 49:27

And then I think, you know, after Narasimha Rao opened up the, you know, economy, then competition came in and, you know, and I think, you know, now we are much, much better in terms of, you know, awareness. And I think, you know, now if we put our minds together, I’m sure we can be a world-class company.

Siddhartha Ahluwalia 49:45

Like in a previous podcast, there are people who are asking in genuine comments, I have one to two CR, how do I set up something related to in semiconductor ecosystem? Because you don’t want everybody with 10,000 CR to come into this, right? If you want an ecosystem to build 1,000 players or 10,000 players to build in this, right?

You need people with small investments and then they can, with one or two CR, and they can maybe start with a very small thing. They don’t need to build an entire chip or a fab, but they can make a part of it. And with one or two CR, they can get support of 10 CR or 20 CR to make that happen.

But right now, these people are clueless. They understand it’s a global once-in-a-lifetime opportunity, but how to capitalize on that, right? And we still don’t have an answer for that.

And what we did is, I think you did your best as an entrepreneur, but as a country, we misplaced focus on design over manufacturing. We excelled in VLSI and chip design talent, but ignored fab and packaging infrastructure. And design doesn’t…

You designed chips for almost 20 years at Resolve for other companies.

Raja Manickam 52:56

Yeah, we were a service company.

Siddhartha Ahluwalia 52:57

Yes. Yeah. Yeah.

But design doesn’t create a robust ecosystem, right? Unless you go into manufacturing, testing, IP ownership, right? So, I think you were a lone warrior fighting a battle for 20-25 years.

Right. Now you are getting recognized, but I think this recognition should have come very long ago. And I think we created an excellent brain export model where Indian design chips abroad and India imported all the hardware.

Like Indians were designing those chips, manufacturing those chips abroad, like the Indian talent, and we are importing costly chips, right? I think, maybe I think you were a patriotic. That’s why you came back to India.

Raja Manickam 53:42

Yeah. I mean, as I mentioned, maybe I did not. I owe it to India in a big way.

My schooling, I know that I got the best of the best, right? Highly, highly subsidized. I had scholarships.

Yeah. Even at that time, our monthly fee was 25 rupees. Even that many people could not afford.

Yeah. And that was also given by the government. So, there is a lot of things I owe, right?

Who I am today, right? So, and I also see that as of now, right? Semiconductor is very, very fundamental, right?

More so that now with all this digitizing and all that, right? And the solutions that we need are, needs to be practical solutions for really solving the major problems, the real problems, right? Whether it’s climate warming or electrification or major, major changes that we need to have in the next 10, 20, 30 years, right?

And I don’t think the companies that are set up today, right? Which are highly profit-minded, right? They’re not going to create those products.

Why would they want to sell a $1 chip, right? They want to sell a $2, $100 chip, right? So, in fact, when I was working all these big companies, right?

Every year we prune business units based on margins, right? If you don’t hit a particular margin, right? You basically shut it down or sell it or do something, right?

So, there was a constant pressure to get more and more margins, right? And so, if you are a fundamental product, right? Like in India, right?

So, this is where I think India is very good at democratizing everything, right? Take, for example, pharma, right? The parliament has passed laws that there are certain drugs that can be highly, highly regulated from a price, right?

Price regulated, right? So that the common man will not have a problem, right? India is a very big market for pharma export, right?

Because if you go to Malaysia or any other country, right? A lot of the drugs actually come from India. They are low-cost drugs.

These are life-saving drugs. It’s for the common good, right? So, India does a lot of these things like this, right?

I think Semiconductor will eventually be something like that, I believe, right? Where it will become more and more affordable, right? Already, we are seeing signs of, if you look at data centers and all that, right?

To build a data center today, right? With NVIDIA chips and all those power, and all that. It’s a very expensive endeavor, right?

Now, you don’t have to sell the data center services to people, right? It’s going to be very expensive. So, is that the solution, right?

So, I think India will democratize a lot of this, in my opinion. So, people will fight against it, right? Especially the incumbents are going to fight against it.

But I think it’s a good thing. Globally, it’s a good thing, right? Because I think we will create more and more innovative products.

We’ll do things differently. Cost-wise, it’ll become more affordable, and it is required, right? So, I think it’s very, very important for India to be a major player in this.

Siddhartha Ahluwalia 57:40

And, you know, there has been a fragmented bureaucratic approach. Are you seeing that change now? Just to give you an example, there was no single empowered semiconductor mission until ISM was created in 2021, right?

And prior policies were siloed across ministries with long approval cycles, red tape, and land and power issues. And unlike Taiwan’s streamlined tech-focused governance, India has a policy intent, but poor execution. So, what are you seeing right now with the setup of ISM?

Raja Manickam 58:15

No, I think, you know, see, one is, you know, the semiconductor has become a very big buzzword, right? Even Prime Minister talks about semiconductor, right? So, I think there’s a lot of focus on it, right?

Because have we initiated projects, and how are the projects doing? I’m sure the Prime Minister’s office is monitoring, you know, what is happening, you know, in all those money that was given in the last, you know, one, one and a half years, right? So, there is an intent, you know, to monitor and make sure that, you know, things are in place.

So, I think that is quite different now. And I think, you know, with ISM, you know, there’s another, you know, one central body that is doing this. We’ll have our, you know, issues, right?

But also, I think, you know, you know, to be to be fair to MeitY and, you know, all this, the bureaucrats, they want to see success, right? They just don’t want to give money and then, you know, at the end of five years, you know, nothing comes out, right? So, they’re also trying to help.

So, for example, right on the DLI scheme, design link incentive scheme, you know, very likely they’re going to announce a DLI 2.0, right? Anytime now. We have given a lot of inputs on, you know, how to give the money to, you know, one is approving, right?

After approval, right? Getting, you know, getting money from government, how difficult it is, right? And for start-ups, the poor guys, right?

One is their techie guys. They don’t know how to play this game, right? And for them, right?

How to get, you know, to keep them, you know, and majority of their expense is salaries, right? So, if the money doesn’t come on time, right? They won’t survive, right?

So, I think government also, you know, you know, through our people like us, right? I get the feedback. So, how they’re going to give money is also changing.

It’s difficult, right? Because there’s so many checks and balance within the government, right? But they’re changing and I can tell you, you know, for the better, right?

It’s a lot, lot easier to work with the government folks, right? I mean, you know, they realize that the start-ups are the future and they’re helping.

Siddhartha Ahluwalia 1:00:24

One more thing that I want to cover about is, you know, the six plants that India has set up, right? Can you tell about those six plants?

Raja Manickam 1:00:33

Well, I think, you know, the government had a policy of, you know, making a few big investments, right? And so, Tata was one of the largest, right? And then Micron, right?

I think all of them are, you know, at some stage of, you know, execution right now, you know, just like anything, right?

Siddhartha Ahluwalia 1:00:56

I’ll read out the names, right? Sure. So, there is Tata Electronics Plant, PSMC in Dholera, Gujarat.

There’s Micron Technology in Sanand, Gujarat. CG Power, Renesas, and Stars Microelectronics in Sanand, Gujarat. Kaynes Semicon again in Sanand, Gujarat.

Raja Manickam 1:01:16

Kaynes, yeah, Sanand, Anand, I don’t know.

Siddhartha Ahluwalia 1:01:18

Yeah, Sanand. And SCL Foxconn joint a venture between in Jewar, Uttar Pradesh and Tata Semiconductor Assembly and test in OSAT in Morigaon, Assam. The four of these plants are in one region. So, can you tell us more about how did the government and the private sector collaborated in setting up these plants?

What is the strategic importance of these plants? What are they producing right now? Why is it of national importance?

And what will enable India to do in the next 10 years?

Raja Manickam 1:01:50

So, you know, and I’m a big believer that, we need to have manufacturing, right? People might say, you know, why don’t we just focus on design, which we are very good at and let manufacturing be done in China or Taiwan or somewhere, right? But as I mentioned to you, without manufacturing, right, you cannot create innovative products.

So, you need that feedback and, you know, how they work together. So, I think that that is very, very critical. So, we need manufacturing.

Now, where do you start, right? Do you start, you know, in the most complex thing is a wafer fab or something, you know, that we can chew on and, you know, get to do very quickly in the next two, three years, you know, it’s a learning curve, right? So, OSAT’s packaging is a relatively, you know, less complex thing.

So, that is why, you know, three of them are OSAT’s. Kaynes.

Siddhartha Ahluwalia 1:02:49

What is the full form of OSAT?

Raja Manickam 1:02:50

OSAT is Outsourced Assembly and Test.

Siddhartha Ahluwalia 1:02:55

Outsourced Assembly?

Raja Manickam 1:02:57

And test.

O-S, Outsourced Assembly and Test.

Siddhartha Ahluwalia 1:03:01

Okay.

Raja Manickam 1:03:02

Right. So, basically packaging, right? Assembly is packaging.

Siddhartha Ahluwalia 1:03:06

Yeah. Right.

Raja Manickam 1:03:07

And then you got to test the chip once it’s done. So, three of them are, you know, the Tata has the one in Assam and then CG Power and Kaynes in Gujarat, right? And then, you know, they also wanted, you know, the next step would be to have fab, right?

So, you know, I was involved at that time as well, you know, trying to see, you know, how and I think, you know, the PSMC Tata is the first fab initiative, you know, large commercial fab. And, you know, given to Tata, you know, you can’t go wrong with Tata, right?

Siddhartha Ahluwalia 1:03:47

Yeah.

Raja Manickam 1:03:48

You know, they have the staying power, what we call patient capital, right? Even if it’s delayed, you know, which will happen, right? Because these are major projects.

They can withstand, right? And Tata is, you know, it’s a nation builder as well, right? I mean, they’ve done great things for the country.

So, I think it’s very appropriate, you know, that they take the lead in this. I’m sure there’s going to be more fabs that are going to come. And the one in UP is, you know, focused on the, I believe, a display, right?

LCD display, I think. And then, you know, but, you know, again, in semiconductor, there are many things. To give you an example, there’s LED, right?

LED is used, you know, in lights, everything, right? You’ve got LEDs, right? Some form of LED.

We don’t make any LED in India. It’s 100% imported from China, right? So, LED manufacturing, LED fab and LED packaging is another very strategic area.

Siddhartha Ahluwalia 1:04:49

Has India any manufacturing facility in that?

Raja Manickam 1:04:52

I think this second round, you know, they’re going to have, you know, I’m actually involved in one of the companies that I’m advising. You know, there’s less money involved as well, right? And then you talk about high power silicon carbide is there.

Silicon photonics is there, you know, so there are many, many things, you know, involved in. Sensors, MEMS, you know, they all come under this big semiconductor umbrella, right? But I think, you know, each one of them, right, has a very strategic importance.

So, I think, you know, the government’s job is to enable them and, you know, give support to one or two companies. Then the private sector has to take it out. But I’m a little bit disappointed with the private sector.

Siddhartha Ahluwalia 1:05:39

Why is that?

Raja Manickam 1:05:42

So far, it has all been government initiatives. Government is picking up the majority of the bill, right? 50% from central government, states 20-25%.

So, 70-75%, right, is coming from the governments, right, all this.

Siddhartha Ahluwalia 1:05:58

And why are not companies like Infosys, Wipro?

Raja Manickam 1:06:02

I think it’s a good question. And I’ll take this, you know, opportunity here to tell my friends in the NASSCOM, you know, put money into this, right? I mean, you guys have, you know, made a lot of money on the back of, you know, this country, right?

And this, and you’ll make more money again, right? You know, it’s not a, you know, but, you know, venture into this. And, you know, collectively, right, you know, we have plenty of money in the country, right?

It’s not for lack of money, right?

Siddhartha Ahluwalia 1:06:32

Or Mahindra.

Raja Manickam 1:06:33

Yeah, all these guys, you know, they have money.

And I think one of the other things I always, you know, feel is, you know, the country has many families, you know, wealthy families and so on, right? And they invest in, you know, different things. Let’s not look at, you know, investing and getting returns in three years or five years, right?

One is, you know, look at a longer horizon, maybe 10 years or 15 years, which is what semiconductor requires. The other thing is, some investments, you will make money, some you will not, right? Which is okay, right?

Don’t feel that, you know, every investment, you have to make money, right? So, I think, you know, that’s another, if you look at historically in the US, why they’re successful, whether it’s Silicon Valley or Seattle, right? The local people in that area invested.

Siddhartha Ahluwalia 1:07:27

You’re saying the local families invested?

Raja Manickam 1:07:29

Local families invested, local, you know, businesses, right? Let’s say somebody has got a coffee chain in Seattle, right?

They were the first guys who invested in Microsoft, right?

Siddhartha Ahluwalia 1:07:40

Yeah, I remember that.

Raja Manickam 1:07:41

Yeah, so, you know, the local people got involved, right?

So, there’s again, you know, it’s what’s a community that built it, right? You know, we need that community feeling and say, you know, I mean, we have all these rich people in Mumbai, right? I mean, they could easily fund, you know, some of these companies, you know, 100 crores for, you know, 1000 people, 10,000 people in India is not a big, big amount.

I mean, Bangalore would have, you know, 1000 people who can put 100 crore each, right? And, you know, they won’t even know that they’ve taken 100 crore out of the bank, right? I mean, this is a very wealthy, you know, country, right?

It’s concentrated in a few people.

Siddhartha Ahluwalia 1:08:25

Yeah, for example, Bangalore has people like Flipkart founders, the Zerodha family, Kamath brothers, for them 100 crores is nothing.

Raja Manickam 1:08:36

So, what I’m saying is, you know, get involved, right? And some of it will work out, some of it will not work out. But, you know, in the end, right, you would have created the ecosystem, you would have created, you know, people of knowledge and so on, right?

Adopt the startups as your family, right? So, I think, you know, the private sector needs to get involved more, in my opinion, I think government has done a good job.

Siddhartha Ahluwalia 1:09:07

You’re satisfied with the work that has been done by the government?

Raja Manickam 1:09:10

I think so. I mean, you know, it’s always room for improvement from a, you know, how they disperse the money, how they monitor and so on, right? But they’ve done a reasonably good job for a government, right?

In fact, I think the government is quite generous.

Siddhartha Ahluwalia 1:09:25

So, what would you do to bring private sector actively involved in this?

Raja Manickam 1:09:32

I think, you know, they’re starting to see, right, you know, see, for example, right, you know, NVIDIA, you know, is a great example, right? Great valuations, right? Are there opportunities, right, you know, to get good market valuations?

Maybe it takes a little bit longer, but, you know, there seems to be a story there, right? So, a lot of, you know, I personally have been giving a lot of talks to the financial community, and they’re, you know, starting to open up their purse. They’re a little bit, you know, not used to this, right?

Because most of the funding goes towards salaries or to tools, right, in our business, right? So, they’re not used to that, and the salaries are very high, right? So, a lot of this funding, right, you know, they’re not used to paying people 50 lakhs, 60 lakhs, 1 crore, right?

They say, well, you know, but even I don’t take that kind of money, right? So, I think it’s a mind-sharing.

Siddhartha Ahluwalia 1:10:34

Yeah, I think more people maybe need to have Tata-like attitude of nation building, and obviously, the returns will follow if you are able to build certain industries.

Raja Manickam 1:10:46

And it’s a success, right? I mean, you know, you’re not throwing money away just for this.

Siddhartha Ahluwalia 1:10:50

Yeah, you’re not doing charity.

Raja Manickam 1:10:51

Yeah, it is, it is, you know, but I would really think that, you know, private sector has to understand and come big in this. You know, government can only do so much.

Siddhartha Ahluwalia 1:11:05

And now, like, you know, because we are towards the end of the podcast, I would like to highlight what the work that you are doing at IVP, and what’s your vision right now? What are you launching?

Raja Manickam 1:11:16

Yeah. So, IVP, right, you know, we want to be, I mean, we are a fabulous company, chip company, right? What I call, you know, we need to create demand in India, right, to fill up all that capacity that is coming up.

And I feel that, you know, we need to create Indian, you know, products, right? So, IVP is a power, focused on the power segment. And we already have a catalog of, you know, 300 over products now, you know, we’re selling, we already have revenue.

For a company that is only one year old, right, you know, we already have some revenues and so on. So, you know, we hope that we’ll be one of the, you know, large chip companies in the next three to four years. Because our market is here, right?

So we’re very, very focused on the Indian market. We want to make our customers, you know, performance better as compared to other products. So we’re working closely with them.

This is very new for our customers as well, because they’re so used to just getting, you know, something from China or something, and then just build a box around it and put a brand and sell, right? So now we are engaging them at a chip level, you know, to design better products. So it’s something new for them as well.

So, you know, they’re very, very happy about it, you know. So, you know, it’s very, very positive, you know, what we’re starting to see. So I think, you know, again, timing is good.

Then they will take us globally in the next few years. Because once they, you know, learn how to make good products in India, right, then we can start to sell to the world.

Siddhartha Ahluwalia 1:13:02

Yeah, it’s good. I’ll just highlight some of the policies that India has in semiconductor space, like the India Semiconductor Mission, ISM, which we discussed about, launched in 2021 with a massive 76,000 crore rupee budget or a $10 billion budget, and incentive package across fab, display, compound semis, OSATs, ATMP, and design sectors.

Siddhartha Ahluwalia 1:15:18

So, many initiatives, as you know, as I highlighted, which other ones do you think are making the most buck for the dollar right now, which are going to impact India in the next five years, making it, taking India to, as you said, a semiconductor infrastructure, right?

So, giving India as much power as Nitin Gadkari is putting on the roads.

Raja Manickam 1:16:05

Yes. So, I think, I mean, certainly the manufacturing infrastructure is definite missing link, right? Just to give you a little bit of history on this, when my previous company, Tesol, when I started in 2003, I was, I came to Bangalore and I was trying to, and I’ve never done business in India, right?

So, we approached KIDB, Karnataka Investment Development Board or something, right? And I presented to them, I want to do this test lab and so on, right? And they were very keen on this, right?

So, I was very surprised, right? Because we are not a software company or something, right? And they said, oh, you are the missing link, right?

Because you’re the hardware guy. Nobody has come with a hardware proposal, right? So, they were very, very keen on this.

So, this is what more than 23 years ago, okay? Or 22 years ago. So, I think what has happened now is certainly whatever they’re doing on the manufacturing are very, very critical that they become successful, right?

If we have a fab today, let us say, a commercial fab, I can tell you there’ll be a lot more startup, chip startups who will use it and become very successful. So, that’s a missing link for us, right? So, the sooner the Tata fab comes up, the better for the country, for a lot of startups.

Having said that, right, same with OSATs, right? They’re all doing something in their own. I think the missing link, in my opinion, is on the funding DLI and the chip companies.

They are the demand creators, right? So, you need to create demand, right? So, L&T is one of the companies that has put their own money into it, right?

They’ve not got any DLI that I know of. There are possibilities of maybe putting an overall structure about where we need to have our own chips, right? Whether it’s LED or microcontroller or whatever it is, right?

Power, right? And then coming up with the, you know, that we have all of these products, you know, made locally by different companies and then coming under one umbrella. I think that could be something that they can do a little bit better job, right?

You know, while you’re giving 10,000 crores to all this, you know, and you are giving, you know, you know, 5 crores, 10 crores, 15 crores to chip companies, which are the guys, you know, who really need that lot more help. So, I think they, you know, a little bit more focus on that and bigger budgets for these guys. And also some amount of hand-holding, you know, required through, you know, maybe consulting companies coming in outside of India to help them as well.

The other thing, you know, you see a lot of these companies, right? The issue is cash flow, right? So, instead of giving grants like this, right?

Why not, you know, give them soft loans or, you know, interest-free loans for so many years and so on, right? And then they can get out of the process, right? So, you know, they basically, government backs the banks, right, to do this, right?

So, the default would be, you know, the government would pay off the banks, right? So, something like that, right, you know, will be a lot easier to do. And, you know, the bank is a commercial entity, right?

So, you know, they will have the agreements with the startups and all that. So, I think that route would be a lot more, you can create a lot, your money will go a lot more, right? Because you’re only, you know, involved in the interest, right?

Interest payments, right? Not the actual capital, right? You know, so I would say, you know, maybe fine-tune it a little bit differently.

And, you know, let’s say, you know, we start a company, right? We will go to the bank and ask for a loan, right? It’s easy, that’s the process, right?

Immediately the bank will say, show some collateral, your house or your jewellery or your land or whatever it is, which they don’t have, right? So, the bank, you know, the government steps in and say, don’t worry about it, I’m behind these guys. You know, I will help them to be successful.

You know, you please go ahead and give them the loan. For the first five years, you know, we will take care of the interest and so forth. Something like that, right?

Will take us a long way. Easier for us to also work, so the government is not involved. We are not sending receipts to the government to get reimbursements.

Everything is not smooth enough. So, low-cost loans and soft loans would be a better way of, you know, creating more companies and move faster.

Siddhartha Ahluwalia 1:21:12

Got it. And you mentioned about, you know, the Tata, what outcome it is producing right now. So, it’s said that, you know, India is now designing three nanometer chips, you know, but upcoming fabs like Tata, PSMC will start mature nodes like 28 nanometer chips, right?

Whereas, Taiwan and South Korea both design three nanometer chips, right? So, how does this work? Like, how do we decide as a country or as Tata, what are the kind of chips that we need?

Raja Manickam 1:21:50

See, you got to understand, right? In a system, right? You need all kind of chips, right?

If you are doing an, let’s say, an AI-based server or something, right? You need two nanometer, three nanometer, five nanometer, you know, that range, right? Which goes in there.

Let’s say you’re in a solar farm, you know, doing inverters, right? You don’t need that, right? You need 180 nanometer or even bigger, right?

You know, so, and even for the server, right? Even if you look at the server, the processor may require, but there are, you know, power chips and there are other peripheral chips, which doesn’t require two nanometer or three. So, having said that, right?

So, my view is this. Even if somebody is willing to transfer technology in two nanometer, three nanometer, we are not in a position to take it. We can’t absorb it.

We just can’t do it.

Siddhartha Ahluwalia 1:22:39

Because we don’t have capability to manufacture it?

Raja Manickam 1:22:41

Yes, we don’t.

Siddhartha Ahluwalia 1:22:43

What is required to do that?

Raja Manickam 1:22:44

So, even, you know, even Intel couldn’t do it, right? They have a history, right?

But yet, they couldn’t do it. So, let us not kid ourselves, okay? So, you start, you know, whether it’s 20 nanometer or 40 nanometer or 65 nanometer, it’s a, you know, it’s a way for you to in the next 10 years, right?

You will slowly start to catch up, catch up. And there are products that will work in this, that is also required. So, it’s not that, you know, you have just some old technology, so it’s going to disappear or something like that, right?

So, you know, so all of these are required in a system. So, it’s okay to start with, you know.

Siddhartha Ahluwalia 1:23:25

And you still think it’s okay because both Taiwan and South Korea manufacture three nanometer chips at scale. And you’re saying India will take 10 years to reach there.

Raja Manickam 1:23:36

Definitely.

I mean, 10 years is a good, you know, very optimistic.

Siddhartha Ahluwalia 1:23:41

Okay.

Raja Manickam 1:23:42

See, remember, you know, TSMC, it started in the 80s, right?

And for them to master two nanometer, three nanometer, you know, even for them, right, the yields and all that. And Samsung, you know, basically is what, you know, you’re talking about in Korea, right? I was involved in TI, you know, when they came to ask for DRAM technology those days.

I was a DRAM test engineer. So, TI actually transferred some technology to Korea. And that’s how they got into semiconductor.

I’m talking about 80s. Okay. So, look at, you know, this 40 years, right?

So, I don’t think, you know, we are ready to do that, right? And we should not, right? There’ll be only, you know, until, you know, so 10, 15 years, it’s okay.

You know, and whatever we do, it’s useful, right? It’s not that, you know, it goes.

Siddhartha Ahluwalia 1:24:34

And keep on importing the three nanometer chips as we are doing.

Raja Manickam 1:24:37

Yeah. I mean, that’s why NVIDIA is so highly valued, right? Only NVIDIA can make that chip.

Can you believe? Only NVIDIA.

Siddhartha Ahluwalia 1:24:45

But it’s mentioned that both Taiwan and South Korea can also make the three nanometer chips.

Raja Manickam 1:24:49

No, no, no. See, we have to design the chip. So, NVIDIA designs a chip and uses them for manufacturing.

Siddhartha Ahluwalia 1:24:56

Okay.

So, nobody else has the technology you’re saying?

Raja Manickam 1:24:59

Yeah, I mean, you know, it’s a little bit more complicated because they also have the software and all that that goes along with the chip. So, they have a lead on that. There are microprocessors, you know, like Apple or Intel, which are using two nanometer, three nanometer, but, you know, they’re not as efficient as probably an NVIDIA chip.

Siddhartha Ahluwalia 1:25:21

Okay. And TSMC, as you mentioned, is only designing it on behalf of NVIDIA. Let’s say, if India wants to get a three nanometer chip from TSMC, India can’t do that today.

Raja Manickam 1:25:34

No, you can. You can. We can design a three nanometer, which is, by the way, is being done in India.

They tape it out to TSMC. Yeah. And they get the chip.

Okay. Now, the two nanometer, three nanometer that we are doing is not for Indian company.

We are doing it for Qualcomm or somebody else, right? That may come out of India as part of the design.

Siddhartha Ahluwalia 1:25:55

I understand.

Raja Manickam 1:25:56

GCCs, right, you know, which is what they’re doing. Right. So, you know, Indian company designing a two nanometer, three nanometer, Indian Indian company, not a GCC.

Siddhartha Ahluwalia 1:26:09

Not a GCC.

Raja Manickam 1:26:10

It’s a ways off. Okay. I would say probably four, five years.

Siddhartha Ahluwalia 1:26:14

Okay. Thank you so much, Raja sir. I think this is a rabbit hole.

It goes as deep as it can go and there is no end to it, right, to know about this ecosystem. My just parting question is, if an entrepreneur who is new to this industry, and we got a lot of comments and I highlighted before in the podcast, has a small amount like $100,000 or 1 crore, how can they become part of this ecosystem?

Raja Manickam 1:26:41

Certainly, you know, it requires a lot more money, right? But there are many, many areas, right, of equipment making or, you know, within equipment making, right, you know, somebody makes a chuck, you know, a vacuum chuck or something. So, there’s a lot of small, small investments that will come along.

And this is where I’m also telling the government, you know, see, for the small guys, right, they can only put one or two crores, right, two crores, three crores, maximum, right, they can do. So, help them. So, let’s say they put two crores, you put seven or eight crores, make it a 10 crore pot, right, 10 crore, you can get something done, right.

Siddhartha Ahluwalia 1:27:17

And become a 50% owner, these people would be happy.

Raja Manickam 1:27:19

Yeah, they will be happy, you know, they will be willing to give, you know, 50%, 45% or whatever, right. So, we’re, you know, trying to tell the government, right, you know, put, because that’s where the job creation happens, a lot more job creation, a lot of innovation happens there, right. If you look at Taiwan, there are thousands and thousands of companies supporting TSMC and all that, you know, and their sales may be 10 million, 5 million a year.

Siddhartha Ahluwalia 1:27:43

Can you give a more concrete example of what industry, specifically, or what equipment specifically?

Raja Manickam 1:27:50

See, there’s a good example in Coimbatore, there’s a company called YES, which actually make a deposition equipment for the wafer fab. They made the entire equipment out of Coimbatore. They started about, I think, seven or eight years ago as engineering development in Coimbatore, because I was involved in, you know, they were using our building, right.

So, slowly they started, you know, sourcing some small, small components in the Coimbatore area. Of course, Coimbatore has a lot of, you know, this kind of, you know, small, small shops, right. They’re very good at reverse engineering, right.

So, they made, you know, small things, right, you know, some cables, some machine shop, some chucks and, you know, all simple stuff, CNC machines and all that. Then they realized that YES, the company realized, hey, you know, we can get all these things for 30% or 40% cheaper, right. Then they started to say, okay, you know, let’s make more out of this, right.

So, they started teaching them to make a little bit more precision equipment, precision stuff, right. Now, they have to now invest, like, you know, you talked about, right, maybe, you know, three crores, four crores, five crores to buy some, you know, a better machine, right. They can afford to some extent, but these are the guys that will need some help, right, to take them to the next level, right.

They’re doing CNC for some industry, maybe, you know, some steel industry, ball bearings or whatever, right. Now you have to go to the next level. And all they need is, you know, some help in CAPEX.

So, we have hundreds and thousands of companies that we can create out of this.

Siddhartha Ahluwalia 1:29:29

Yeah. And we can create a very rich ecosystem supporting each other.

Raja Manickam 1:29:33

Absolutely. Absolutely, you’re right.

Because, you know.

Siddhartha Ahluwalia 1:29:37

So, is the government capital only the missing piece to create this ecosystem? What else is required?

Raja Manickam 1:29:41

A lot of this, you know, like, you know, we’re working with applied materials and all these, so they want to create these companies, right, to work with them, right. So, their lack of, you know, working capital and CAPEX.

Siddhartha Ahluwalia 1:29:56

And you think the larger companies are willing to support and incubate these companies?

Raja Manickam 1:30:00

Yes, they’re willing to incubate from, because they benefit, right.

Siddhartha Ahluwalia 1:30:03

Yeah.

Raja Manickam 1:30:04

They become suppliers to them, right. See, equipment making is basically, you know, the big companies like, apply materials and lab research and all that, their big fab equipment, they basically integrate, right. They have thousands of suppliers, thousands.

And each supplier will be a small guy. And I think that is what is required in India, right. Not one massive company, you know, sucking up all the capital.

Siddhartha Ahluwalia 1:30:29

Thank you so much again, Raja sir. It’s been an amazing podcast again. Thank you for coming on Neon Show for the second time.

And we got into much more depth, much more numbers, much more stats. So, it’s a very good, you know, follow up for the first conversation. We set out the basics of the semiconductor industry.

Raja Manickam 1:30:46

Thank you.

Siddhartha Ahluwalia 1:30:47

Thank you for your service to the nation.

Raja Manickam 1:30:50

Thank you. Enjoyed it.