Indian chip buzz catches the eye of specialty chemicals companies

Specialty chemicals and gases producers Merck and Linde are mulling setting up facilities specifically to serve the burgeoning semiconductor industry in India, signalling that global companies have started looking to be part of an upcoming ecosystem around chip manufacturing here, people aware of the developments told ET.

Semiconductor manufacturing uses more than 150 chemicals and over 30 gases and minerals in the production processes. In fact, the success of chip manufacturing depends upon the reliability, safety and innovation of these chemicals and gases.

"Merck is looking to set up a plant to manufacture specialty chemicals here in India," said a person aware of the plans of the German company. "They are in talks with the government to establish a chemical plant for semiconductors, which could mean investment to the tune of around $300-500 million. The site for the plant has not been finalised yet."

Specialty gases firm Linde is planning to put up plants for high purity gasses, this person said.

"As a leading global industrial gases and engineering company, Linde is an essential supplier to the semiconductor industry," Linde said in a statement to ET. "Linde actively supports investments in this critical sector and is committed to supporting its growth in India."

Merck, on its part, said it has been monitoring semiconductor manufacturing developments in India for the past couple of years.

"We believe that India is becoming an increasingly important partner in the global semiconductor ecosystem," the company said in a statement to ET. "However, at this time it is too early to talk about concrete investment numbers in India. We continue to closely follow opportunities that align with our strategic goals."

Specialty chemicals and gases enable precise control over the deposition and removal of materials on silicon wafers. They help perform critical tasks like etching, doping, cleaning and depositing layers, all the while maintaining the necessary ultra-high purity levels required for the tiny and sensitive components in semiconductors.

Navin Bishnoi, country head at semiconductor company Marvell India, underscored the importance of such players coming in. He said it was crucial as without them, the ecosystem would not be complete.

"Ancillary companies need to come and set up base in India. The companies that provide gases, chemicals, the different wafers, tools, equipment and everything else,” Bishnoi said. “Earlier, these companies existed in Taiwan as the ancillary companies to enable the manufacturing there, and now with India building its own fab, they are slowly coming in here."

Neil Shah, vice president-research at Counterpoint Research, said there were certain aspects that must be kept in mind.

"For bulk gases and specialty gases, it is critical to maintain uninterrupted supply," Shah said. "Suppliers should be at least within 40 kms of the fab for timely and disruption-free supplies. So, having local plants would be very important."

Linde already has a good base in India and supplies to multiple industries including India's only fab, the Semi-Conductor Laboratory in Mohali, he said. For business continuity and to get new fab clients, and not lose out to Linde or Merck, competitors such as Korea Gases and Taiyo Nippon Sanso will have to be more aggressive in India, he said.