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Semiconductor industry: A way ahead for Bangladesh

Published : Tuesday, 16 August, 2022 at 12:00 AM  Count : 2693

Semiconductor industry: A way ahead for Bangladesh

Semiconductor industry: A way ahead for Bangladesh

With the burgeoning progress of a technology-driven world, the semi conductor industry has been experiencing rapid growth in recent times. According to a market & consumer data providing company STATISTA, the semiconductor industry has crossed $600 billion worldwide in 2022. Moreover, this industry will reach a staggering one trillion dollars by 2030, as projected by a global consultancy firm, Mckinsey & Co.

Bangladesh's position in this emerging industry remains to be seen since Bangladesh accounts for only an approximate $5 million in this mammoth $600 billion market. There are many dominant global players in this industry, including those from South Korea, Japan, European Union, Taiwan, China, and the US. Among these, China and the US remain significant consumers of chips.

In 2020, China alone imported $353 billion worth of semiconductors, although there was a noticeable chip shortage in the market due to covid-19. Many device manufacturing companies were forced to slow down their production chain during the pandemic due to chip shortages. This shortage occurred because a few foundries worldwide are operating to fulfill the majority of the chip demand, which is a chokepoint of this industry.

Consequently, a natural disaster or a war easily costs billions of dollars to device-making companies. Therefore, companies are decentralizing their manufacturing hubs from China and Europe and diversifying chip-importing sources, which can be a massive opportunity for Bangladesh. If Bangladesh can expand its semiconductor industry, fabless companies will be attracted to import chips, as well as to install their device manufacturing hubs here.

Semiconductors are the heart of digital devices. They are widely known as chips or integrated circuits (ICs) that are manufactured using the Very Large-Scale Integration (VLSI) technology. Each chip is constructed with many tiny nano-meter (nm) transistors. Ultraviolet rays are used to etch and connect these tiny transistors on the silicon wafer surface for manufacturing an IC. The plants manufacturing these ICs are foundries or fabrications (fabs).

These fabs manufacture chips for other fabless companies using their designs. Many big fabless companies, such as QUALCOMM, NVIDIA, and Apple, and thousands of other small and medium-sized companies are the target market for these semiconductor foundries. Only a few integrated device manufacturers (IDMs), including IBM and INTEL, perform each step of chip and device manufacturing from scratch by themselves.

Since it is expensive to handle both chip and device sectors together, therefore, most manufacturing companies order chips from fabs. Consequently, the chip fabrication market is expanding rapidly and becoming a potential investment sector.

Many challenges are involved in building a semiconductor industry. Firstly, this industry is knowledge-oriented and requires skillful workers, which is converse to the ready-made-garment (RMG) sector. So, a chain of skilled workers needs to be prepared and maintained. Secondly, the initial fab installation expenditure is extortionate and requires multi-billion dollar machinery and raw materials investments. A minor tweak in the manufacturing process or technology can cause a massive loss.

Thirdly, land acquisition, local transport system, and management of port or airport consignment-time are crucial. Because the semiconductor industry depends on importing sensitive materials and equipment, including chemicals, gas, and wafers, these are time-critical. So having active ports or airports and an excellent local transportation system is a plus. Fourthly, determining the target sectors for chip production and analyzing the market for estimating the nm range is essential.

Lastly, creating a marketplace by delivering quality products and reducing manufacturing costs is mandatory to earn the buyer's faith. Thus, Bangladesh needs to be cautious before heavily investing in this industry. It needs to tick all the challenge boxes before indulging in heavy investments because the semiconductor industry is of high value, high demand, high return, and high risk.

However, Bangladesh has enormous potential in this sector as it has already met many criteria to excel in it. For instance, a chain of skilled workers can be prepared quickly since many engineering graduates study VLSI at the university level in Bangladesh and already possess the basic knowledge of chip designing. Hands-on practical training can uplift their understanding at the industry level.

In addition, Bangladesh has already built several hi-tech parks and economic zones; hence land will not be a problem. Local road and transport infrastructure is developing, and several new ports and airports are coming up in a few years, showing Bangladesh hopes to meet the industry needs.
Moreover, Bangladesh is a low-wage country. The average salary of a graduate in Bangladesh is relatively low compared to leading countries in this sector; the total production cost can be minimized through this lower human resource management cost. According to Mckinsey's report, computing and data storage (25%), wireless communication (25%), and automobile electronics (20%) cover 70% of the chip market.

Pertinent decision-making in selecting the targeted subsegment will be a good strategy for Bangladesh. Besides, leading companies like IBM and TSMC have recently started manufacturing 2-7nm ICs; this technology is hard to buy from them. No company will sell its hard-won technologies to others, neglecting self-privilege. Therefore, Bangladesh should focus on 28, 45, and 65nm technologies that still possess the majority of market demand.

However, the private sector alone cannot build the foundation of this industry as the chip industry requires heavy investment. Diversification of investment is needed, including government incentives and foreign direct investments. Proper policies from the government can be helpful in this regard.

Government subsidies provided in the RMG sector for electricity and gas supplies can be replicated in the chip industry, which will minimize manufacturing costs and capture the attention of potential buyers and investors. A few Bangladeshi companies, including Ulkasemi Limited, Neural Semiconductor Limited, Prime Silicon, etc., have already started exporting. Now what Bangladesh needs is to nurture this industry as it did with the RMG sector back in the 1980s-1990s.
The writer is research associate, Bangladesh Institute of Governance and Management














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