Formidable Industrial Infrastructure Is Propelling Gujarat's Emergence As India’s Semiconductor Hub: Mona Khandhar, IAS

A lot can happen in a year, and Gujarat is a prime example. The state has seen three semiconductor units break ground this year.

At the helm of this transformation is Mona Khandhar (Indian Administrative Service), Principal Secretary of the Department of Science and Technology in the Gujarat government. She is leading the state's ambitious semiconductor mission.

A Mason Fellow and a Master in Public Administration (MPA) in International Economics from Harvard Kennedy School, Khandhar brings hands-on expertise in sectors such as trade, commerce, and finance.

Her tenure as Minister (Economic) at the Indian Embassy in Tokyo saw her champion India’s semiconductor policy to Japanese corporations and government bodies, establishing crucial international ties. This experience, coupled with her deep connection to Gujarat, has equipped her to offer pivotal policy guidance in crafting Gujarat's own semiconductor policy.

In an exclusive conversation with Swarajya, Khandhar shared her insights on a wide spectrum of topics — from the progress of ongoing semiconductor projects to the strategic significance of Dholera as a chip manufacturing hub and the evolving semiconductor skills ecosystem in Gujarat.

Excerpts:

How has Gujarat’s semiconductor policy leveraged the Government of India’s India Semiconductor Mission to draw semiconductor manufacturing to the state?

Gujarat has taken a proactive approach in leveraging the India Semiconductor Mission (ISM) to attract semiconductor manufacturing to the state. Our semiconductor policy works hand-in-hand with the ISM, providing a strong foundation of support for investors.

Gujarat was the first state to craft a dedicated policy for the semiconductor sector. While the central government provides significant capex (capital expenditure) support, we have focused on a balanced approach between capex and opex (operational expenditure), recognising that this is a long-term journey where competitiveness is crucial.

In addition to offering capital assistance, which is 40 per cent of the capex support provided by the Centre, we are also providing substantial opex incentives. For instance, we offer a Rs 2 subsidy on every unit of power for 10 years — an essential benefit given the energy-intensive nature of semiconductor manufacturing. I believe no other state offers such an extensive power subsidy.

Furthermore, we are offering a water subsidy for five years, a 75 per cent land subsidy for the first 200 acres, and a 50 per cent subsidy beyond that. Electricity duty is fully waived for five years, and we ensure uninterrupted power supply all the way to the factory’s doorstep.

What sets us apart is that all these benefits are embedded in our semiconductor policy framework. Instead of focussing solely on capex, we have carefully designed a comprehensive approach that includes strong opex support.

While much of the capex is handled at the national level through ISM, state-level initiatives like opex incentives and infrastructure advantages are crucial. In addition, we are investing in human resource development, R&D (research and development), and design to ensure long-term success and growth in the sector.

Besides policy incentives, Gujarat’s formidable industrial infrastructure clearly makes it a go-to destination for mega manufacturing projects. What are key macroeconomic factors that drive it?

Gujarat is uniquely positioned due to its robust infrastructure. The state is not only urbanised but also maintains a sharp focus on rural areas, ensuring civic amenities and utilities are well-developed across the board. Importantly, Gujarat is a power surplus state, with 48 per cent of our installed capacity coming from green power, which is becoming increasingly critical for industries with a focus on sustainability.

In terms of industrial infrastructure, Gujarat has more than 250 industrial estates, including special investment regions like Dholera and Sanand, where we have strategically focused on attracting investments. The GIDC (Gujarat Industrial Development Corporation) also plays a key role in bringing large-scale projects to these regions.

Additionally, logistics is a major strength — Gujarat handles around 40 per cent of India’s sea cargo with 40 ports and the longest coastline in the country, along with excellent connectivity through roads, airports, and railways. We're part of the DMIC (Delhi-Mumbai Industrial Corridor), further enhancing the state's logistical capabilities.

Furthermore, we’ve made significant investments in creating dedicated industrial estates specifically for the semiconductor sector. Semicon City in Dholera and the Semicon Cluster at GIDC Sanand are equipped with redundant water supply, effluent treatment plants, and a statewide gas grid, ensuring all utilities and environmental considerations are addressed from the start.

Our strong presence in the chemical and metallurgy industries gives Gujarat an additional competitive edge, particularly for supplying specialised gases, chemicals, and tools essential for semiconductor manufacturing.

Moreover, Gujarat is emerging as an electronics hub, with significant investments in space technology, drawing from the legacy of ISRO (Indian Space Research Organisation) and Dr Vikram Sarabhai.

On the human resources front, Gujarat produces over 75,000 STEM (science, technology, engineering, and mathematics) graduates and more than 110,000 professionals annually from a network of 120+ institutions, including IIT (Indian Institute of Technology) Gandhinagar, IIM-A (Indian Institute of Management, Ahmedabad), and two IIITs (Indian Institutes of Information Technology).

Gujarat offers a significant cost advantage over international competitors such as Vietnam and Malaysia, with lower utility rates, land costs, and human resource expenses. These factors, combined with a business-friendly environment and the ease of doing business, position Gujarat as an attractive destination for semiconductor manufacturing.

Adding to this, both Prime Minister Narendra Modi and the Chief Minister of Gujarat, Bhupendra Patel, have been instrumental in driving this vision forward, ensuring the state remains at the forefront of India’s semiconductor ambitions.

The Dahej chemical cluster is seen as being a decisive factor in attracting semiconductor investments. How has its presence been pivotal in attracting major semiconductor projects to the state?

Semiconductor manufacturing is a highly disruptive industry, requiring not only innovation but also a deep understanding of business dynamics and opportunities for localisation. Gujarat, with its established strengths, offers a significant advantage in these areas.

One of the key factors contributing to Gujarat's appeal is its robust chemical industry, particularly at the Dahej cluster. Chemicals and gases are essential components in the semiconductor manufacturing process, and Gujarat’s expertise in this sector has provided a competitive edge.

Additionally, the state's strengths in metallurgy, with specialised tools and machinery from Rajkot, and ceramics offer further support to the semiconductor ecosystem.

These unique linkages between the chemical, metallurgical, and ceramics industries in Gujarat create a comprehensive and competitive environment for semiconductor manufacturing, making the state an attractive destination for global investors.

What is the current status of the semiconductor projects being implemented under the state’s semiconductor policy?

Micron's facility is progressing ahead of schedule, and we are optimistic about meeting all the projected timelines. We expect the main facility to be commissioned by mid-2025.

As for Tata's fab in Dholera, it is a significantly more complex project — about 100 times more intricate — with an investment that is four to five times higher. Tata’s mini facility is expected to be operational by 2026, with the main facility slated for completion by 2027.

As regards CG Power’s OSAT (outsourced assembly and testing) unit in Sanand, their mini facility could be operational by mid-next year, with the main facility targeted for mid-2026.

These are the likely timelines, and we remain hopeful of meeting them all.

What are the major challenges in rolling out semiconductor projects, and what proactive measures are being taken to overcome these obstacles and ensure the policy’s success?

Rolling out semiconductor projects in Gujarat presents several challenges, primarily because we are building this industry from the ground up in India. The lack of extensive prior experience, both in the private sector and within government, poses significant hurdles.

While there are pockets of experience, this is not widespread. One of the major challenges we face is ensuring that both the government and private sector are adequately prepared to meet the demands of this new industry. We recognise that there are many factors to consider, from infrastructure to skill development, which require our attention and proactive measures.

Moreover, we are working with stringent timelines, making it imperative to address these challenges efficiently. To overcome these obstacles, we are actively engaging with industry stakeholders, fostering collaboration and facilitating knowledge transfer to build a robust semiconductor ecosystem in Gujarat.

What innovative strategies are being employed to develop a skilled workforce for Gujarat’s burgeoning semiconductor industry?

To meet the growing demand for a skilled workforce in Gujarat's rapidly expanding semiconductor industry, several innovative strategies have been implemented, with a strong emphasis on skill development collaboration.

One notable initiative is the establishment of a dedicated skilling centre for assembly, testing, marking, and packaging (ATMP) and OSAT in partnership with Pandit Deendayal Energy University (PDEU). This is a significant step in ensuring that our talent is equipped with the latest industry-specific skills.

On top of that, we are in the process of setting up a Centre of Excellence (CoE) for Semiconductors and Electronics in partnership with IIT Gandhinagar, alongside key anchor investors like Micron Technology and CG Power. This CoE is being developed using a hub-and-spoke model, and we are nearing the final stages of its setup.

Moreover, around 15 STEM institutions across Gujarat, including IIT Gandhinagar, have updated their academic curricula to better align with the semiconductor industry's needs. They have modernised courses in mechanical and chemical engineering, among others, to include semiconductor-focused education.

There are already four major investments signed up in the state. Are there any additional projects in the pipeline that might qualify for incentives under Gujarat’s semiconductor policy?

Yes, we are actively pursuing new projects, but we prefer to let the companies make their announcements first. There are several discussions currently underway, both in the fab sector and in OSAT. We are hopeful for more developments in the near future.

Beyond Dholera and Sanand, are there other regions in Gujarat being developed as semiconductor hubs that we should be aware of?

The state government has established two dedicated regions for the semiconductor manufacturing ecosystem: Dholera SEMICON City and the GIDC industrial area in Sanand.

We have expansion plans for both Dholera and Sanand, with work progressing on the draft development plans for Phase 2 and Phase 3 of Dholera. Additionally, efforts are underway for further expansion at Sanand.

Our focus is to fully utilise these locations first; as I mentioned earlier, the process requires a step up to the next level. Once we have maximised these sites, we will explore other options.