Introduction
This case study focuses on a project commissioned by a confidential client in the semiconductor manufacturing industry. The client requested us as a consultant to prepare a comprehensive project report to fill in the missing gaps like manpower needs for executing and operating the project, additional infrastructure needs, likely challenges in implementing the project, likely timelines, etc. The Client proposes to undertake a project to set up a manufacturing facility in Maharashtra to produce products like semiconductors, wafers, and detectors. These products will be applied for security, medical purposes, and scientific projects.
Case Background
Semiconductors are essential to modern technology, powering devices from smartphones to electric vehicles. The global semiconductor market is projected to grow significantly, driven by advancements in AI, 5G, IoT, and the electrification of vehicles. However, recent supply chain disruptions during the COVID-19 pandemic exposed vulnerabilities, prompting industries and governments to secure more localized production.
Setting up semiconductor manufacturing facilities offers strategic independence, reducing reliance on foreign suppliers. It boosts economic growth by creating high-skilled jobs and fostering innovation. India is incentivizing local production by introducing PLI Scheme to offer subsidies and grants.
Challenges in establishing semiconductor fabs include the high capital required, technological complexity, labor shortages, and environmental concerns. Despite these obstacles, such facilities represent a strategic investment, aligning with government incentives and addressing the global demand for semiconductors, ultimately contributing to local economic growth and technological advancement.
The client, an industry leader in the electronics sector, aimed to build a new facility to increase production capacity. Given the high stakes, the project report needed to cover multiple aspects, from technical to financial, ensuring that the proposed facility would be competitive and sustainable.
Consultant’s Scope for the Project Report
The scope of work included the following:
- Value Proposition & Project Conceptualization: Value proposition- (A very sharply articulated response to the question – why the customer should buy from us what we propose to manufacture). The apparent business case for the consumer industry’s growth, criticality of the proposed product and technology for the end consumer industry, key concerns relating to the value proposition.
- Market Assessment (Top-down Assessment): Industry Analysis and overview of the Indian Market, Demand Assessment, key Demand Drivers, and supply assessment
- Business Model / Technical Assessment: Manufacturing Process Description, Production Capacity Calculation – Installed Capacity and Utilization, Plant & Machinery, infrastructure required, Manufacturing Technology landscape in that Industry, Use of information technology / automation proposed ensuring minimal cost of production.
- Operating Needs Assessment: List of Raw Materials / BOM, Input-Output Ratios, Water, Electricity, labour, other utilities required, consumables, tentative organization structure covering manpower numbers, roles, qualifications, experience, salary levels.
- Regulatory Framework Review: Government Policy, Licenses required, Pollution Clearances, Direct Taxation – Income tax applicability details, Indirect Taxation – GST / Customs – applicability details, Information on Subsidies and applicable government schemes, Environmental Considerations.
- Project Risk Assessment: Policy risk, incumbency (lobbying) risk, critical material availability risk, customer industry healthiness, price fluctuation, exchange fluctuation risk, project implementation time and cost overrun risk etc.
- Financial Feasibility Assessment: Cost of the Project, Means of Finance, Revenue Forecasts, Operating Expenditure Forecast, Financial forecasts, Modelling Assumptions, Key Project Feasibility Indicators – IRR, NPV, DSCR, Payback Period etc.
Conclusion
The project report enabled the client to make informed decisions about the facility’s location, technology, and cost implications. This case study highlights the importance of a detailed, multi-disciplinary approach when planning large-scale industrial projects like semiconductor manufacturing. It serves as a model for future projects in terms of integrating sustainable practices, mitigating risks, and ensuring financial viability.
Read more about our thoughts on Semiconductor here.
