Technically, semiconductors are the brains of modern-day electronics;
they are in the form of chips, which are present in every circuit board of any
electronics in the world. They are everywhere, from mobile phones to home
appliances, from cars to our modern-day weapons. Their unique ability lies in
their conductivity, which falls between conductors (like
metals) and insulators (like rubber). This allows them to control the flow of
electricity in a way that other materials can't. This means today’s
life is just not possible without these chips. Which makes it a very strategic
asset geopolitically as well as economically. Let’s look at the
economic importance and geopolitical challenges of the semiconductor industry's
progress in India till now, from the very beginning, and India’s expected
future growth in the global semiconductor market.
Chip-making is quite decentralized all over the world. Unlike their name,
they are not very easy to make. Chipmaking has three major processes:
designing, manufacturing, and assembling. Designing and manufacturing can
produce big bucks; that’s where the skill is, and by extension, that’s where
the money is. Even more than manufacturing, designing holds a lot more
importance all over the world. Like oil, not all countries can make chips. In
the field of design, the United States holds a share of 46%
all over the world, which is declining but is the highest as compared to any
other country in the world. The United States is followed by Japan and then the
rest of the countries. In terms of manufacturing, Taiwan is the global center
for chip manufacturing, producing up to 50% of the chips
globally, followed by South Korea (17%), Japan (9%), and China (5%).
The final step is ‘assembling’ which, in simple words, is putting the chips
inside devices where China is miles ahead of India. They have more factories,
so they assemble more devices. Looking at how big this chip market is, in 2022
it was around 570 billion dollars and is projected to be a 1
trillion-dollar market by the end of this decade. Therefore, it is a
very lucrative business, and the potential is immense. That’s the reason why
all countries are rushing to capitalize. Let's examine India's position in the
semiconductor industry. India's semiconductor market was estimated to be worth
27 billion dollars in 2022, and it is projected to grow to 55 billion dollars
by 2026. India had high aspirations for 2021,
anticipating the establishment of twelve semiconductor factories throughout the
nation. It is reasonable to conclude that this didn't occur. India did,
however, attempt to join this market. To entice investors, the government
unveiled a set of incentives. Ten billion dollars were invested, yet the
program had a flaw. Businesses had a 45-day window in which to apply; those who
failed to do so would not be eligible. As a result, it had relatively little
success. In the same year, the Indian government began a business division
called India Semiconductor Mission (ISM) that aims to
establish a semiconductor and display ecosystem.
The mission had a financial outlay of Rs. 76,000 crores
under the Ministry of Electronics and IT (MeitY). In
2023, the government reopened the window, and this time there was no deadline
so that the companies could apply until the 10 billion dollars were used up.
After that, one major deal was signed between Foxconn (a
Taiwanese semiconductor company) and Vedanta (a leading
natural resources company). They were setting up a plant in Gujrat; the project
was worth 19.5 billion dollars. Foxconn had the technology,
and Vedanta understood the raw material needs. It was a good start, but the key
was to build on it. That joint venture collapsed in August last year because
they lacked a technology partner. But this year, there have been some
advancements. This year, New Delhi approved three projects
worth around 15 billion dollars. The first project is a
semiconductor fabrication plant; it will be India’s first fabrication plant. It
is set up by Tata Group and Taiwan’s power chip; it is to be
set up in Dholera, Gujrat, and the project costs around 10
billion dollars. The official website of the Indian Semi-Conductor
mission mentions six visions and Goals. It is expected to produce 3
billion chips every year. Now they won’t be just AI chips, but they
will be able to power many things, like high-power computers and EVs. The
second is a chip assembly plant worth $3.2 billion. Set up by
the Tata group in Assam. It will be India’s third semiconductor
unit, and once ready, it will have the ability to produce 48
million chips every day. Lastly, the third is a chip
packaging facility. It will be set up by CG Power in Gujrat’s
Sanand; the company partners with a Japanese company called Renesas
Electronics. The project cost is expected to be 7,600 crores.
It will make specialized chips for the use of defenses and space.
As you can see now, there are three big projects, billion-dollar investments,
and international partners. These factors are quite evident, indicating that India
has taken semiconductors very seriously and wants to become a big player to
compete with Taiwan and China. Not only that, last year India announced a 2.75-billion-dollar
micron facility; this was during PM Modi’s visit to the United States.
The plant is to be ready by the end of this year. Taiwan’s Foxconn is
planning to make a chip-making facility; the United States’ AMD is
also investing nearly 400 million dollars in India; it is
setting up its largest global design center here.
Talking about the Semi-Conductors mission, the Press Information Bureau elaborates, India Semiconductor Mission (ISM) has been set up as an
independent business division within Digital India Corporation. ISM has all the
administrative and financial powers and is tasked with the responsibility of
catalyzing the Indian semiconductor ecosystem in manufacturing, packaging, and
design. ISM has an advisory board consisting of some of the leading global
experts in the field of semiconductors. ISM is serving as the nodal agency for
efficient, coherent, and smooth implementation of the program for the
development of semiconductor and manufacturing ecosystems in India. The vision
of ISM is to build a vibrant semiconductor and display design and innovation
ecosystem to enable India’s emergence as a global hub for electronics
manufacturing and design in a more structured, focused, and comprehensive
manner through various mechanisms. A long-term strategy for developing
semiconductors and display manufacturing facilities in India is being developed
in consultation with government ministries, industry, and academia. The
strategy aims to facilitate the adoption of trusted electronics, support
early-stage start-ups, promote indigenous intellectual property, and facilitate
collaborations. The strategy also considers geopolitical factors, such as
Taiwan's dominance in chip manufacturing and the massive local demand for these
chips, as India is the most populous country globally. China dominates the chip
market, with a market worth around 192 billion dollars, seven times India's.
India faces challenges in entering and leaving the market, as
it is difficult to enter and leave. The current political situation in India
requires political maturity and wise geopolitical decisions. The semiconductor
market is like a cartel, and India may be stuck in a US-dominated grouping with
labor standards, green targets, and anti-corruption measures. India should
focus on new strategies, such as leveraging ties with the US and Japan and
focusing on designing chips. India should also focus on AI chips, which are
crucial for AI development and deployment. Setting up the chip industry is a
long-term process that can take decades.
I’ll conclude by saying that India has shown significant growth in the field
of manufacturing semiconductors. It is up for becoming a global player and has
started establishing the very base for the production of Semi-Cons. As you can
see, 2023 was the year when major investments and plans were made for the
growth of the semiconductor industry. If India gets into the chip market, it
has to face all the conditions given by the United States, and if it doesn't,
India will fall back in the race. Semi-conductors are the new oil, and sitting
on the sidelines is not an option. First of all, India is supposed to invest
more in design than manufacturing, considering the abundance of skilled workers
and massive local demand. Even if there is growth in the industry, the growth
must encompass the latest technology, unlike India, which is trying to form a
base for developing chips and not AI chips. Producing semiconductors is not an
easy task; it has very fragile market conditions, and carelessness or poor
strategies might end up in an irreversible catastrophe. Therefore, the
government as well as the political wing of the country have to make mature
decisions to lead the semiconductor industry.
- Soham Sonar
