Every manufacturing sector, from the production of autos to that of telecom equipment, from solar panels to the production of defence products, depends on chips, or integrated circuits imprinted on silicon wafers. In an age of artificial intelligence and electric vehicles, which require many more chips than gasoline-powered ones, chips will become even more important.
However, because of the huge sums of money required for cutting-edge research and extremely expensive production facilities, the chip-making industry has been consolidated into a dozen businesses that hold a monopoly over the world.
India’s Chip Move
India's attempt to get involved in the worldwide chip manufacturing boom is probably the country's biggest "industrial strategy" gamble in a long time. Such governmental engagement in policy fell out of favour decades ago as the free trade ethos gained traction.
Due to the supply disruption caused by Covid-Ukraine, which made every major economy aware of its strategic weaknesses, it has recently made a comeback. The worst-case scenario would be if China, which makes up half of the world's demand, invaded Taiwan, which supplies more than half of the world's chips.
Government after the government is currently pouring billions of dollars into the semiconductor industry in an effort to increase market share. 52 billion USD worth of incentives has been provided by the US. The European Union is increasing its initial $30 billion offer. China reportedly spends USD 15 billion annually subsidising its semiconductor production. Samsung intends to spend $200 billion on new semiconductor manufacturing facilities.
Can India, which is on track to overtake Japan as the world's third-largest economy in a decade and one of the biggest markets for a variety of chip-based products worldwide, be left to do nothing? It has already made an unprecedented capital subsidy offer of USD 10 billion. Does that suffice? And in a high-stakes game, is independence the best strategy or is it preferable to join a network? Let's investigate.
Flying Solo or Team Playing?
An intricate ecology is required for chip manufacturing. You need the equipment that will be used in factories, which is a Japanese strength, the photolithography machinery that will be used to photo-print circuits on silicon wafers, which is a Dutch speciality, and the raw materials that will be used to make the final product, such as neon gas and palladium, which have historically been supplied in the largest quantities by Russia and Ukraine.
In an effort to compete with the US, which has gathered 10 other nations into a Minerals Security Partnership, China moved quickly to acquire several rare piles of earth and minerals. India has hence been excluded.
As a result, it can be concluded that interdependence is unavoidable. The design of logic chips is at the forefront in the US, while memory chip design is at the forefront in South Korea. Taiwan is used to manufacture wafers for Intel and other companies. The older technology for which there is still a market is still the main emphasis of the Japanese chip industry.
While Samsung and Taiwan Semiconductor Manufacturing Company produce chips with a 10 nm (one-millionth of a millimetre) manufacturing process, Intel in the US has yet to do so. China has achieved 7 nm, while Japan and the US are working together on 2 nm technology. Such coalitions can grow in number.
What aims does India have? Its initiative to manufacture chips is a part of a larger, incentive-based push into the electronics industry. The early success in manufacturing mobile handsets has given it a boost. It has to be seen if it can be successful in producing display units (for laptops, handsets, etc.), which is another priority area. The automotive industry and several smartphones employ mid-range processors (28 nm), which chip manufacturers considering setting up shop in India may want to consider as well.
The argument between a full-spectrum approach and specialisation is inevitable. The nation has advantages in the labour-intensive portion of chip manufacturing as well as strengths in chip design (assembly, testing and packaging). Additionally, it might perform well in the assembly of downstream products like mobile phones. To supply assembly lines, some manufacturers of components or subassemblies may invest here. An ecosystem with connections throughout the globe might eventually form.
The full-spectrum strategy, which the government prefers, aims to replace imports of downstream products as well as chips, but upstream import dependence on raw materials and manufacturing machinery would endure. Additionally, you could need to maintain investing billions because the wafer fabrication process requires a lot of money, has a difficult production process, and is characterised by constant technological progress.
The government nonetheless seems to believe that India cannot afford to withdraw from this contest. Well, we will know in a few years whether this is, as Macbeth famously said “vaulting ambition which overleaps itself”, or whether it actually is a breakthrough strategy employed by India.
Written By: Devika Mishra
Edited By: Nidhi Jha
.jpeg)
0 Comments