Why India May Not Be Able to Surpass EU And US in Semiconductor Manufacturing, Highlight Experts

Published  March 3, 2023   0
S Staff

The situation is a bit challenging for India because the amount of subsidies offered in the home countries of the global chip manufacturers is way higher

Over the past few years, semiconductor chips are playing a pivotal role in the consumer electronics items and in the automobile industry, rather it is now a very critical piece of these sectors. The chips or the SoCs programmed with power now powers almost every electronic device we use today be it washing machines, laptops, refrigerators, smartphones etc and in fact, the top-notch warehouses, manufacturing units that leverage industry 4.0 tools, logistics with GPS trackers, and electronic defense weaponries all use cutting-edge chipset.  

Now, imagine a situation when the production of these SoCs slumps to a larger extent and is not able to meet the demand of the industry globally. With the onset of COVID-19 pandemic, when the production has been reduced, both the automobile and the electronic industry suffered significantly. The manufacturing plants were unable to make cars, the dealer’s inventories were almost squeezed out, and the entire manufacturing units completely stopped functioning. Currently, geopolitical scuffle is another major concern among the experts. The “China Plus One Strategy” and the USA’s ban of export of key semiconductor technology in China is a major issue. 

This is when the governments of most advanced countries have stepped in to find solutions to build and boost the semiconductor industry. Either you have to take bold decisions or wait for the production to be normalized. The government of India in December 2021 has unleashed the much-awaited PLI scheme of Rs 76,000 Crore to boost the semiconductor industry, whereas the EU on the other hand has mobilized €43 billion incentive schemes in February 2022. USA, the leader in semiconductor manufacturing, has announced the CHIPS and Science Act worth $52 billion scheme in August 2022. So, be it India, USA, EU, Korea, Japan, and China all want to lead the semiconductor industry.

In an exclusive interaction with BusinessToday, Vinod Dham, the father of the landmark Intel Pentium processor, and currently a Member of the Advisory Committee of the government’s India Semiconductor Mission (ISM) told, "Considering the magnitude of the task facing us, I think we are beginning to make good progress on many fronts. But this undertaking is not for the faint of heart. And it will take... decades to catch up and reach a sustainable threshold." Experts added that India is looking to craft a lesser top-notch chip category as its incentive scheme is a bit lower than that of US and the EU and is aiming to associate with the former to ward off China’s tech race.

The situation is a bit challenging for India because the amount of subsidies offered in the home countries of the global chip manufacturers is way higher. Hence, Intel assured to invest $20 billion to build another unit in Ohio and an additional investment of €33 billion was announced by the EU in March 2022 to power the manufacturing and R&D. As per media reports, India did not receive a well-respected response in the first round of applications because major firms such as TSMC, Intel, Micron, etc. did not show interest. Then, slowly Singapore’s IGSS Ventures, Vedanta, Tata Group joined the league. 

As there are several intricacies involved, the government is also taking a lot of time in evaluating the process. ISMC’s proposal is not even approved even after one year. Problems increased when in February 2022, Intel acquired Israel’s Tower Semiconductors. Government is worried because Intel has no plans to build new units in India other than the US and the EU. Analysts proclaimed that at this moment, India should deeply focus on building compound semiconductors which increases performance of electronic circuit designs and power devices. 

Now, once the construction of fab commences, new impediments will emerge on skilled workforce, volume of producing profitable items, and sourcing raw materials. For raw materials, the country requires high-purity gasses and wafers to fabricate the chips. Initially, these things will be imported, but with time, it could be made in-house.