Success with chips will take much more effort | Mint

Success with chips will take much more effort

At the Semicon India 2023 conclave held in Gandhinagar last week, Prime Minister Narendra Modi indicated that firms could get 50% financial backing to set up the desired facilities in the country.
At the Semicon India 2023 conclave held in Gandhinagar last week, Prime Minister Narendra Modi indicated that firms could get 50% financial backing to set up the desired facilities in the country.

Summary

India’s pitch as a trusted partner for global semiconductor makers and offer of financial incentives could yet be queered by the geopolitical context. We’ll have to do plenty ourselves

Data may or may not be ‘the new oil,’ but advanced microchips for digital devices are in geopolitical focus as the Indo-Pacific witnesses a contest of glares between China and the West over Taiwan, whose grip on the manufacture of these prized inputs has pushed both sides into a race for supply security. Globally, cutting-edge semiconductors are seen to underlie the current path of tech evolution. India’s effort to break into this field has faced setbacks like a proposed Foxconn-Vedanta venture coming apart, but Prime Minister Narendra Modi has signalled the government’s determination. At the Semicon India 2023 conclave held in Gandhinagar last week, he indicated that firms could get 50% financial backing to set up the desired facilities in the country. Apart from policy enablers and our tech talent, Modi referred to the covid pandemic and Ukraine war in his pitch to global investors. “The world needs a trusted, reliable chip supplier," he said, “What can be better than the largest democracy in the world?" This, he added, “is the right time for India and for the world." US-based companies have been lured; AMD said it plans to invest $400 million in an R&D centre here, while Micron has a $825-million plan for local chip assembly, testing and packaging. This conforms with New Delhi’s strategy of offering India as a reliable partner for the West to cover its supply risks. Yet, it remains unclear if India has any chance of becoming a chip player of global significance.

Chips are of various kinds. A flashpoint on global risk radars could arise from a segment of sophisticated chips almost ruled by Taiwan Semiconductor Manufacturing Company. While a few other companies around the world can make these tiny things, the task is tough and chip facilities elsewhere must play catch up—a tough ask—against a clock ticking on Beijing’s designs for Taiwan, a US-shielded island that it considers a rebel province. Alarm over a potential chip snap-off has driven the US to abandon talk of free trade, adopt an inward industrial policy under its Chips Act, and enforce a regime of technology denial to China, all to stay ahead on digital technology. On its part, Beijing has local chip fabrication projects too. That today’s Cold War II could pivot on microchips is no longer hyperbole. So, while an ecosystem for modest chip-making could set a stage for India to ascend the sector’s value curve, the big league would still be a steep challenge. Beyond a point, geo-strategic interests would lead tech transfers and the Western anxieties that favour us could also let us down. A world that’s moving apart and erecting barriers as it loses trust in open trade could mean very little of significance is shared even with ‘friend-shoring’ partners.

Diplomacy might have a role. At the same event, Indian foreign minister S. Jaishankar urged global chip investors to “optimize globalization" by investing in chip fabrication units here. This way, they could combine the advantages of offshore production with their goals of risk reduction. Left unsaid was the geopolitics of it. As Jaishankar was optimistic on prospects of a more collaborative world, perhaps India’s red carpet for chip-makers should be seen in the light of closer ties with the US. Even so, our most reliable shot at joining the global chip race someday would be through our very own R&D endeavours. Large outlays for fab incentives can lure investment, sure, but success at a level that could eventually justify the public expense will have to be achieved the studious old way.

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