Union Electronics and Information Technology Minister Ashwini Vaishnaw is optimistic that India will become the world’s largest destination for semiconductor manufacturing in the next five years, with the cheapest cost of production in the world. The minister’s confidence may stem from the 76,000 crore Semicon India program to boost semiconductor and display production in India. The reality, however, is more nuanced. In February 2022, just two months after India’s move, the EU said it was mobilizing €43 billion in incentives to bolster the chip industry. And in August 2022, the US, the world leader in chip manufacturing, announced a subsidy plan worth about $52 billion. South Korea, which accounts for nearly 40% of the world’s most advanced chip capacity, has unveiled its “K-Semiconductor Belt” strategy. R&D.
The reason for the semiconductor fever is understandable. Semiconductor is a high-stakes game, both in terms of money — global sales have more than quadrupled over the past two decades and are expected to reach $602 billion by 2024 — and also in terms of control over critical electronic components that power the global economy. drive . Semiconductors are therefore pioneering technology-led development, and China’s shadow on Taiwan, a major chip manufacturing country, has underlined the importance of supply chain resilience and bolstered industry immunity to geopolitical shocks for any country that invests in technology-led growth in the coming decades.
The appeal of subsidies in their ‘home country’ has persuaded leading chip companies to invest money there. For example, Apple said on Tuesday that it has struck a billion-dollar deal with Broadcom Inc to use chips made in the US. Micron plans to invest $40 billion in memory chip production, while Qualcomm and GlobalFoundries have announced a new $4.2 billion partnership to produce chips. And for the US, it’s not just domestic companies that are drawn to the stimulus program. The world’s largest chip maker, Taiwan Semiconductor Manufacturing Company (TSMC), is set to open its second factory there to begin production by 2026 — it had announced its first US factory before the CHIPS Act came into effect in 2022.
India’s pace, on the other hand, leaves much to be desired. Nearly a year and a half after it received three applications in the first round of applications for its semiconductor manufacturing program – and after modifying it to offer a 50% fixed incentive – India has yet to approve a single one. With competition heating up, such a slow pace can throw a spanner in the works. Building the right ecosystem requires developing the required talent in addition to sufficient funding and securing the semiconductor manufacturing value chain, including the required chemicals. The global semiconductor industry is facing a talent shortage, with an estimated 10,000 job openings in the US alone. India needs about 1.5 million skilled semiconductor workers by 2027, according to one estimate, but the government estimates a pipeline of just 85,000. With anywhere from 400 to 1,400 steps of varying complexity involved in manufacturing, a talent shortage can be a major hurdle.
There are also other challenges. Within commodities, India needs a variety of high-purity gases and wafers to fabricate the chips. Setting up the supply chain for the right raw materials is not an easy task. Initially, India would have to import these, but over time it could focus on bringing some of these supplies in-house. According to Vaishnaw, about 250 specialty chemicals are needed to make semiconductors – the pace of pipeline setup for this needs to be much faster to realize the top manufacturer’s dream.