As the world's fifth largest economy, India hopes to become a chip power, a share of this global hot track. Like the U.S., India has been seeking strategic alliances around semiconductors and has also moved to bring chip manufacturing into the country, creating incentives for the industry. However, there are neither large chip design companies nor industry-leading chip manufacturing companies. Why does India dare to have such ambitions?
If you don't have a leading local semiconductor company, then look to foreign tech giants to join -- this is one of the important strategies of the Indian government to develop the chip industry. In December, India gave the green light to a $10 billion incentive package for the semiconductor industry to attract semiconductor and display makers, aiming to make India a key player in the global supply chain. More recently, India has also pledged to expand incentives, with plans to provide eligible manufacturers with the financial support of up to 50% of the project cost.
The huge capital investment, the time required to set up a factory, and the uncertainty of the business, tax, and trade environment are the main stumbling blocks for investing in and setting up factories in India.
"Because of these problems, previous attempts in India have failed." An analyst said.
However, there are signs that things are changing.
It is not entirely impossible for India to become a global chip manufacturing center, according to a partner at technology consulting firm Counterpoint Research.
"India, as the world's second-largest population economy, has a huge domestic consumer market for semiconductors."
"Furthermore, India has an abundance of English-speaking engineering talent and (cheap) labour, making it cost-effective," he added.
This cheap, well-educated labor could help India excel in a specific area of the semiconductor supply chain chip design, which requires a lot of skilled workers. "Semiconductor design requires a large number of skilled engineers, and this is where India's strengths lie."
In addition, some analysts said that eight of the world's largest semiconductor companies have set up design institutes in India. Although it is still in the early stages, India is working hard to develop the technology building of domestic companies.
"What we're seeing now is that the Indian government is trying to take the next step. But while it has design centers for multinational companies, India doesn't have much of its own intellectual property. So the next step should be to build an ecosystem where Indian companies have some of India's own IP (Intellectual Property)”.
India's IT and Electronics Minister has stated that there are nearly 55,000 semiconductor design engineers working for different companies in India. As part of the Semiconductor Initiative, India has launched a design-led initiative, " for the next five to six years, we will be the great semiconductor design capital of the world ".
Although analysts believe that India has certain advantages in developing chip design, chip manufacturing is difficult.
East Asian manufacturers dominated by China, Taiwan, and South Korea dominate the global semiconductor supply chain, while India does not have any factories to make chips.
India itself is well aware that the situation is not conducive to its ambitions to develop semiconductors. The government has begun to court foreign chip manufacturers, announcing a series of cooperation plans one after another. A consortium of investors, ISMC Digital, is planning to build a $3 billion manufacturing facility in India, with Israeli firm Tower Semiconductor as a technology partner in the project. Meanwhile, Foxconn, which assembles iPhones for Apple, and Indian mining company Vedanta have partnered to announce that they will build a $19.5 billion chip factory in India.
The above-mentioned factory will be one of the first semiconductor manufacturing plants in India, and India also hopes to attract giants such as TSMC and Intel to choose India to invest and build factories.
However, even if ISMC Digital is put into production in India, the chips it manufactures belong to low-end and mid-range chips, which are not the same as the advanced process chips of TSMC and other companies. When national competition intensifies, this may limit India's potential to become a global chip manufacturing center.
"Many countries are attracting chip giants with lucrative incentive packages, so India may have to lower its expectations," the analyst added.
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