Rising animosity between China, West over supply chain issues offers India window of opportunity
Post Date – 12:15 AM, Tue – 27 June 23
US chipmaker Micron Technology has proposed a $2.75 billion semiconductor factory in the state of Gujarat, marking the first major investment inflow in India’s nascent semiconductor ecosystem. The decision, announced during Prime Minister Narendra Modi’s recent visit to the United States, comes at a critical time for India, which has drawn up an ambitious $10 billion chipmaking incentive package. The assembly and testing plant in Gujarat will be operational next year and is expected to create more than 5,000 direct jobs. This development has two important implications: First, it will boost China’s efforts to create a robust chip-making ecosystem. Second, it will eventually reduce its dependence on China, which remains the global leader in this field. The global chip supply chain is currently under enormous geopolitical pressure as the United States and its allies try to rein in their reliance on Chinese semiconductor companies and their markets. That hostility entered a new phase last month when China’s State Cyber Security Administration issued a partial ban on Micron. This is the first time China has taken action against a U.S. chipmaker. Rising hostility between China and the West over supply chain issues presents a window of opportunity for India to emerge as a lucrative investment destination for US and European chip giants looking to diversify their operations geographically. Micron’s entry must be seen as the first success in this direction.
Micron’s entry into India also marks the first time the center has approved its $10 billion India semiconductor plan for 2021 to lure chipmakers. Under the plan, Micron would be eligible to receive up to 50% of the total project cost from the union government. In addition, the chipmaker will also receive incentives from the Gujarat government as the assembly and testing facility will be located in Gujarat. While India has traditionally had a strong semiconductor design industry base, hardware manufacturing has remained elusive. While many other countries also offer financial incentives to attract potential investors in the semiconductor industry, India’s offerings stand out among other countries due to their size and scope. India also has a fast-growing semiconductor market, which is very attractive to global chipmakers. Memory chips account for about 30 percent of overall demand for semiconductor chips. The global chip market is expected to grow to $1 trillion by 2030. The market is resource intensive, requires highly skilled workers, and already faces capability gaps. Semiconductor job vacancies will increase as India embarks on its silicon journey. With its talent pool, India needs to capitalize on this opportunity and find ways to provide practical and industry-relevant training to engineering students. Taiwan provided clues. It owes its success to a public-private partnership focused on training and certification.
