In this article, we will discuss India’s Semiconductor Market (Issues and Management). So, let’s get started.
India’s Semiconductor Market (Issues)
- Dominance of Certain Countries: The semiconductor manufacturing capacities are concentrated in a few geographies. Nearly all leading edge (sub 10nm) semiconductor manufacturing capacity is limited to Taiwan and South Korea, with nearly 92% located in the former.
- Further, 75% of the semiconductor manufacturing capacity is concentrated in East Asia and China.
- The concentration of capacities poses many challenges, leading several countries to be vulnerable to a few.
- The short point is that there could be moments of stress and conflict between India and the major powers.
- In order to preserve the capacity to stay autonomous, India needs not just smart alliances but also indigenous capability.
- Pursuing Western Companies: Although India has a decent chip design talent, it never built up chip fab capacity. It would also require convincing western companies to set up advance silicon fabs in India.
- However, the coming of several semiconductor fabs to India is not sufficient. It would also require maintaining a balance between pursuing globalisation in this field while ensuring that the vision of Atma Nirbhar Bharat is not undermined.
India’s Semiconductor Diplomacy
- Seizing the Recent Opportunities: The current decade presents a unique opportunity to India as;
- Companies are looking to diversify their supply chain and for alternatives to their bases in China.
- The chip shortages due to Covid-19 have hit automakers with a revenue loss of $110 bn in 2021.
- The Russia-Ukraine conflict and its implications for raw material supplies for the semiconductor value chain has also poised chipmakers to invest in strengthening the semicon supply chain.
- India must seize this opportunity and become an attractive alternative destination for semiconductor manufacturing.
- Conceptualising A Semicon Diplomacy Action Plan: Placing semicon diplomacy at the heart of India’s foreign policy is essential both strategically and economically.
- The establishment of the value chain for semiconductors would ensure a multiplier effect on the entire economy.
- Further, since electronics items form one of the most highly imported items after oil and petroleum products, domestic production would be saving forex and reducing the balance of payments, especially vis a vis China.
- Merging Semicon Diplomacy with Act East Policy: Semicon diplomacy is pivotal to India’s Act East Policy, which aims to build resilient ties in the Asia Pacific region.
- Considering that the semiconductor manufacturing and testing bases are heavily concentrated in East Asia, the Act East policy provides an opportunity to connect and strengthen ties with key players in the region.
- At the same time, keeping an eye on the larger vision – frequent technological exchanges between a regional bloc like ASEAN via tracks in forums like the East Asia Summit and the ASEAN regional forum will also be beneficial.
- Potential of QUAD in Semicon Diplomacy: One of the ways of leveraging semicon diplomacy is increasing multilateral and bilateral cooperation. A key institution with immense potential in this regard is the Quad.
- Australia, being rich in raw materials required for semiconductors, can be an important supplier to fill in India’s deficits.
- The US and Japan can be leveraged for capacity building and their advanced semiconductor technology in logic and memory segments.
- The Quad Semiconductor Supply Chain Initiative is a good starting point; India shall push for a Quad Supply Chain Resilience Fund to immunise the supply chain from geopolitical and geographic risks
- Strengthening Engagement with Semicon Hubs: Technical collaboration with Vietnam may be stressed, as it is home to many technical research and academic institutes in the area of microchip design and development besides having abundant availability of trained and skilled manpower.
- Strategic partnership with Taiwan, a leading global hub for semiconductor design and manufacturing, with leading producers of the semiconductor chip like Taiwan Semiconductor Manufacturing Co., which caters to the needs of Apple, Intel, AMD, Nvidia and other conglomerates, will also be a good beginning in this direction.