Ajit Kumar Jha
On July 10, when Foxconn announced breaking off a $19.5 billion joint-venture plan with Vedanta, scheduled for Gujarat, a pall of gloom descended on India’s digital circles. The withdrawal by the Taiwanese giant Foxconn from the JV was despite the Narendra Modi-led NDA government’s 2021 approval of a $10 billion incentive plan to attract global semiconductor and display manufacturers as part of a deepening push to establish the country as an international digital manufacturing hub.
Foxconn’s withdrawal is an echo of historical mistakes. India should have had a semiconductor fab decades ago. India was just two years behind the latest chip manufacturing technology in 1987. Today India is 12 generations behind global standards. Furthermore, the Covid pandemic has brought to the fore the fragility of the global supply-chain of semiconductor manufacturing, given the world’s overdependence on East Asia for fab manufacturing. The rising price of silicon and the US-China trade war added to the worries.
As a result, countries began scampering to safeguard their interests by introducing attractive packages to attract more chip manufacturing. The US has announced a $50 billion package to create domestic foundries. Germany and Japan have got chip-maker TSMC (Taiwan Semiconductor Manufacturing Company Limited) to start speciality technology fabs in their respective countries.
The Modi government has offered fiscal support of up to 50 per cent of a project’s cost to eligible display and semiconductor fabricators. With the goal of ‘Make-in-India’, the NDA government has listed key incentives to get top global chip MNCs to set up shop in India, either by themselves or, with the help of a local partner. The NDA government also approved an incentive plan to support 100 local firms working on integrated circuit and chipset designs, providing a fillip to the domestic industry.
Across key phases of the chip production value chain – product development, design, fabrication, ATP (assembly, test and packaging) and support – India has a strong presence only in the design function. India houses 20 per cent of the global talent in chip design. Currently, 50,000 Indians are performing this work. Most semiconductor manufacturers including Intel, AMD, and Qualcomm also have their ambitious R&D centres in India, leveraging local engineering talent. Getting trained personnel, however, could become a headwind for companies with an estimated quarter million people required to work across the value chain when investments start flowing. The NDA government has begun training 85,000 engineers through its ‘Chips to Startup’ scheme. Improvement in global rankings on logistics, infrastructure and efficiency, and a more stable electricity grid, a critical pre-requisite for semiconductor manufacturing have fortified India’s preparedness to be part of this global race.
Following an agreement with the US on Critical and Emerging Technology to enhance bilateral collaboration on semiconductor supply chains, India signed a similar MoU with Japan. New Delhi, as an increasingly close US ally, can become a viable friend-shoring destination for MNCs seeking to outsource support functions. Considering the changing geopolitical dynamics, with developed Western powers looking favourably toward India, the initiative by the NDA government is a welcome first step. Semiconductors are at the core of the fourth industrial revolution. If all goes well, this push might symbolize India’s trajectory towards a semiconductor superpower.
