India is trying to emerge as a competitive alternative to China in the semiconductor sector amid heightened chip war between the US and China.
India and the US last week signed a memorandum of understanding on establishing a semiconductor supply chain, which experts see as an opportunity for both countries to reduce global dependence on China.
“The MoU aims to establish a collaborative mechanism for the resilience and diversification of the semiconductor supply chain in view of the US CHIPS and Science Act and India Semiconductor Mission (ISM),” said Charlie Dai, vice president and research director at research firm Forrester.
ISM is a government initiative that aims to promote the growth and development of India’s semiconductor industry and boost India’s strategies for developing the semiconductor and display manufacturing ecosystem.
India wants to become a major semiconductor player
While India has no semiconductor manufacturers of its own, the country has focused on attracting global chip manufacturers to set up facilities in the country. In December 2021, India approved a $10 billion stimulus plan to attract investment for semiconductor and display manufacturing and become a major player in the global semiconductor supply chain.
The semiconductor industry depends on a complex global supply chain for raw materials such as silicon wafers, chemicals and gases. Disruptions in the supply of materials due to the pandemic and geopolitical tensions have contributed to semiconductor shortages, affecting products ranging from servers and personal computers to car manufacturing.
The pandemic has made companies in several regions think about how to address supply chain disruption, which is largely the result of over-reliance on just a few countries for chips.
Taiwan, South Korea, Japan, the US and China are currently the major players in chip production.
With the US increasingly concerned about China’s growing geopolitical power, which rests in part on its manufacturing capabilities, the administration of US President Joe Biden has imposed sweeping restrictions on chip technology exports to China.
All this has made India a potential hot spot for chip technology development and potentially an important link in the global semiconductor supply chain.
The latest partnership between the US and India indicates that the US views India as a future partner in building a resilient supply chain, said Gaurav Gupta, an analyst with research firm Gartner.
However, considering the “entire semiconductor space, including raw silicon wafers; chip design; wafer manufacturing; assembly including testing and packaging; raw materials, including chemicals, and EDA (electronic design automation) – the only area where India has a decent presence today is chip design or whatever is considered part of the fabless ecosystem,” said Gupta.
India understands the need to be competitive in an industry as important as semiconductors and is working with other countries to create a resilient supply chain.
September 2021the Quad Alliance – comprising India, the US, Japan and Australia – worked together to secure supply chains in semiconductors and 5G telecom technologies in an effort to limit China’s growing influence.
“If successful, India could be part of the global semiconductor supply chain, especially in manufacturing, where about 75% of the share is held by China, Taiwan, South Korea and Japan. The idea is to have a balanced regional share of chip production going forward, so that you can better respond to logistical or geopolitical crises, such as during the pandemic,” said Gupta.
According to Gupta, the most important task for India now is to demonstrate its first commercial plant.
Just this week, Indian IT Minister Ashwini Vaishnav said the country is about to announce its first semiconductor manufacturing facility, selecting a proposal from one of three international bidders: a Vedanta-Foxconn joint venture, the International Semiconductor Consortium ( ISMC) and Singapore’s IGSS companies.
If any of the proposals go ahead quickly, it could be three or four years before manufactured wafers can be shipped to customers, Gupta said. For an outsourced semiconductor assembly and test (OSAT), the timeline could be two and a half to three years, he said.
“At the moment I will not really focus on when India becomes a viable alternative against the established countries. The current priority is to take small steps and prove it can be a player in this space. We have government regulations, proposals, interests and agreements, but the key would be how and when projects actually get done,” Gupta said.
India could become a major chip maker in 3-4 years
However, some experts believe that India has the potential to become a manufacturing country in three to four years as the country is resourceful and has a strong emphasis on skills development.
“There is a very large footprint of chip design prowess in India with a very sophisticated and robust chemical industry. With the promulgation of NEP (National Education Policy), new syllabi design by AICTE (All India Council for Technical Education) recently and major policy push in hardware including PLI (product-linked incentive) and DLI (design-linked incentives ) arrangements by According to the government, India should be a semiconductor manufacturing country in three to four years,” said Anurag Awasthi, vice president of the industry association for designing and manufacturing electronic systems, IESA.
As both India and the US focus on building resilient national semiconductor supply chains, the MoU between India and the US will help both countries overcome regulatory barriers to the mobility of companies and talent in both countries and accelerate strategic development in longer term of diversified semiconductor ecosystems. Forresters Dai said.
Not only is the MoU expected to lead to increased technology development cooperation between the US and India, but it is also likely to fuel business investment in the semiconductor sector, said Helen Chiang, Asia/Pacific Semiconductor Research Lead and General Manager of IDC Taiwan . “The collaboration also shows that the US hopes to build more partnerships with non-Chinese supply chains to build a US-led semiconductor ecosystem. India is the seventh country for Chinese semiconductor exports; the deeper relationship with the US will be a potential concern for China in the long run.
Copyright © 2023 IDG Communications, Inc.
