Connect with us

Headlines Of The Day

Highly unlikely that India will attract as many global chip-makers needed to build critical mass

In December last year, the government approved a $10 billion package to give a fillip to semiconductor manufacturing in India. This incentive could mark the beginning of India’s latest foray at grabbing a share of the $107 billion global foundry market, 64 per cent of which is controlled by a tiny nation Taiwan.

So far, the scheme has attracted three players. They have already submitted proposals for setting up fab plants in India.

The first is Vedanta, along with Taiwanese contract manufacturer Foxconn. The second is ISMC, a consortium led by India-based investment firm Next Orbit, which has entered a tie-up with Tower Corporation Israel. And, the third is Singapore-based IGSS, which has IMEC as a partner. The government, on its part, will provide 50 per cent of the investment cost of setting up a fab plant. Their applications involve a projected investment of $13.6 billion. They have sought support from the Centre to the tune of $5.6 billion.

But, India’s track record is not very encouraging. In 2005, bureaucratic hurdles ended up scuttling the plans of multinationals to set up plants in India. Attempts to attract chipmakers in 2017 and 2020 also failed.

In 2007, Intel moved to China and Vietnam after showing interest in India. In 2013, the government approved two proposals by Jaypee Group and HSMC. It even promised to subsidise the project cost. However, the projects were aborted after failing to attract investors.

So, when in September 2021, Israel-based chipmaker Tower Semiconductor threatened to pull the plug on its India plan over lack of policy clarity, it seemed like history was repeating itself. It had even called for Prime Minister Narendra Modi’s intervention. The company is the technology partner of the Next Orbit Ventures-led consortium.

But, in May, ISMC, announced that it had signed an agreement with the Karnataka government to invest $3 billion to set up India’s first and largest semiconductor fab unit in partnership with the same Israeli firm, Tower semiconductors.

The current response from these players shows their confidence in the government’s ability to provide adequate infrastructure and incentives. The government is definitely being seen as more welcoming of chipmakers than before. All of this indicates that India’s latest foray into the sector is not a false start and might bear fruit.

Unlike in 2005 or 2013, the present situation in India is very different. India imports almost all of its chips. According to an analysis of data from the commerce and industry ministry, India’s semiconductor imports in 2021-22 increased 65.2 per cent from 2019-20.

The Ministry of Electronics and Information Technology estimates that India’s semiconductor market will grow to 63 billion dollars by 2026, from less than $20 billion in 2020. And, with the 5G roll-out underway, wireless communication will drive the country’s semiconductor demand.

So, the demand is expected to go up, adding to the economic rationale of a domestic chip-making industry.

But, will India become a global player in semiconductor chips? Well, it will be an uphill task with little guarantee of success since significant challenges remain.

India’s $10 billion incentive scheme falls short of competing schemes from countries with larger captive markets. India is not even in the list of top ten in market share of chips. The US has announced an incentive package of $52 billion for chip manufacturing. China will be doling out $150 billion in incentives till 2025. So, India might not be able to attract the number of global chip-makers needed to build critical mass. Business Standard

Copyright © 2021.Broadcast and Cablesat

error: Content is protected !!