Is India’s Semiconductor Dream Under Threat?

India’s semiconductor dream is under threat as none of the major chipmaking companies, including Intel, TSMC, Samsung, Global Foundries, and Micron, have applied for the incentives provided.

In the 1970s, India made quite a visionary bet — on chips!

We’re talking about semiconductors, of course. We realized that almost everything in the world would rely on electronic components in the future. And it would all need these complex chips to power them. So we set up a government-owned entity called the Semiconductor Complex Ltd (SCL) in Mohali in 1983. We’d design chips. We’d manufacture them. Maybe even export them to the world.

We were chipmakers on a mission.

But in 1989, the dream was shattered. A massive fire broke out at SCL and it burnt down almost everything. We lost ₹60 crores worth of imported equipment. We were still a young nation grappling with a lot of other internal issues. So fixing this took a backseat. And it took us 8 years to put the pieces back together again.

Now you can imagine that the world did not wait for us. The need for chips was rising quickly as electronics made their way into every household. And while we were struggling to recover, an unlikely contender had emerged — Taiwan.

How did that happen, you ask?

Well, back then the US and Japan were vying for the top spot in the semiconductor business. And in order to cut costs, they turned to Asia. They wanted cheaper labour. And Taiwan already had a few things going for it — good roads, railways, and reliable electricity. More importantly, they welcomed foreign investment unlike India and some other emerging markets.

We missed out. And the end result is that today, Taiwan produces over 90% of the world’s most advanced semiconductors. It’s a virtual monopoly. And it’s all pretty much in the hands of one entity — Taiwan Semiconductor Manufacturing Corporation (TSMC).

But then came the pandemic. Chips were in short supply due to a multitude of reasons. And suddenly everyone realised how dependent they were on Taiwan. They worried that Chinese interference in the area would mean that China could seize control of all these important manufacturing on their own whims and fancies.

India smelt an opportunity. We wanted to bring back semiconductor manufacturing to the country. And this time, it would be different. We’re an open economy. Our infrastructure has greatly improved. Lots of foreign companies already have all sorts of manufacturing plants in the country too.

So in December 2021, we announced a massive $10 billion incentive for the semiconductor industry. We told manufacturers that if they made and exported a certain number of chips from the country, they’d be eligible for a payout from the government. We’d bear nearly 50% of the setup costs.

It was quite exciting.

But it doesn’t seem to be panning out the way we expected.

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