A  Big Push To Set Up High Tech Semiconductor System

  Girish Linganna

The Indian government is capitalizing on the global push to reduce dependence on China by providing significant incentives, amounting to billions of dollars, to establish a complete semiconductor ecosystem on extensive, undeveloped land.

In his New Delhi office, Ashwini Vaishnav, India’s Minister of Electronics and Information Technology, proudly displays a 12-inch silicon semiconductor wafer on the wall. It gleams like a precious platinum record, positioned alongside a portrait of Prime Minister Narendra Modi. These semiconductor circuits, measured in nanometers and too small to be seen with the naked eye, are among the most advanced and intricate creations ever manufactured. They rival oil as one of the most valuable traded commodities globally.

According to the Indian government, the goal is to produce microprocessor chips, the core components behind all digital technology, entirely within India. This aspiration, both audacious and improbable, reflects Prime Minister Modi’s firm belief in India’s potential to rise to the forefront of advanced technology manufacturing.

In July, a multitude of enthusiastic foreign entrepreneurs gathered on stage alongside Mr. Modi in his native state of Gujarat. There’s approximately $10 billion in subsidies on the table, offering to cover 50 percent or even 70 percent of a company’s expenses. Anil Agarwal, the chairman of Vedanta, a British mining and metals conglomerate, informed reporters to anticipate the availability of “Vedanta made-in-India chips” by 2025.

They are eyeing a vast, empty area in Gujarat called Dholera, where India plans to establish its first “semicon city.” This space is as large as Singapore. Straight roads have been built, connecting offices, power stations, canals for freshwater from a redirected river, and the outline of an international airport, all in an otherwise largely empty grid.

Mr. Modi is taking a chance, hoping to attract private companies to this remote location, which is considered quite isolated even in the Indian context, both from within India and internationally.

The traditional technology hubs in India, particularly around Bengaluru, located a two-hour flight to the south, have positioned the country within the global semiconductor network through their chip design expertise. However, they haven’t been involved in actual chip manufacturing. Over the past two years, the government has heavily invested in subsidies to transform India into an electronics manufacturing hub. Manufacturing actual chips poses a completely different set of challenges.

Since 2020, Mr. Modi has employed “production-linked incentives,” where companies receive larger government incentives based on their production volumes, to encourage mobile phone manufacturers to assemble a significant number of units in India, surpassing all other countries except China. However, this kind of assembly work can be carried out using semi-skilled labour in typical factories. In contrast, chip manufacturing is at the far end of the complexity spectrum due to its difficulty.

Presently, the majority of advanced logic chips are manufactured in Taiwan. With growing concerns about China and the growing importance of chips in various technologies, this reliance on Taiwan has started to appear riskier to both buyers and sellers. The Taiwan Semiconductor Manufacturing Company (TSMC), established in 1987 by the renowned chip innovator Morris Chang, has been facing challenges in assisting the United States in establishing its own chip fabrication plants, known as “fabs,” in Arizona. This endeavour has received support through President Biden’s subsidy-driven CHIPS Act.


India lacks a track record in chip fabrication and possesses hardly any of the highly specialized engineers and equipment required for such an endeavour. Nevertheless, India has expressed its determination to manufacture chips domestically, and it aims to achieve this goal promptly. It’s worth noting that companies like TSMC and other Taiwanese firms required decades of government support, substantial capital investments amounting to billions, and sustained effort to reach their current positions in the semiconductor industry.

Since October  last  year, when the United States opted to limit Chinese chip makers’ access to Western technology and talent, China has made substantial investments in its own semiconductor manufacturers, surpassing the financial commitment that India has made to its own companies.

Mr. Agarwal, part of Vedanta, a conglomerate aiming to establish India’s inaugural semiconductor foundry, holds the belief that they can commence chip production within two and a half years. To spearhead this endeavour, he has recruited David Reed, a seasoned professional with a background in various global chip-making companies, including Texas Instruments, a former industry leader in semiconductor technology.

Reed, a charismatic leader known for his friendly demeanour, plans to leverage his network within the closely-knit chip-making industry. His task is to entice approximately 300 foreign experts currently working in semiconductor fabs in East Asia and Europe to relocate to rural Gujarat and participate in constructing a complex from the scratch. To attract these professionals, he is willing to offer them salaries that are three times their current earnings. Concurrently, an equivalent number of Indian employees will be hired and trained to eventually assume leadership roles in the project.

Perhaps Reed’s most challenging endeavour will be convincing well-established individuals within the East Asian-centric ecosystem to relocate to a region they had never previously considered for their residence and family life. While the land and power infrastructure in Gujarat may be enticing to his expatriate recruits, amenities such as housing, schools, and nightlife are still under development. Nonetheless, the abundant pool of local talent in India is a source of optimism for him. India produces over 1.4 million engineers annually, including many of exceptional quality, just as Taiwan faces a shortage of new talent.

To manufacture microchips, a significant amount of custom ingredients is essential. Mr. Vaishnaw, the government official overseeing the project, pointed out that India’s largest chemical facilities are situated in close proximity to Dholera. These facilities have the capability to produce the specialized gases and liquids required to operate any semiconductor fabrication plant. Additionally, the presence of seaports and railheads in the area ensures excellent connectivity levels.

India’s tech industry is currently basking in the spotlight. In late August, the Chandrayaan-3 lunar lander successfully touched down on the moon’s south pole. Prime Minister Modi viewed the Group of 20 summit as an opportunity to showcase India’s robust digital-public infrastructure.

A significant part of the pressing enthusiasm for India’s semiconductor manufacturing is linked to the changing landscape in China. China is no longer as attractive for investment as it was in the past three decades. Prime Minister Modi has been conveying to nations that are not aligned with Beijing that India holds a pivotal position in the creation of a reliable supply chain.

In 2015, during the initial stages of Mr. Modi’s first term as prime minister, he introduced the “Make in India” program, which serves as the overarching framework for the current semiconductor initiative. However, in terms of its contribution to the economy, the manufacturing sector has remained stagnant at approximately 15 percent. Smaller Asian nations such as Bangladesh and Vietnam have outperformed India in various sectors, notably in exporting larger quantities of products like clothing and electrical equipment.

India has achieved global recognition for its expertise in exporting intellectually demanding services and excels in the field of “deep tech.” However, its manufacturing companies, apart from the pharmaceutical sector, have struggled to establish a strong international presence.

Several business leaders, including those who are not critics of Mr. Modi, contend that the Indian government’s pursuit of logic-chip foundries as its objective may be overly ambitious. The timeline proposed by Vedanta’s Mr. Agarwal is indeed very ambitious, if not improbable. However, this doesn’t discount the potential benefits. Enhancing India’s position in the global chip supply chain appears to be a more feasible alternative. While Indian officials may not explicitly state it, this could be seen as a backup plan to Mr. Modi’s ambitious chip manufacturing endeavor.

Malaysia is currently engaged in similar work, and India could gradually capture a share of that market while focusing more on chip design.

Regardless of whether these plans achieve their goals or encounter setbacks, they reveal a significant level of ambition. They also highlight India’s intention to play an active role in the economy, utilizing a combination of tariffs and subsidies to support its leading domestic companies as they enter the global market. This form of state capitalism aligns India with not only China but also the United States and other major nations that have recently adopted similar approaches. Ultimately, this may be Mr. Modi’s ultimate objective. (IPA )



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