Editorial: Boost to chip manufacturing

Increasing hostility between China and the West over supply chain issues provides a window of opportunity for India

US chipmaker Micron Technology’s proposal to set up a $2.75-billion semiconductor facility in Gujarat marks the first major investment flow into India’s nascent semiconductor ecosystem. The decision, announced during Prime Minister Narendra Modi’s recent visit to the United States, comes at a crucial time for India which has set an ambitious $10-billion incentive plan for chip manufacturing. The assembly and testing plant in Gujarat will become operational next year and is expected to generate over 5,000 direct jobs. The development has two crucial implications: One, it will provide a fillip to the country’s efforts to create a robust ecosystem for chip manufacturing. Second, it will eventually reduce dependence on China which continues to be the global leader in the area. The global chip supply chain is currently undergoing massive geopolitical pressure as the US and its allies are trying to rein in their dependence on Chinese semiconductor players and its markets. This hostility entered a new phase last month when China’s Cybersecurity Administration handed out a partial ban to Micron. This was the first time that China made a move against a US chipmaker. The increasing hostility between China and the West over supply chain issues provides a window of opportunity for India to emerge as a favourable investment destination for American and European chip majors who wish for geographical diversification in their activities. The entry of Micron must be viewed as the first success in that direction.

Micron’s entry into India also marks the first approval given by the Centre under its $10-billion Indian Semicon programme unveiled in 2021 to woo chipmakers. Under this scheme, Micron will be eligible to receive up to 50 % of its total project cost from the union government. Further, the chipmaker will also receive incentives from the Gujarat government since the assembly and testing facility will be housed in the State. Though India traditionally had a strong base for the semiconductor design industry, hardware manufacturing has remained elusive. Though many other countries are also offering financial incentives to attract potential investors in the semiconductor sector, India’s offerings stand out among the rest for its scale and scope. India also houses a rapidly growing market for semiconductors which the global chip players find very appealing. Memory chips account for around 30% of the overall demand for semiconductor chips. The global chips market is expected to grow to $1 trillion by 2030. Resource-intensive, it requires highly-skilled workers and is already facing a competence gap. As India embarks on its silicon journey, semiconductor job openings are set to rise. With its talent pool, India needs to leverage the opportunity and find ways to provide hands-on and industry-relevant training to engineering students. Taiwan provides a cue. Its success is attributed to public-private partnerships that focus on training and certification.

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