Across the world, countries are spending wagonloads of taxpayer money to develop or support their semiconductor industries. This pipeline of cash has yielded some successes and some failures; the difference is usually down to how strategically the money has been spent. The Indian government, which has also loosened its purse strings, needs to figure out a strategy — and soon.
Under Indian Prime Minister Narendra Modi, federal budgets have generally been pretty stingy with subsidies. However, US$11 billion has already been set aside, and largely allocated, to various chip-related projects. News emerged last week that another US$5 billion to US$10 billion might follow.
These are not small numbers by Indian standards. The government might spend five times more on this sector than it does on support for solar panels or autos — and 50 times more than it plans for labor-intensive sectors such as leather goods. According to officials, when various funds from state and federal sources are added up, three-quarters of the capital cost of a new semiconductor manufacturing facility will be borne by the government.
Yet it is not clear officials know exactly what they want from their semiconductor mission. They seem to have multiple objectives, and that always leads to a bit of mess when it comes to designing policy.
Is the goal to increase the amount of value added in India, or to create jobs? Is the government’s primary concern reducing India’s dependence on China, or substituting imports overall? Do officials think domestic production is essential to support the creation of a broader electronics sector, or to provide supply-chain resilience to the growing automobile sector?
What they say in public is troubling. The emphasis seems to be on onshoring production and promoting what Modi calls “aatma-nirbharta,” or self-reliance.
That is hardly a sensible objective. Not even the US can really aspire to true semiconductor self-sufficiency, given the complexity of chip supply chains. There is no reason to think India can, especially starting from scratch.
Nor should the nation worry too much about “strategic dependence” on chip imports, as long as a significant proportion come from friendly sources such as South Korea, Taiwan or the West. Reducing China’s share in Indian imports might make sense, but semiconductors is not a sector where this should be a concern. A large proportion of China’s future production will go to satisfy its own demand for chips.
Instead, the focus should be on identifying the spots in the supply chain where India can enter quickly and scale up effectively. Fabrication is glamorous, but as multiple countries across the world have discovered, the startup costs can be ruinous.
Requirements are stringent as well. Some companies interested in manufacturing in India may have given up because it seemed too tough to secure a reliable supply of ultra-pure water. The private sector needs to be given a freer hand in identifying the right locations for its investments. Most new plants have been steered toward states ruled by Modi’s party, including his native Gujarat.
Officials should focus on addressing some of these questions first. They also need to work harder on an unexpected problem: Getting the right workers. India may be the world’s most populous country now and claims to have thousands of engineering colleges. However, quality control in higher education is so poor that new plants will struggle to recruit a workforce.
Officials are at least aware that one of the biggest bottlenecks is the availability of engineers. If their plans are to come to fruition, they estimate they need between 10,000 and 13,000 trained workers by 2027. Some private forecasts of the talent shortfall are much higher.
Restructuring academia to focus on research and training will pay dividends. India should aim to staff not just its own plants, but also to fill manpower requirements in the rest of the world.
Fabrication is not the only place where money is made in the chip supply chain. Design, assembly and packaging together represent about half of the sector’s revenue. India already has one-fifth of the world’s chip designers, but only 7 percent of actual design facilities.
New assembly plants are coming up and government support for design has been increased. However, more could be done if New Delhi spends its money rationally. The real bang for its buck would come through investing in those sections of the supply chain where India may have a comparative advantage.
Fabs can follow once an ecosystem develops. There is no point obsessing over self-reliance when even a giant like the US is only one cog in a global machine.
Mihir Sharma is a Bloomberg Opinion columnist. A senior fellow at the Observer Research Foundation in New Delhi, he is author of Restart: The Last Chance for the Indian Economy. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Taiwan’s semiconductor industry gives it a strategic advantage, but that advantage would be threatened as the US seeks to end Taiwan’s monopoly in the industry and as China grows more assertive, analysts said at a security dialogue last week. While the semiconductor industry is Taiwan’s “silicon shield,” its dominance has been seen by some in the US as “a monopoly,” South Korea’s Sungkyunkwan University academic Kwon Seok-joon said at an event held by the Center for Strategic and International Studies. In addition, Taiwan lacks sufficient energy sources and is vulnerable to natural disasters and geopolitical threats from China, he said.
After reading the article by Hideki Nagayama [English version on same page] published in the Liberty Times (sister newspaper of the Taipei Times) on Wednesday, I decided to write this article in hopes of ever so slightly easing my depression. In August, I visited the National Museum of Ethnology in Osaka, Japan, to attend a seminar. While there, I had the chance to look at the museum’s collections. I felt extreme annoyance at seeing that the museum had classified Taiwanese indigenous peoples as part of China’s ethnic minorities. I kept thinking about how I could make this known, but after returning
What value does the Chinese Nationalist Party (KMT) hold in Taiwan? One might say that it is to defend — or at the very least, maintain — truly “blue” qualities. To be truly “blue” — without impurities, rejecting any “red” influence — is to uphold the ideology consistent with that on which the Republic of China (ROC) was established. The KMT would likely not object to this notion. However, if the current generation of KMT political elites do not understand what it means to be “blue” — or even light blue — their knowledge and bravery are far too lacking
Taipei’s population is estimated to drop below 2.5 million by the end of this month — the only city among the nation’s six special municipalities that has more people moving out than moving in this year. A city that is classified as a special municipality can have three deputy mayors if it has a population of more than 2.5 million people, Article 55 of the Local Government Act (地方制度法) states. To counter the capital’s shrinking population, Taipei Mayor Chiang Wan-an (蔣萬安) held a cross-departmental population policy committee meeting on Wednesday last week to discuss possible solutions. According to Taipei City Government data, Taipei’s