| Introduction: Contextual introduction. Body: Write some lessons that India can learn from East Asian governments in developing the domestic Chip manufacturing industry.Conclusion: Write a way forward. |
Semiconductor foundries are the world’s most expensive factories, accounting for 65% of industry capital expenditure but only 25% of the value addition. . The industry is dominated by the USA, Taiwan, South Korea, Japan, and the Netherlands. The USA leads in design of chips, but it is Taiwan that has over 70% market share in chip manufacturing.
Following lessons India can learn from East Asian governments in developing the domestic Chip manufacturing industry:
- Government intervention: in the form of promoting research, facilitating cooperation and industry linkages. Like public sector research and development institutes such as Industrial Technology Research Institute (ITRI) in Taiwan, and the government coordination and encouragement of investment in the early stages as in South Korea.
- Foundry model: In this, manufacturers does not design their own chips (or establish their own brands), but acted only as outsourced manufacturers for chips designed elsewhere. This may incentivize chip companies to outsource manufacturing to India.
- Performance evaluation: For this, set the goals for companies, ration the finance, discipline poor performers with financial stringency and reward good performers with financial largesse.
- Purchase of process technology: from advanced firms to bring expertise through the hiring of engineers, the licensing of product designs and offering in exchange either cash or fabrication capacity, or second sourcing and OEM contracts for the established players.
- Financial support: Investments in major semiconductor fabrication activities should be financed almost entirely by the companies themselves from external loans, government credit agencies or, from cross-investment by one part of the business group in another.
Areas like stable power, large quantities of pure water and land, are state subjects, and it will be up to state governments to create the right climate for easy implementation of semiconductor projects. Securing Chip industries is a necessity for India if it has ambitions of becoming a big global hub for manufacturing and technology innovation in the future.
