Catching up on chip

Source: Business Standard

Synopsis:  India needs to secure semiconductor chips to lead the race in the emerging ICT technologies

Background

• The global semiconductor industry has become the arena for the most bitter technology battle between the US and China.
• Taiwanese semiconductor players are caught squarely in the middle.
• As per few observers, China’s recent aggression to assert sovereignty over Taiwan is guided partially by its need to secure cutting-edge chip fabrication facilities.
• The ripples of this war are also being felt in Europe, Japan, and South Korea.
• The Indian government, unfortunately, has largely ignored what is going on, though it affects every country that hopes to be a strong manufacturing and digital innovation hub.

Significance of Semiconductor Chips

• Chips are at the heart of every product and device from automobiles to aircraft, and from motor cars to mobile phones. Its importance is only going to increase in the coming years.
• Securing access in advance to the latest and most powerful chips will determine the winner in the latest technologies such as artificial intelligence, cryptocurrency, NFT mining, 5G, etc.,

Implications for India

1. The consequences of the technological war between the US and China could lead to more chip shortages in the next few years.
2. It could also drive up chip prices because manufacturing in the US, EU, or Japan is far more expensive than doing so in Taiwan or China.
3. India has so far not managed to attract any player into setting up a new generation fab foundry in the country, though it has been trying. The main problem has been that fabs require enormous investments running into billions, stable electricity, and lots of water.

Thus, all the developments mentioned above would have a huge implication for India.

Suggestions 

• One option for it is to invest in existing fab companies in the US and South Korea. Another could be long-term contracts with fab foundries outside of Taiwan.
• The US is offering billions in incentives to ensure that the latest generation chip fabrication facilities are set up within its borders. Like the US, India too can offer incentives to attract semiconductor fabrication industries.

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.