West’s hype of competition is no help to India’s semiconductor ambitions
Published: May 11, 2023 11:04 PM
Illustratioin: Chen Xia/Global Times

Illustratioin: Chen Xia/Global Times

India is set to revive its effort to lure prospective chipmakers to the country by reopening the application process for $10 billion in incentives and assistance, in an attempt to encourage chip manufacturing, Bloomberg reported on Wednesday, citing people familiar with the matter. No matter whether India is or isn't willing to accept it, its semiconductor ambition is always viewed against the backdrop of the US-initiated chip war against China, as some Western analysts claimed the US' crackdown on China's chip industry is prompting chipmakers to relocate production chains to India.

Bloomberg's report comes two months after the US signed a memorandum of understanding (MOU) with India on semiconductor supply chain and innovation partnership, which aims to increase private sector cooperation in the area of semiconductors. As the US' ill-intentioned chip war against China escalates, Washington is trying to rope more countries into its clique, with India being one of US' key targets. In face of this pressure, Indian politicians should maintain strategic sobriety. There is ample evidence that the true purpose of the US is to build up a global chip industrial chain with itself at the core. Cooperation based on the US' selfishness is unlikely to bring tangible investment in India's chip manufacturing industry and help India achieve its semiconductor ambitions.

Although some Western analysts are attempting to tempt India into believing it can emerge as a supply-chain alternative to China in the semiconductor industry, it should be pointed out there is still a long way to go for India to comparatively improve its semiconductor manufacturing capacity to catch up with China. The Indian semiconductor sector has advantages in design link and market size, but still lags behind in the manufacturing link. It will not be easy for India to claim a place in the global chip manufacturing competition. India must face up to the reality of the development of the domestic semiconductor industry rationally and objectively.

The manufacturing link of India's semiconductor sector almost remains totally underdeveloped due to disadvantages including backward infrastructure construction, inefficient bureaucratic system and lack of a pool of skilled manpower. Given the high cost of building semiconductor manufacturing plants, the actual effect of government financial subsidies is limited. There were reports in March that the South Asian country had announced the plan to build the first semiconductor manufacturing facility within its territory to reduce dependence on chip imports, but the plan has not been made as of now.

As India develops manufacturing industries such as smartphones, its demand for chips is on the rise. Indian semiconductor market was worth nearly $23.2 billion in 2021 and is further projected to reach $80.3 billion by the year 2028, according to Indian media reports. However, while demand in the Indian semiconductor market is expected to grow further, this will only aggravate its dependence on imports of semiconductor products. It is not an easy job for India to build manufacturing capacity that matches its market.

As chips get smaller, chip manufacturing requires a solid industrial foundation for producing manufacturing products, the application of cutting-edge technologies, and strong capabilities in supply chain, talent, and intellectual-property protection. India's semiconductor ambitions should, more realistically, be implemented step by step with patience. Before the country makes itself a good destination for high-end semiconductor industry, it should, firstly, make itself a good destination for middle and low-end manufacturing products, building the country into a global manufacturing powerhouse.

Some Western media outlets have tried to exaggerate the competition between China and India in the semiconductor manufacturing sector, but, it seems India has still a long way to go to compete with China in chip manufacturing. The two countries should see that in the process of manufacturing development, there are still broad prospects for mutually beneficial cooperation.

De-globalization, economic "decoupling," or forming economic "small circles" that exclude China will not be conducive to the development of chip manufacturing industry. Only by creating a good business environment, establishing a solid industrial foundation, and continuously upgrading the industrial chain can India ultimately achieve its chip ambitions.

The author is a reporter with the Global Times.