The Industrial Revolution 5.0 would not be here without the semiconductor chips. In fact, the way to super economic power status for India runs through the highway of semiconductors. Attaining and sustaining this status, however, may face roadblocks from China. The tiniest, invisible game-changer industrial product of the 21st century has ushered in a new era of industrial revolution and is already turning out to be the lynchpin of the industrial strength of a country.
A country cannot have strategic autonomy unless it does not maintain its own or has a friendly source of supply of semiconductor chips or other inputs, as we are witnessing during the Sino-American tech war. A country that is mostly dependent on a single or dual source of supply of semiconductors may face tremendous pressure from the supplier country to mend its foreign and economic policy. That China succeeded in bringing the US to its knees was very much visible to the world community, when top US leaders recently made a beeline to the Great Hall of the People and Zhongnanhai, the seats of Chinese powers in Beijing.
The Dragon nation, which is currently in a tough military engagement with India, has already poked fun at India’s very ambitious plan to be a semiconductor hub in the next one decade. As hopes and expectations of achieving this goal were widely discussed in Indian economic and strategic circles, the Chinese official news outlet Xinhua said in a commentary: “As the ‘chip war’ fever catches the imagination of India’s politicians, diplomats and industry leaders, the age-old problem of talent, infrastructure, and fast-transforming technology ecosystem will plague the country’s vision." The Xinhua commentary clearly asks Taiwanese companies to stop obsessing about business opportunities in India.
Chinese commentator Sima Nan, talking about Foxconn’s business plans in India, said: “Foxconn’s future lies in the acceptance of 'one country two systems' (of China) in a peaceful and prosperous world, there is no other way.” This was a warning not only to Foxconn but also to India, which seems to be bragging too much on its successes in getting the company on board its semiconductor journey.
Obviously, China is not happy with Foxconn’s mega plan to make India self-dependent in all the segments of semiconductors supply chain. Definitely, Chinese scoffing attitude towards India's semiconductor mission does not bode well for India. Since China has a world monopoly over production of basic raw materials like Gallium and Germanium, and any Indian plan to become a hub of chip production can be easily derailed by China by blocking the supply of these raw materials on which chips are fabricated.
ALSO READ | Why Becoming Semiconductor Chip Manufacturing Hub Is A Strategic Necessity For India
India’s Emergence As Global Hub For Electronics Manufacturing
India’s semiconductor mission talks of building a vibrant semiconductor and display ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design. But India was embroiled in policy paralysis in previous decades, relating to setting up of semiconductor production facilities, due to which India ignored many lucrative offers from leading international companies. Now, there seems to be a political resolve at the highest level to remove all bottlenecks in the production of semiconductor fabs, design and packaging of chips. This was reflected in the deliberations made during the July-end Semicon-India-23 at Gandhinagar.
Participants at the conference, from major semiconductor-producing countries, wanted an appropriate ecosystem for a sustainable India programme for semiconductors for which assurances and promises came from the highest level of the government. With the fast growth we are witnessing in India’s economy, the demand for semiconductors has also seen exponential growth, which is expected to rise to $55 billion by 2026. The demand for semiconductors has been fuelled by significant growth in India’s technology sector-based industries like consumer electronics, automotive, and telecommunications, along with the growing adoption of emerging technologies like artificial intelligence and 5G. Smartphones, wearables, automotive components and the IT sector, besides computers and data storage, are the industries that will account for 60 per cent of the market in India. At present, they share 10-20 per cent of the world's demand.
Obviously, India offers a thriving market for semiconductor chips for which global companies are seriously planning to set up facilities in India. But none of them seems to be focussing on the alternative source of mining and production of two materials indispensable to the semiconductor industry. China produces 80 per cent of the world's Gallium and 60 per cent of Germanium, and China has imposed special export licences in the wake of US sanctions on Chinese access to advanced microprocessor technology. India has very little reserves of Gallium and Germanium and is 100 per cent dependent on their imports, 80 per cent of which comes from China, Germany and South Korea.
The current geopolitical environment is both bad and good for India as far as semiconductor chip production is concerned. Being a Quad member, India is engaged in talks with the US, Japan and Australia for together working in the field of semiconductor chips production and if leading advanced semiconductor countries wants to adopt India under its China plus One strategy, India needs to be in the Chinese good books also to get a regular uninterrupted supply of Gallium and Germanium. To avoid Chinese imports for these critical raw materials supply, India and partner countries need to find alternate sources of Gallium and Germanium. Until then, India and other partner countries will be critically dependent on China.
The semiconductor industry has four main segments — raw materials, foundry, fabless design and packaging. China has a monopoly in raw materials and packaging, whereas the US leads in fab-less jobs and Taiwan leads in foundry technology. China may not have high-end chip manufacturing equipment, which the Netherlands recently stopped exporting to China, but it is a leading player in raw material and packaging, which will force the world semiconductor companies and countries to come to terms with China.
To be totally self-dependent in the semiconductor supply chain, India needs to master all four segments, which unfortunately India would not be able to achieve on its own in the near future. The international companies planning to set up an adequate ecosystem for the production of chips will have to be dependent on China for getting raw material supply. To get rid of Chinese source of Gallium and Germanium, India and partner countries must find other countries where these raw materials can be produced.
The high-end semiconductor chips, which are nowadays normally of the size of 20-30 microns, are now being produced in the smallest 7-micron size. Micron size can be compared to the size of thousands times less than the width of a human hair. The production of these invisible chips requires a supply of uninterrupted electricity and water in its purest form. It is obvious that the semiconductor industry is extremely labour, technical and capital-intensive, requiring several billions of dollars. To attract foreign investors in this sensitive sector and equip India with these strategic materials, India has offered a 50 per cent investment incentive. With a planned fund of Rs 70,000 crore to support the industry, it is hoped that semiconductor companies will capitalise on this lucrative proposal as India itself offers a huge semiconductor market.
The author is a senior journalist and strategic affairs analyst.
[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal.]
Subscribe And Follow ABP Live On Telegram: https://t.me/officialabplive