What good will made-in-India chips really do?

IT minister Ashwini Vaishnaw on Tuesday presented the prime minister a showcase of some chips made in India—by research bodies, private firms, and university students. India has already handed out $18 billion in incentives to make chips locally. Why? Mint explains:

Can we manufacture chips indigenously?

Semiconductor fabrication is complex. No country has singular control over the $665-billion global chip industry due to its size and the niche expertise needed. Not even Taiwan, which controls over half the world’s chip supplies. The US has ruled semiconductor design through behemoths such as Intel, AMD and Nvidia. Dutch giant ASML is the only company in the world with the tech to make cutting-edge chips. Taiwan has mastered efficiencies and scale to make chips at the lowest cost and highest performance. And China has control over the supply chain—including critical elements such as lithium, hafnium and more.

Why are we spending so much on this?

The focus is not full autonomy, but reducing dependency on specific nations. For instance, ever since US sanctioned Huawei in 2016, the tech giant has disappeared from the global map and now only serves China. As the world gets fragmented amid geopolitical tensions, autonomy in chip design and patents, and establishing a supply chain locally is imperative. Also, chips account for at least 40% of the overall cost of smartphones to laptops. So far, India imports all chips. Localizing chipmaking will boost earnings of the domestic electronics industry—which India projects would be worth $500 billion in the next five years.

Is India making any progress on this front?

Yes. Chip testing factories, the final gate of the supply chain, have commenced pilot operations in India—and commercial chip assemblies are said to begin by year-end. India’s first chip fabrication plant or ‘fab’ is expected to roll out chips by 2027. Also, Qualcomm, Intel, AMD, Applied Materials and Lam Research have stepped up semiconductor design in the country.

So, what would all of this mean for a user?

It is unlikely that local chips will reduce the cost of your next TV or phone. But increasing autonomy in the semiconductor supply chain will create an electronics economy that will depend lesser on patents from the US, Europe, China, Taiwan or any other country. This would reduce chances of unpredictable disruptions and increase economic stability. In the long run, companies will be able to increase the size of the domestic electronics ecosystem, boosting employment, entrepreneurship and more.

Can we take on China, Taiwan one day?

Experts advise against it. India’s big opportunity is to cater to use cases that developed chip nations do not. For instance, Tata Electronics’ upcoming fab is expected to make chips between 28 nanometres (nm) and 110nm in size. In comparison, the latest cutting-edge chips in consumer devices are at 3nm in size—and are getting smaller. India is focusing on localizing chips for mainstream industrial solutions to begin with. Experts call this a right approach—acquiring niche engineering specialty takes far longer.

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