The 12-inch silicon semiconductor disc that Ashwini Vaishnaw, India's minister of electronics and information technology, displays next to a portrait of Prime Minister Narendra Modi in his New Delhi office shines like a platinum record. Its nanometer-scale, nearly invisible circuits are among the most complex ever created. It's up there in value with oil as one of the world's most valuable commodities.
The Indian government claims that the country will soon be producing 100% of the world's microprocessor chips. It's an audacious goal that says volumes about Modi's confidence in his ability to lead India to the forefront of high-tech manufacturing.
In Modi's home state of Gujarat in July, a swarm of adoring foreign businesses queued up onstage behind him. There is a total of about $10 billion in subsidies at stake, enough to cover 50-70% of any business's expense. The head of the British mining and metals conglomerate Vedanta, Anil Agarwal, recently advised reporters to look forward to "Vedanta made-in-India chips" by the year 2025.
Dholera, a desolate plain in Gujarat, has been chosen as the site of India's first "semicon city." You could fit Singapore inside it. Cutting across flooded fields, the new roads go to the power plants, the freshwater canals fed by the river that was diverted, and the massive airport that has been sketched out in the dust. The great majority of Dholera's grid is unoccupied.
Modi is placing his bets on his ability to entice private enterprises from all across India and the world to come to this outpost in the middle of nowhere.
Bengaluru, two hours' flight to the south, is home to India's traditional tech clusters, and it is through their work in chip design that India has established itself as a node in the global semiconductor network. The government has invested heavily in the electronics industry during the past two years.
Making the chips themselves is a whole other set of difficulties.
Starting in 2020, Modi encouraged mobile phone makers to assemble more units in India than in any other country save China through "production-linked incentives" (the more you make, the bigger your government giveaway). However, in regular factories, even semi-skilled laborers can accomplish this. Making chips is extremely challenging and falls on the opposite end of the scale.
These days, Taiwan is the only producer of all the world's most advanced logic chips. Buyers and sellers alike may view this as unsafe due to rising China concerns and the increasing importance of chips in every area of technology. With the support of President Joe Biden's subsidy-filled CHIPS Act, Taiwan Semiconductor Manufacturing Co., founded in 1987 by chip legend Morris Chang, has been fighting to help the United States establish its own fabrication plants or "fabs" in Arizona.
India lacks both the experience of chip fabrication and the highly specialized engineers and tools necessary to begin. They're still promising to produce them in the US, and soon at that. TSMC and other Taiwanese enterprises didn't reach their current level of success overnight; it took decades of government spending and countless billions of dollars in capital investment.
China has spent far more on its own chipmakers than India has on its businesses since last October, when the US chose to restrict Chinese access to Western tools and personnel.
Vedanta's Agarwal is certain that his company can begin manufacturing chips in two and a half years, making it the first semiconductor foundry in India. As his point man, he's brought on David Reed, a seasoned chip industry veteran who has worked for companies like Texas Instruments and Chang's native China's Huawei.
Reed plans to leverage his charisma and popularity among the close-knit chipmaking group. His mission was to entice 300 foreign specialists from fabs in East Asia and Europe to relocate to rural Gujarat and start fresh in constructing a complex. He's at the point where he has to triple ("3x," he mutters) the pay he's offering to prospective workers. A "mirrored" team of Indian employees will take over ultimately.
To get established participants in the East Asia-centric ecosystem to relocate to a region they and their families have never considered before may be Reed's greatest challenge. Although the homes, schools, and nightlife in Gujarat need improvement, the land and power infrastructure he discovers there will be tempting to his expatriate workers. But the local talent pool gives him hope: Even though Taiwan is in need of new engineers, India produces over 1.4 million graduates every year.
There are a lot of one-of-a-kind materials needed for manufacturing microchips. The responsible government official, Vaishnaw, claimed that India's largest chemical factories were located in close proximity to Dholera, making it possible to supply any chip fab with the specialty gases and liquids it required. Connectivity can be ensured in large part via harbors and rail hubs.
The Indian tech industry is reveling in the spotlight. In late August, its Chandrayaan-3 lunar lander arrived at the moon's south pole. Modi wanted to use the G20 conference to showcase India's public digital infrastructure.
Since China is no longer a prime investment destination, there is even more pressing interest in India's chip manufacturing. To countries that aren't in lockstep with Beijing, Modi has been stressing India's importance in "building a trusted supply chain."
Modi's "Make in India" program, the larger industrial push that underpins the present chips plan, was first announced in 2015, at the outset of his first tenure as prime minister. However, manufacturing's share of the GDP has remained stagnant at roughly 15% ever since. India's exports of items like clothing and electronics have been overtaken by those of smaller Asian countries like Bangladesh and Vietnam.
India is a world leader in the export of "deep technology" and other intellectually taxing services. Its factories, with the exception of the pharmaceutical industry, are unable to compete successfully on the global stage.
Others in the business world agree with Modi's critics that the Indian government is overreaching by setting its sights on the development of logic-chip foundries. Vedanta's announced timeline is, to put it mildly, ambitious. But that doesn't imply there isn't any upside: boosting India's position in the global semiconductor supply chain appears to be a smarter play. Though they don't call it that, it's essentially a back-up plan for Modi's ambitious chip manufacturing initiative.
The Boise, Idaho-based memory-chip manufacturer Micron Technology, for instance, has pledged $2.7 billion to a second industrial complex in Gujarat, around 60 miles from Dholera. Assembling, testing, marking, and packaging (ATMP) operations are planned for this area. These cutting-edge procedures are crucial to the efficiency of today's semiconductors.
While Malaysia already performs some of this work, India may be able to chip away at some of its market share by focusing more on chip design.
Regardless of the outcome, the sheer scope of these proposals is impressive. They also show that India intends for the government to play a strong role, using a combination of tariffs and subsidies to get its national champions off the ground and ready to compete on a global scale. It joins the ranks of other big countries like China and the United States that have dabbled in state capitalism in recent decades. And perhaps that is Modi’s ultimate aim all along.
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