India’s goal of creating a successful semiconductor ecosystem hit a new milestone recently as the Israel-based International Semiconductor Consortium announced plans to begin construction on India’s first semiconductor fabrication plant as soon as February 2023. Indian conglomerate Vedanta and Taiwanese manufacturer FoxConn also recently invested $19.5 billion to build semiconductor and display production plants in the state of Gujarat and are expected to start construction in the next two and a half years. India has been investing in domestic semiconductor manufacturing to address its own semiconductor consumption and to gain access to one of the world’s most valuable technologies.
India’s goal is to become a world leader in the semiconductor industry. Domestic semiconductor consumption is expected to cross $80 billion in 2026, and policy makers/politicians have signaled the importance of the sector to India’s future, with Prime Minister Narendra Modi saying, “It is our collective aim to establish India as one of the key partners in global semiconductor supply chains.” Despite this attention from the top, however, India is unlikely to overcome its own shortcomings and make up the gap with the world’s major semiconductor manufacturers.
This is not India’s first foray into the semiconductor industry. In the mid-2000s, India was a serious contender as a site for an Intel chip plant, but the plan fell through after the government failed to introduce a semiconductor investment policy in time. India’s bureaucratic dysfunction during the Intel bid process deterred other investors from seriously considering India for many years. In 2019, the Modi administration renewed the country’s semiconductor efforts and launched the India Semiconductor Mission (ISM) as a part of its “Make in India” initiative. The ISM is a $10 billion incentive plan which extends fiscal support of up to 50 percent of a project’s cost to display and semiconductor fabricators. This investment plan is partly what drew attention from the International Semiconductor Consortium and Vedanta-FoxConn. Aside from these existing ventures, at least three other major investments and twenty other expressions of interest have been submitted to the Indian government since 2019.
The bureaucratic dysfunctions which marred India’s last attempt to enter the semiconductor market hover over these most recent efforts. The Make in India initiative, under which many of the semiconductor subsidies are distributed, has been criticized as unfocused and overly broad, with policymakers shifting their stance on issues like export taxes regularly. Large semiconductor manufacturing projects, including the International Semiconductor Consortium and Vendata-Foxconn factories, have also been pushed to set up in the Indian state of Gujarat, the home state of Prime Minister Narendra Modi and a major power base of the ruling Bharatiya Janata Party (BJP). The Vedanta-Foxconn plant has been especially controversial, with officials in the state of Maharashtra saying publicly that Vedanta-Foxconn relocated their plant from Maharashtra to Gujarat under political pressure. While some political maneuvering is expected on major projects, the level of infighting in India, and the inconsistent stance of BJP officials on a variety of important tax and business issues, have all made India less attractive for semiconductor manufacturers.
ISM, India’s semiconductor subsidy program, also lags behind the tens of billions of dollars and tax incentives other countries are providing. The European Union, United States, and China have all announced or passed major semiconductor initiatives in the past year, including a €43 billion package in the EU CHIPS Act, $50 billion in the U.S. CHIPS and Science Act, and a $143 billion Chinese plan. Creating a semiconductor manufacturing ecosystem requires significant investments and tax incentives from the government to keep companies in the country. India has yet to make the same level of commitment to industry stability and future investment as its competitors.
Aside from government support, building a semiconductor manufacturing industry requires adequate talent. India already has a strong semiconductor research and design industry, and has been attracting more research centers in recent months. Additionally, India’s top engineering schools like the Indian Institute of Technology have been partnering with universities across the world to create specialized educational programs focused on semiconductor design and production.
While India has a functioning semiconductor talent pipeline, and potential avenues to expand it, other resources, like raw materials, water, and energy will be harder to come by. China controls many of the metals and alloys needed. India would need to either import these critical materials or invest in its own mining industry. India holds over 6 percent of the world’s rare earth reserves, some of which are vital to the production of semiconductors, and Indian companies have been pushing for the government to take advantage of this fact. However, expanding this industry would require considerable time and financial investment to keep up with the demand from the electronics industry.
Water and energy are two other critical resources in semiconductor production, and India already does not have enough of either. Reports indicate that almost 6 percent of India’s population, over 83 million people, lack access to safe drinking water. Adding large semiconductor factories, which can use enough water per day to supply 300,000 households, to this mix would further strain supplies. The Indian government has made some progress in improving groundwater management, but it is unclear whether, or how quickly, those initiatives will succeed.
Production at India’s established electronics manufacturers has also been plagued by power outages and coal shortages this year. India has worked to increase adoption of renewable energy to expand its power grid, but it remains uncertain how quickly that will ease the load on the power grid.
Despite enormous investments in semiconductor manufacturing, a lack of power, water, and bureaucratic ability will prevent India from turning into any kind of semiconductor powerhouse on the back of the current initiatives. Creating a viable semiconductor ecosystem is not simple. The world’s current chip powerhouses took decades to develop a mature industry. India’s difficulties in administering the Make in India campaign and in providing the basic resources necessary to facilitate the semiconductor process do not bode well for its effort to expand the sector. India would be better served if its government focused on expanding access to power, water, and education, rather than creating a complex semiconductor ecosystem on the back of already strained resources.
Srishti Khemka is a former intern for the Digital and Cyberspace Program at the Council on Foreign Relations.
scpi dans l assurance vie scpi les plus rentables scpi deficit foncier bnp scpi credit mutuel nord europeacheter scpi corum achat scpi assurance vie rachat pret scpi scpi chez fortuneo revenusscpi pinel les scpi sont elles un bon placement achat scpi nu propriete scpi assurance vie credit mutuel investir dans une scpi avis scpi pinel societe generale scpi fortuneo scpi elysees pierre definition prime d’emission scpi scpi le placement immobilier qui rapporte scpi arnaques historique collecte scpi scpipinel caisse epargne scpi demembrement placement scpi creditmutuel avis scpi pf02 forum scpi primovie scpi cic les meilleures scpi de capitalisation scpipierre laffitte les meilleurs scpi pinel demembrement scpi pfo2 rendement scpi la francaise scpi generali defiscalisation scpi de rendement rentabilite scpi immobilierparts de scpi et ifi scpi primovie frais scpi en nu propriete scpi foncia placement pierre simulateur scpi demembrement avis scpi corum convictions valeurde realisation scpi hsbc scpi scpi france liste scpidans l assurance vie achat scpi pinel scpi pierre investissement avis amundi immobilier scpi rivoli scpi avis forum scpicorum demembrement scpi lcl avis scpi ciloger atout pierre