Spike Narayan-
Spike Narayan is a seasoned hi-tech executive managing exploratory research in science and technology at IBM.
Earlier this summer, the legislative branch in the United States, in a bipartisan push, funded the Chips for America Act. This created quite a stir globally with many countries following suit to limit their vulnerabilities in the all-important supply chain security. Among them, India pledged large investments to develop indigenous semiconductor capabilities. Earlier this year, the government, in a surprise move, pledged $30 billion to jump start the semiconductor self-reliance initiative. This did not go unnoticed for very long. This past week CNBC featured India’s role in the global semiconductor playing field by headlining that “New Delhi is trying to turn India into a chip powerhouse”. While it has long been noted that India can play a significant role in the world stage and India has made several attempts to enter this space, the results have not been noteworthy. This current string of announcements can be one more attempt to do just that and the question to ask is what is different now?
To critically answer this question, we must look at the global landscape in the present geopolitical light. Three important differences from two decades ago are: one, access to semiconductor chips, two, foreign investments in India over time and three, political will. Let us examine them in more detail.
Access to Semiconductor Chips: Two decades ago, the US controlled nearly a third of the global chips supply. There was no need to have any concerns about the supply chain to satisfy national needs. Today, the US controls only 12% of the chips supply. That combined with the fact that by 2030, India’s semiconductor demand will reach $110 billion which at that time will be over 10% of global demand. This puts the supply-demand equation in India on a completely different plane. The supply has shifted from the US to the far east with China, at number three, becoming the fastest growing supplier of chips with Taiwan and S. Korea becoming the top two players in that order. With the rising tensions in the Taiwan Straits, the supply chain disruptions are suddenly beginning to look very real.
This comes at a time when internal demand is rising almost exponentially with semiconductors being used not just in computers but widely in the automotive sector, in consumer electronics/appliances and in communication devices. As the manufacturing industry grows in India, so too will the dependance on chips from overseas.
Foreign Investments in India over time: Let us see what the pattern of investments in India has been. Representing the US semiconductor chip technology, Intel, one of the chip giants in the world, is investing $8B in India. While they have stated that they do not plan to manufacture in India in the near future, they will invest in building a chip ecosystem in the country. They already employ 14000 people in India today. The other US chip giant Micron, is also increasing its footprint in India. The company is going to be one of the fastest growing semiconductor operations in terms of skill sets and headcount, as Micron will have a 3,000-people workforce by the end of this 2022 calendar year.
In the chip design space, all three global Engineering Design Automation (EDA) companies Synopsys, Cadence and Siemens EDA (formerly Mentor Graphics) have had a presence in India for quite some time. Together these three EDA companies employ nearly 12000 people in India. Their presence is spread across Hyderabad, Noida, Mumbai and New Delhi to name a few. EDA skills are one of the most important pieces of the chips ecosystem and the training these companies provide is a critical component of the in-country workforce development.
A third, and probably the most important chip industry segment, is the packaging capability which is likely to be the biggest growth area and benefit most from the Indian government investments in the next 5 years. International investment in this sector is very key to jump starting this enabling technology. Although no major alliances have been announced yet, I would watch this space for the next big news in chip infrastructure capability partnerships. Finally, under the ecosystem banner, the chemical industry can play a significant role in supplying electronic grade materials for the chip packaging industry and later in the chip manufacturing area as well.
Political Will: Under this third point, I believe the global geopolitical climate is driving self-reliance in many countries and India is no exception. The present government appears to be ready to deploy significant resources to developing the ecosystem for robust semiconductor industry. It also appears that many international players are taking a closer look at India this time around.
In summary, the semiconductor industry in India is poised for significant growth in the next decade. The supply/demand equation in India, foreign investments and the political will in the country all appear to be aligned finally to enable such welcome growth. This may well be the turning point.
