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Reporter investigation: "replace China"? What's going on behind India's chip ambitions?

via:凤凰网     time:2022/7/1 9:01:30     readed:82

Editor's note: A senior executive of India's largest conglomerate Tata announced that semiconductor manufacturers in Asia face "geopolitical concerns" and "risk of natural disasters," and India will become an "alternative destination." The executive stressed that more multinational companies would invest in India under the "China +1" strategy. Over the years, India has occasionally revealed its chip ambitions to the outside world, and the US has encouraged India to become an "alternative to China". What is the status of the Indian chip industry? Can it replace China in the chip industry? Reporters from Global Times investigated the case.

Single family "Specialty"

Nikkei Asia recently reported under the title "India touted as chip investment Choice in risk" that Tata Technologies CEO Raja & Middot; Mr Manikam said India and South-east Asia were destinations for chipmakers, citing the country's location and easy access to land and sea. Meanwhile, The Economic Times of India reported that Roy, executive director of telecommunications, media and technology at Singapore's DBS Bank, said that With the implementation of multinational companies' "China +1" strategy, India may become the preferred destination for semiconductor investment.

When it comes to Indian chips, many people tend to frown. In fact, India is the world's leading chip designer. The Global Times has been to The Bangalore International Technology Park, India's "Silicon Valley", many people would not expect that it is also one of the world's major chip design centers.

Texas Instruments has long had a high-tech r&d center in Bangalore that designs semiconductors. Although there are no well-known chip design companies in India, Bangalore is home to half of the world's semiconductor design service companies, such as THE UK's ARM, qualcomm, Intel and other global famous semiconductor companies have set up design centers in India.

As a "specialty student" in the single field of chip design, India has never stopped its ambition and dream. India started to develop its chip industry in the early 1990s, but the development was put on hold in 1998 when the US imposed sanctions on nuclear tests. In 2007, India wanted to introduce Intel to build factories there, but Intel turned to Build factories in China and Vietnam after inspection. In 2012, The Indian state of Karnataka rejected an application by a chipmaker to set up a factory after India created a national electronics incentive to develop the chip industry again. The local government said it was worried about the environmental impact of waste water and waste from chip manufacturing, but the media revealed that the real reason was that the plant would leave an irreparable hole in the region's fragile power supply.

Since COVID-19, the ambitions and calls for chip manufacturing in India have been greater, stronger and more urgent than previous abortive chip manufacturing policies of the Indian government. In May 2020, the Indian government announced plans to set up a chip production unit, and in December of that year, the Indian government approved financial incentives for Samsung's display factory in India; In December 2021, the Indian government approved an incentive plan of about $10 billion to attract global chip and display manufacturers to India, while the government will provide financial support of up to 50 percent of the project cost to eligible companies.

It is reported that the international semiconductor consortium ISMC recently announced that it is considering investing $3 billion to establish a foundry in Karnataka, India, to produce 65 nanometer chips, with Israel's High Tower Semiconductor providing high technology support. Indian mining group Wanda has signed an agreement with Taiwan's Foxconn to start semiconductor production as early as 2025, with an investment of about $10bn. The semiconductor market in India is forecast to grow from $27.15 billion in 2021 to $64.05 billion in 2026, according to a report by the Indian Institute of Electronics and Semiconductors.

Seize the "window"?

India's eagerness to transform its chip industry is meant to seize the "window" created by the global chip shortage. Due to geopolitical and economic competition between China and the US as well as the COVID-19 pandemic, multinational companies are tightening the pace of production in China, and chip capacity in Southeast Asia is nearing saturation, making India the best choice.

Geng Bo, deputy secretary general of the Third Generation Semiconductor Industry Technology Innovation Strategic Alliance, told the Global Times that on the supply side, the epidemic has disrupted semiconductor supply across the world, and the chip shortage in India is particularly acute. The Indian government has realised that it is not reliable to rely solely on global supply chains in key areas such as semiconductor chips. On the demand side, India has plenty of domestic car manufacturing and electronics manufacturing, and in 2019, It became the second largest mobile phone manufacturer in the world. The internal market for chips in India is strong.

In addition, the United States and the West have also contributed to India's "lift sedan chair". Han Xiaomin, general manager of Jiwei Consulting, told the Global Times that the US is behind India's semiconductor development. New Delhi: India has an opportunity to fully integrate the Indo-Pacific supply chain, including the semiconductor industry, as an alternative to China, the US ambassador to India said. Iia recently signed a memorandum of understanding with the Semiconductor Industry Association, which represents the U.S. chip industry, to identify potential areas of cooperation between the two countries. The US chose to cooperate with India not only because India has many talents in semiconductor design, but also because it wants to deepen cooperation with India to improve its own capability in chip development and reduce its dependence on Asian chip system.

An even more important reason for India to foster a chip industry is to reduce its dependence on China. India relies heavily on chips made in China and Southeast Asia. As of March 2020, India imported electronic components worth rs 1.15 trillion (100 Indian rupees about 8.48 yuan), of which about 37 percent came from China, according to government statistics.

India's weakness

However, the disadvantages of India's semiconductor industry are also obvious. So far, the Indian government's support for the chip industry has been more of a policy statement than financial support. Mr Han argues that the semiconductor industry is capital - and technology-intensive, with fabs extremely expensive, costing billions of dollars to build even relatively small plants. With only $10 billion, India is not financially supportive. At a time when the Indian government has limited financial resources, securing external financial support from leading semiconductor companies will be key to the success of the plan, but it remains to be seen whether such support can be secured.

Second, India currently lacks manufacturing capacity. Both ISRO and DRDO currently have their own fabs, but their capacity is limited to their own needs and is not at the sophisticated level needed for industrial semiconductor production. In addition, India lacks other skills and talent pool. Indian IT companies have reached the top level in the field of service outsourcing, and have a large number of chip design talents, but Geng Bo said that the chip industry is a large industry chain such as packaging and testing, India is only good at design, other technology reserves almost zero starting point, the relevant talent reserve is seriously insufficient. Compared with chip design talents, manufacturing talents need a longer period of training and industrial support.

Third, India suffers from inadequate resource efficiency and poor infrastructure. The semiconductor industry requires a lot of water, an extremely stable power supply, lots of land and strong infrastructure. India is riddled with problems in these areas, according to an analysis by The Business Standard.

Moreover, the international situation is not entirely favourable to India. Raja & Middot, South Asia scholar, India; Mr Mohan said becoming a global semiconductor centre was the government's most ambitious and challenging task. This requires a combination of technologies, industrial capabilities and global partners. Even with US support, it will not be easy to develop chip manufacturing based on India's existing base, and the US will not transfer core manufacturing technology to India, but will only create a low-end role for India, According to Gumbo.

Long Xingchun, executive director of Chengdu Worldcom Research Institute, told the Global Times that Compared with China, India's chip industry has a weak foundation and a poor business environment. From the perspective of investment, India is not the first choice for multinational companies in Asia because its conditions are even worse than Those of Indonesia. Therefore, multinational enterprises' investment in India's chip industry is mostly a "try it out" mentality, similar to Samsung semiconductor's large-scale layout in China, which is difficult to achieve in India.

Indians like to "build concepts", says Mr Long, but a high-tech industry such as semiconductors requires real work. He believes it will be difficult for India's chip industry to truly replace China, and the industry will not grow much in India in the short term.

Other analysts say India's overall international environment for manufacturing chips is better than China's, but there is a mismatch between ambition and capability. The Indian government's development of chip manufacturing is becoming more and more like a "pie", which can be used to give incentives when the election or public opinion is low.

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