Chip tactics

The article discusses the Indian government's efforts to attract major global chip manufacturers to the country and its initiatives to bolster the semiconductor industry. It highlights the need to reduce dependence on China in the chip manufacturing supply chain and compete with other countries offering significant incentives to attract semiconductor companies..

Key Points

1. The government has made a fresh bid to attract major global chip manufacturers into the country. 
2. At the Semicon India summit 2023 taken proactive decisions to address areas of concern for example

• Apart from low corporate tax rates and sops for all new manufacturing projects, 
• the incentives offered to tech firms to set up production facilities under 
• India's semiconductor programme have been scaled up to 50% financial assistance. 
• PM s U.S. State visit, the decks were cleared for a $2.75 billion assembly, testing, marking, and packaging facility in Gujarat proposed by the U.S.-based Micron Technology to build a semiconductors supply chain.
• $10 billion production-linked incentive scheme was unveiled for chip makers in late 2021.

Suggestion to further improve:

1. Apart from incentives, investors also need to see evidence of a stable operating environment with a predictable policy framework that is not amenable to kneejerk deviations such as export curbs to cope with shortages. 
2. They would also compare India's trade linkages with world markets through bilateral or multilateral compacts and its approach to tariffs on myriad components that may need to be shipped in.

Importance of semiconductor manufacturing:

1. Semiconductor fabrication units turn raw elements like silicon into integrated circuits used in practically all electronic hardware.
2. Fabs are highly capital-intensive undertakings costing billions of dollars for large facilities.
3. Fabs require a highly reliable and high-quality supply of water, electricity, and insulation from the elements, reflecting the high degree of precision, cost, and capital needed to make sophisticated circuits.The US passed the CHIPS Act to provide subsidies and investments to manufacturers opening fabs and making semiconductors in the US.

4. US also pushed some restrictions and sanctions on the Chinese semiconductor industry.

   India’s advantages in semiconductor manufacturing

   1. India has an advantage in semiconductor manufacturing as a large portion of semiconductor design engineers globally are either Indian or Indian-origin.

   2. China is losing control over this advantage in the face of sanctions and an ageing population.

   3. Experts believes that without a sustainable pipeline of high caliber talent, China’s goals for the semiconductor sector will not be achievable.

   Way Forward

   1. Sufficient Fiscal Support for All the Elements (Hardware, Design & Fabrication).

   2. Maximizing Self-Reliance.

   3. Future chip production should be to develop an ecosystem from design to fabrication, to packing and testing.

   4. The immediate need is to connect related industries in India to create the chip manufacturing ecosystem.