It’s not too late for India to gain a global edge with high-end chips

News: The opportunity in high-end semiconductor chip manufacturing is huge, but India must create an entire ecosystem that can deliver innovative products.

Must Read: Semiconductor chip manufacturing in India – Explained, pointwise

Moreover, India also needs to be wary of cheaper chip alternatives from Taiwan and China, especially considering the Chinese plans of controlling most of the world’s semiconductor manufacturing capacity within 4 years under its ‘Made in China 2025’.

How to counter Chinese plans of dominating world semiconductor manufacturing?

A two-step transition can be planned:

First, fund local fabless companies to design substitute chips that reduce dependence on China in 2-3 years, and then migrate to next-gen products.

Note: Fabless manufacturing is the design and sale of hardware devices and semiconductor chips while outsourcing their fabrication to a specialized manufacturer called a semiconductor foundry.
What are the future growth estimates for the semiconductor industry?

The industry is poised to touch $53 billion by 2025, propelled by technologies like 3D printing, artificial intelligence, Internet of Things and blockchain, and with the rise of EVs, online games, cryptocurrencies and ever-increasing cloud use.

Considering this huge opportunity and the fact that this is a rapid obsolescence industry, it’s still not late for India.

Note: Semiconductor industry is a rapid obsolescence industry, as in whatever is produced gets obsolete in 4-5 years.
What is the way forward for India?

If India is eyeing the chips industry in view of future opportunities, then policy should focus more on creating a sustainable ecosystem of collaborative innovation, and not just on manufacturing. Following steps need to be taken:

Building an ecosystem: With economies short of supply and high on the demand, chip-makers will need to produce value-added offerings to be globally competitive. Building a robust ecosystem that aligns all stakeholders—from policymakers, scientists, businesses and media to landowners, suppliers, customers and producers of complementary products and services—will hold the key to that.

Here’s what the government can do to help create an innovation ecosystem:

One, increase sharply the number of high quality integrated-circuit (IC) software and system design engineers, as opposed to the currently dominant IC design and testing engineers.

Two, aid manufacturers in adapting to new processes that can save three months to market (the benchmark time is 19 months for a new design and 14 months for an upgrade).

Three, create an open and collaborative environment where foundry and other suppliers can share information on production, future technology and expansion with manufacturers

Four, ensure that the ecosystem has a vibrant group of complementors, beyond just suppliers and manufacturers.

Five, attract more players for application-specific IC/ASIC/ASSPs microprocessors, graphics ICs, and also software players for applications, programming, etc. Energy conservation efforts, for example, could go a long way.

Lastly, India must cultivate global media relationships that could help it position its emerging industry as a producer of differentiated products of high quality and value. China mustn’t get to corner the global market.

Public Funding: India needs to deploy public funds for tax incentives and to foster collaborative innovation among key stakeholders. The Shakti project at IIT Chennai, that resulted in the creation of India’s first-ever indigenous RISC-V microprocessor, is a good example.

Allocating funds to innovations, even if these are in their trial phase, is critical. Developed nations provide grants to private researchers for projects that can generate value for society or ecosystems. In contrast, India exhibits impatience by offering no more than 10 lakh to a startup.

Source: This post is based on the article “It’s not too late for India to gain a global edge with high-end chips” published in Livemint on 27th Dec 2021.

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