As India embarks on its ambitious journey to build a domestic semiconductor ecosystem, the experience of China presents a dual lesson: a strategic roadmap and a cautionary tale. According to Professor Rakesh Kumar, author of 'The Chip Age' and a faculty member at the University of Illinois, New Delhi must be strategic in its approach, learning from both China's successes and its limitations.
China's Semiconductor Journey: A Model and a Warning
China has invested tens of billions of dollars over the past decade to develop capabilities across the entire semiconductor supply chain. This sustained, methodical effort has made it highly competitive in many areas, particularly in legacy chip production and various segments of the supply chain. However, despite this massive investment, China still struggles to manufacture the most advanced chips and remains vulnerable to export controls on critical chipmaking equipment from countries like the US and the Netherlands.
Professor Kumar highlights that China's persistence, strategic maneuvers, and consistent state support offer valuable insights for India. Yet, it also serves as a stark warning, demonstrating the immense difficulty and capital intensity involved in becoming a leader in advanced chip manufacturing, even with significant resources.
Strategic Priorities for India
For India, Professor Kumar advises a pragmatic, long-term strategy rather than an immediate pursuit of advanced fabrication:
- Strengthen Chip Design: India already possesses a strong base in chip design services. The focus should shift from low-end services to cutting-edge design, cultivating world-class fabless chip companies.
- Focus on Assembly, Testing, and Packaging (ATP): These areas are relatively easier entry points into the hardware market, leveraging India's lower input costs and offering a practical 'beachhead'.
- Develop Legacy Chip Manufacturing: If India pursues manufacturing, it should prioritize legacy chips (older, less advanced nodes) over advanced ones. This requires a 10-20 year commitment, supported by tariffs, preferential access policies, and strong ties with local markets like the automobile industry.
- Attract Talent: India can learn from China's 'Thousand Talents Plan', offering competitive salaries, research freedom, and state-of-the-art labs to attract its vast global diaspora of engineers and professors.
- Consider 'Friend-shoring' and Alliances: While chip sovereignty (onshoring everything) is aspirational, India can secure chip supplies through 'friend-shoring' (investing in allied countries' chip companies for guarantees) and forming strategic alliances where different partners specialize in different parts of the supply chain (e.g., India does design, an ally does manufacturing).
Economic and National Security Imperatives
India's push into semiconductors is driven by crucial economic and national security concerns. Reducing a hefty import bill, participating in a highly lucrative industry, and ensuring access to critical components for defense systems are key motivations. The reliance on imported chips carries risks, including potential supply disruptions, sabotage, or the use of 'kill switches' or tracking capabilities.
While establishing dedicated foundries for defense chips might seem appealing, Professor Kumar cautions about the rapid pace of technological advancement and the prohibitive costs of maintaining state-of-the-art facilities. For some avionics, radars, and missile systems, less advanced chips suffice, allowing for a domestic defense chip industry. However, future wars will likely be won with the most advanced chips, posing a continuous challenge.
The Role of AI and Industry Dynamics
The burgeoning field of Artificial Intelligence heavily relies on advanced chips, leading to massive capital expenditure for AI companies. Professor Kumar warns that if AI progress stalls, the economic consequences could be severe, as many investments are debt-funded with chips as collateral. However, he also notes that even if AI proves to be a 'bubble,' like past phenomena such as railway mania or the dot-com boom, it will still drive significant infrastructure build-outs beneficial to society.
Attracting global giants like TSMC or Samsung is desirable for capacity building and ecosystem development, but India must carefully weigh the subsidies provided against the actual value added in terms of local employment, tax revenue, and genuine economic/national security. Foundries are not job-intensive like other industries, and foreign ownership does not automatically guarantee supply security.
Measuring Success and Sustained Commitment
For India's chip ambitions to succeed, clear metrics and sustained national consensus are vital. Success could be defined by achieving a significant market share by a certain year or meeting specific technological benchmarks, such as manufacturing 28-nanometer chips domestically by a target date. Such goals allow for backward planning, resource allocation, and necessary course corrections.
Ultimately, India's entry into the chip race requires massive, sustained state support over decades, even for legacy manufacturing. Without a long-term national consensus that transcends political cycles, investments risk being squandered. India must invest prudently, leveraging its strengths and learning from both the strategic successes and the cautionary tales of other nations in this critical technological domain.