India's Bold Leap Towards Semiconductor Supremacy

In a bid to reduce global dependence on China, the Indian government has expressed its ambition to become a leading player in the semiconductor industry. The government has reportedly offered billions to construct an entire semiconductor ecosystem on vast empty plots. The plan is to make microprocessor chips that power all digital things entirely in India. This move is seen as a reflection of Prime Minister Narendra Modi’s belief in propelling India into the top tier of advanced technology manufacturing. In July, foreign businessmen pledged their support for Mr. Modi's vision in Gujarat, his home state. About $10 billion in subsidies are up for grabs, ready to fund up to 70% of any company's expenditure. Anil Agarwal, the chairman of Vedanta, a British mining and metals group, announced plans for 'Vedanta made-in-India chips' by 2025. The government has chosen a barren plain in Gujarat, Dholera, to be the future home of India’s first 'semicon city.' The area is the size of Singapore and is currently under development with new roads, power stations, freshwater canals, and an international airport. Mr. Modi hopes to attract private companies from across India and the world to this location. Over the past two years, the government has poured heavy subsidies into making the country an electronics manufacturer. However, actual chip-making presents an entirely different challenge. Nearly all cutting-edge logic chips are currently made in Taiwan. With rising concerns about China, and chips becoming more integral to every kind of technology, this seems increasingly risky. India, with no history of chip fabrication and a lack of specialized engineers and equipment, is still confident about making chips locally, and soon. Vedanta's Anil Agarwal believes he can start making chips in two and a half years. He has hired David Reed, a veteran of chip-making firms, to lead the charge. Reed plans to use his connections to bring about 300 foreign specialists from fabs in East Asia and Europe to live in rural Gujarat and build a complex from scratch. India's technology scene is currently in the spotlight. Its Chandrayaan-3 lunar lander reached the moon's south pole in late August. The country is also experiencing a surge of interest in chip-making due to China's decreasing attractiveness as an investment destination. In 2015, Mr. Modi announced a 'Make in India' program, an industrial push that frames the current chips initiative. However, manufacturing as a share of the economy has remained around 15%. India excels in the export of intellectually demanding services and in 'deep tech.' Still, apart from pharmaceuticals, its manufacturing firms have largely failed to compete globally. Some business leaders argue that India's government has bitten off more than it can chew with its chip foundry goal. However, even if the timeline announced by Vedanta is overly ambitious, expanding India's role within the world’s chip supply chain seems like a viable option. For example, Micron Technology, a memory-chip firm based in Boise, Idaho, has committed $2.7 billion to another industrial site in Gujarat. This site is expected to become a hub for assembly, testing, marking, and packaging of chips, processes integral to making modern chips powerful. Whether these plans succeed or fail, they signify a scale of ambition. They also highlight India's vision of a strong role for the state, with a mix of tariffs and subsidies to help its national champions compete globally. This approach puts India in the company of China, the United States, and other big countries that have engaged in similar strategies.