In the global arena, semiconductor chips have emerged as critical assets shaping geopolitical strategies
Semiconductor chips are posited as the new oil by some; some see them as a threat to national security, while others view them as a passport to economic prosperity. Dominated by companies from the United States, Taiwan, South Korea, Japan, and the Netherlands, the semiconductor industry is seen as the new oil, serving as a fulcrum of future geopolitical strength for these nations. Similarly, traditional military combat is no match for AI-enabled missile attacks, quantum computer-driven decision-making, drone swarms, and cyberattacks powered by state-of-the-art semiconductor chips, the manufacturing capabilities of which bestow power and influence.
They are embedded in our lives, from coffee machines and mobile phones to electric vehicles and health equipment, offering an industry potential of trillions of dollars by 2030, according to McKinsey. India’s ambition to ascend the pecking order of global superpowers by building advanced technology manufacturing capabilities, including semiconductor chips, is aptly based on a bold vision, the realization of which requires careful analysis of the following:
Complex value chain: The three core verticals of Design, Fabrication, and ATP form one of the most diverse supply chains in the world, crossing as many as 70 borders before reaching the consumer. US companies dominate the design of advanced chips, capturing ~47 per cent of the value. Foundries manufacture the designed chips operating at subatomic-level precision, capturing ~24 per cent of the value. ATP is a relatively automated and lower-value business but is now changing with advanced packaging techniques. Precision: The advanced chips, benchmarked below 7 nanometers (nm), are the true test of technology manufacturing capabilities, currently largely vested with Taiwan and South Korea. These foundries require facilities 10,000 times cleaner than a hospital surgical room, and the purity standards of some of the 300 different materials needed to produce an advanced semiconductor are 1,000 times higher than for solar energy panels.
Geopolitics: The US continues to control key choke points of the global supply chain and retains the ability to influence other nations that wrest control over manufacturing processes. Samsung’s decision to diversify its manufacturing to Vietnam signals the unfolding of opportunities for other nations from a technological decoupling with China.
Technological Catchup of South Korea and Taiwan: In less than twenty years, Taiwan and South Korea displaced the technology leaders like Germany and climbed the patent charts on semiconductors from zero to 386 and 267 respectively in the late nineties. In South Korea, the chaebols led vertical integration from the design to the testing of chips and anchored R&D, whereas a network of specialised firms and Government-supported institutions developed the R&D capabilities and acquired foreign technologies in Taiwan. Though they followed different evolutionary paths in the development of the semiconductor industry, both leveraged inter-country mobility of experts wherein return of foreign-educated nationals provided significant transfer of best practices and state-of-the-art knowledge.
India’s moonshot at becoming a Semiconductor Hub: The recent promise of $10 billion under the Semicon India programme, the PLI scheme, and the separate Design-Linked Incentive (DLI) scheme aspires to build India’s muscle across the semiconductor value chain. Its international strategic partnerships as part of the QUAD, India-US iCET, and investment interests from leading US firms like Micron are aimed at exploiting opportunities in technology, resourcing, talent, and research. However, in a complex industry such as Semiconductors, only industrial cooperation can do so much. Talent is identified as one of the top three risks for the industry, whereas India’s skilled workforce can at best claim expertise in Chip design. India is said to be two decades behind the Chip curve, and some of the most developed nations in advanced manufacturing have struggled to establish prominence in the field.
India’s attractiveness therefore needs to extend beyond the availability of cheap land and capital and instead emerge as an attractive destination for the highly specialised global knowledge workers who relocate with their families and participate in the country’s ambitious journey of development. It’s also important to grab the opportunities offered by the decoupling that allows India to find value-aligned international partners, who, knowing its history of respectful coexistence and burgeoning economic prominence, bridge the R&D and execution gaps. India’s success with Chandrayaan-3, 5G, and Digital technologies does offer optimism with respect to its ability to realise its formidable vision.
(The writer is Deputy Chief Mechanical Engineer, North Western Railway, views are personal)
