Why in the news?
- Recently, Prime Minister Narendra Modi visited Washington DC and a technology partnership was established, between US-India, emphasizing the significance of technology as a crucial aspect of geopolitics.
- A prominent aspect of this partnership involves addressing the global semiconductor supply chain’s diversification, a critical factor in the ongoing competition between the world’s top two economic powers, the US and China.
What are Semiconductors?
- Semiconductors are elements that have transmission between conductors and insulators. They can be purified elements like silicon or germanium, or composites like gallium, arsenide, or cadmium selenide.
- They are the fundamental building elements that serve as the heart and brain of all contemporary electronics and information and communications technology goods.
- These processors are now found in modern cars, domestic appliances, and critical medical equipment such as ECG monitors.
Importance OF Semiconductor
- Also known as semis/chips, semiconductors can be found in thousands of products such as computers, smartphones, appliances, gaming hardware, and medical equipment.
- They are essential to almost every modern device, from a phone to advanced defence systems, and advanced artificial intelligence-powered machines.
- But only a few countries are in the business of making chips, among the world’s most advanced technologies, and some specialise only in some aspects of it.
- 20th century was dominated by oil. In the 21st century Chips are the new oil.
What is the US-CHINA Chips War?
- The US-China chips war refers to the ongoing trade and technological competition between the United States and China in the field of semiconductor chips. It encompasses various economic, political, and national security aspects.
- The United States has traditionally been a leader in semiconductor technology, with American companies dominating the global market.
- However, in recent years, China has been striving to develop its domestic semiconductor industry to reduce its reliance on foreign chip manufacturers.
- In recent years, China emerged as a significant player in the semiconductor market, aiming to achieve self-sufficiency in this crucial industry through initiatives like Beijing’s “Made in China 2025” plan.
- However, the landscape has changed due to export controls imposed by the United States and upcoming restrictions from other countries.
- These measures have presented significant challenges for China, potentially impacting its ability to fulfill its semiconductor goals.
Opportunities for India from the Ongoing Chip War
- India is pushing itself as an alternative to China. India is aspiring for turning the ongoing war into its advantage.
- India does not have native semiconductors firm but it is trying to attract foreign chipmakers companies by providing them incentives and various other benefits.
- To realise this plan the government has announced a 10 billion dollars incentive plan which aims to boost manufacturing of semiconductors in India.
- This is India’s chance to be a global player in the semiconductor sector, but success is not guaranteed.
- India’s government must provide its homegrown industry with the needed help, both financially and material-wise, and strike the right balance between accepting U.S. partnership while not letting Washington dictate terms.
India’s Chip Challenges
- Similar attempts failed earlier: Three companies that applied to set up fabrication plants (Foxconn-Vedanta joint venture, Singapore’s IGSS, etc) failed to get off the ground for separate reasons.
- Expensive Fab Setup: A semiconductor fabrication facility (or fab) can cost multiples of a billion dollars to set up even on a relatively small scale and lagging by a generation or two behind the latest in technology.
- Resource Inefficient Sector
- Chip fabs are also very thirsty units requiring millions of litres of clean water, an extremely stable power supply, a lot of land and a highly skilled workforce.
- At the moment, there is no place in India that can guarantee 24×7 power or water supply.
- Lack of Highly Skilled Workforce: Chip manufacturing also requires a highly skilled workforce. Industry experts have repeatedly said that chip making is “not like assembling a phone”.
- Absence of “Chip Ecosystem”
- The absence of a “chip ecosystem” is why, despite the political will, no big international chip makers have yet shown interest in India.
- Taiwan has long been pushing India for a free trade agreement and a bilateral investment agreement to make it more attractive for TSMC, the world’s biggest chip maker, to set up base here, but Delhi has been reluctant.
- Lack of Fabrication Capacities: India has a decent chip design talent but it never built-up chip fab capacity. India’s only government-owned semiconductor fabrication unit is in Mohali, Punjab.
- India is at least two decades behind the chip curve. It could take the country 10-20 years to establish itself as a serious player in the semiconductor industry.
- But for now, India has positioned itself in the global chip war, with a technology partnership that promises to take bilateral ties with the US to the next level.
Read also:- Semiconductor
India and US-China Chip Wars,India and US-China Chip Wars