A new wave of industrial policy efforts has emerged as countries around the world seek to establish their own semiconductor manufacturing industries. India, in particular, has announced a $10 billion initiative called the Semicon India Programme, with hopes of becoming a major player in chip production. However, while India has a strong presence in chip design services, it currently lacks commercial chip manufacturing facilities.
Drawing a comparison to India’s successful space program, some have wondered if the learnings from Chandrayaan-3 mission could be applied to help India become a semiconductor power. However, there are significant differences between the two sectors that make this approach challenging.
One key difference is the scale of output demanded. Space and nuclear programs typically produce products for a single buyer, the government, whereas semiconductor manufacturing facilities require contracts with multiple chip design firms to achieve financial sustainability. Additionally, the capital investments required for chip manufacturing far exceed those of space missions, making it a riskier endeavor.
Another difference lies in the supply chain. Space and nuclear industries have been able to indigenize and upgrade technology through government backing, but the semiconductor supply chain relies on a comparative-advantage-based specialization approach. Various regions, including the US, South Korea, Japan, China, Taiwan, and Europe, contribute to the semiconductor industry, highlighting the international nature of the supply chain.
Even with government support and talented scientists, it is unlikely that India could achieve complete self-sufficiency in semiconductor production. The dependence on foreign companies for inputs, talent, and capital will remain a significant challenge.
China serves as an example of the difficulties in transitioning from successful state-run space and nuclear programs to semiconductors. Despite early successes, China’s government-run semiconductor efforts fell behind other countries without the discipline that market finance and competition bring.
While India’s semiconductor ambitions are commendable, it is crucial to recognize the unique challenges involved in building a domestic chip manufacturing industry. Lessons from the space program may not directly translate, and a practical approach that considers the complexities of the semiconductor supply chain is essential.