India’s ambition to join the league of global superpowers rests on its ability to build advanced technology manufacturing capabilities, including semiconductor chips. These chips have emerged as critical assets, shaping geopolitical strategies and serving as passports to economic prosperity. While some compare them to the new oil, others view them as essential for national security.
The global semiconductor industry, dominated by companies from the United States, Taiwan, South Korea, Japan, and the Netherlands, holds immense potential. They are omnipresent in our lives, from everyday devices like coffee machines and mobile phones to cutting-edge technologies like electric vehicles and health equipment. McKinsey predicts that by 2030, the industry could be worth trillions of dollars.
To understand India’s path to technological prominence, it is crucial to analyze the complex value chain of the semiconductor industry. This chain consists of three core verticals: Design, Fabrication, and Assembly, Test, and Packaging (ATP). The United States dominates chip design, capturing approximately 47 percent of the value. Foundries in Taiwan and South Korea manufacture the chips with subatomic-level precision, making them the true test of technology manufacturing capabilities.
Geopolitics also play a significant role in the semiconductor industry. The US retains control over key choke points of the global supply chain, allowing it to influence other nations that seek control over manufacturing processes. The recent decision by Samsung to diversify its manufacturing to Vietnam signifies opportunities for other countries as they decouple from China.
South Korea and Taiwan have achieved remarkable technological catchup in the semiconductor industry. Within two decades, they surpassed technology leaders like Germany in patent filings. South Korea achieved vertical integration from chip design to testing, while Taiwan relied on a network of specialized firms and government-supported institutions. Both nations benefited from the mobility of experts, who brought back best practices and state-of-the-art knowledge.
India, aiming to become a semiconductor hub, has made significant strides. With initiatives such as the Semicon India program, the Production-Linked Incentive (PLI) scheme, and the Design-Linked Incentive (DLI) scheme, India aims to strengthen its position across the semiconductor value chain. Strategic partnerships with global players and investment from leading US firms demonstrate India’s commitment to technology, talent, and research. However, India still faces challenges, including a shortage of skilled talent and a two-decade lag behind the chip curve.
To succeed, India must become an attractive destination for highly specialized global knowledge workers who can contribute to the semiconductor industry. Beyond land and capital, it must offer an environment that appeals to these experts and encourages their relocation. India can leverage opportunities presented by the ongoing decoupling from China to find value-aligned international partners who can bridge the gaps in research and execution.
India’s success in other fields such as space exploration, 5G, and digital technologies is proof of its potential to realize its ambitious vision. By prioritizing talent development, international collaboration, and a conducive business environment, India can pave its way towards technological prominence in the semiconductor industry.
(The writer is Deputy Chief Mechanical Engineer, North Western Railway, views are personal)
FAQs: India’s Path to Technological Prominence in the Semiconductor Industry
1. What is the semiconductor industry and why is it important?
The semiconductor industry produces components, known as semiconductor chips or microchips, which are essential for the functioning of a wide range of electronic devices. These chips are omnipresent in our daily lives, from everyday devices like coffee machines and mobile phones to advanced technologies like electric vehicles and health equipment. The industry holds immense potential, with predictions that it could be worth trillions of dollars by 2030.
2. Which countries dominate the global semiconductor industry?
The global semiconductor industry is dominated by companies from the United States, Taiwan, South Korea, Japan, and the Netherlands. The United States leads in chip design, while Taiwan and South Korea specialize in chip fabrication with high precision.
3. What is the value chain of the semiconductor industry?
The semiconductor industry value chain consists of three core verticals: Design, Fabrication, and Assembly, Test, and Packaging (ATP). The United States dominates chip design, while Taiwan and South Korea excel in chip fabrication. These verticals are interconnected and crucial for the manufacturing process.
4. How does geopolitics influence the semiconductor industry?
Geopolitics plays a significant role in the semiconductor industry. The United States, having control over key points in the global supply chain, can influence other nations seeking control over manufacturing processes. Recent developments, such as Samsung diversifying its manufacturing to Vietnam, have created opportunities for other countries to decouple from China.
5. How have South Korea and Taiwan achieved success in the semiconductor industry?
South Korea and Taiwan have achieved remarkable technological catchup in the semiconductor industry. South Korea achieved vertical integration from chip design to testing, while Taiwan relied on a network of specialized firms and government-supported institutions. Both nations benefited from the knowledge and best practices brought in by experts.
6. What initiatives has India taken to strengthen its position in the semiconductor industry?
India has taken significant strides to become a semiconductor hub. Initiatives such as the Semicon India program, the Production-Linked Incentive (PLI) scheme, and the Design-Linked Incentive (DLI) scheme aim to strengthen India’s position in the semiconductor value chain. Strategic partnerships with global players and investments from leading US firms demonstrate India’s commitment to technology, talent, and research in the sector.
7. What challenges does India face in the semiconductor industry?
India still faces challenges in the semiconductor industry, including a shortage of skilled talent and a lag of almost two decades behind the chip curve. Addressing these challenges is crucial for India’s success in the sector.
8. How can India succeed in the semiconductor industry?
To succeed in the semiconductor industry, India must attract highly specialized global knowledge workers who can contribute to the sector. Beyond land and capital, India needs to offer an environment that appeals to these experts and encourages their relocation. Leveraging opportunities presented by the ongoing decoupling from China and finding value-aligned international partners can also help bridge the gaps in research and execution.
9. What evidence supports India’s potential for technological prominence?
India has shown success in other fields such as space exploration, 5G, and digital technologies, which demonstrate its potential to realize its ambitious vision in the semiconductor industry. By prioritizing talent development, international collaboration, and a conducive business environment, India can pave its way towards technological prominence in this sector.
Definitions:
– Semiconductor Industry: The industry that produces semiconductor chips or microchips, essential components for electronic devices.
– Semiconductor Chips: Components that are crucial for the functioning of electronic devices.
– Value Chain: The sequence of activities involved in producing and delivering a product or service.
– Choke Points: Strategic locations or factors that can control or influence a particular industry or process.
– Vertical Integration: A strategy where a company controls multiple stages of the production process within its industry.
– Catchup: The process of rapidly matching or surpassing the performance of others in a particular field or industry.
– Lag: A delay or gap between the current state and the desired state.
– Incentive Schemes: Programs or policies aimed at providing benefits or rewards to encourage certain behaviors or activities.
Suggested Related Links:
– McKinsey: Semiconductors – The Next Wave of Growth
– Semicon India
The source of the article is from the blog portaldoriograndense.com