In the compelling narrative of “Chip War,” the global semiconductor industry comes under intense scrutiny, with Miller’s stark warnings about the perils of an overly concentrated supply chain. The book delves into the intricate beginnings of chip production, shedding light on the critical “choke points” scattered throughout the supply chain. These junctures often see select companies exerting significant market control, sometimes even monopolising the expertise and machinery necessary for manufacturing.
A notable example is the production of cutting-edge lithography tools, dominated exclusively by ASML, a Netherlands-based company boasting an astounding 100% market share. These lithography machines play a crucial role in etching circuitry patterns onto wafers. Utilizing an intricate process known as Extreme Ultraviolet Lithography (EUV), each machine, priced at around USD 150 million, comprises a staggering hundred thousand parts. The caveat? These unique machines are exclusively owned by ASML, a fact Miller emphasizes as a potential danger.
The narrative further delves into the colossal influence of the Taiwan Semiconductor Manufacturing Company (TSMC), a global leader in pure-play semiconductor foundries. TSMC’s dominance extends to producing roughly 90% of the most advanced processor chips, which are integral components in smartphones, computers, and advanced data centers across the globe, once again exemplifying a near-monopoly scenario.
Miller’s exploration extends to the purification of chemicals essential in the semiconductor chip manufacturing process. He sheds light on the handful of companies based in Japan, the US, and Europe that hold the capability to purify these chemicals to the requisite standards. Once more, the semiconductor design sphere revolves around highly concentrated markets.
This landscape sets the stage for India, an emerging player in the semiconductor arena, as it embarks on ambitious plans to establish itself as a semiconductor hub. Despite being in its infancy compared to the industry giants, India is unflinchingly unveiling grandiose chip dreams in a market characterized by significant monopolistic tendencies.
The Global Dominance of Chips and India’s Aspirations
The distribution of chip manufacturing power is far from equitable, with the following regional breakdown:
- East Asia produces 90% of memory chips, 75% of logic processor chips, and 80% of silicon wafers.
- China contributes 15% of all chips, predominantly low-tech variants.
- Taiwan leads with 41% of processor chips and over 90% of advanced chips.
- South Korea manufactures 44% of memory chips and 8% of processor chips.
- Japan’s contribution stands at 17% of all chips.
- Singapore plays a role with approximately 5% of all chips.
India’s vision for the semiconductor industry was elucidated by External Affairs Minister S Jaishankar, who emphasized that India’s semiconductor mission extends beyond domestic requirements. India’s intent is to contribute to global demand for reliable manufacturing. This vision was underscored during the Semicon India Conference, where Jaishankar positioned India as a vital component of the world’s semiconductor manufacturing ecosystem, benefiting from geopolitical factors favorable to the semiconductor chip manufacturing domain.
Despite these ambitions and significant incentives, India’s journey to establish a commercial-grade fab has faced roadblocks. Deloitte forecasts the Indian semiconductor market to exceed USD 55 billion by 2026, with substantial growth in industries such as smartphones, automotive components, and computing. The sector’s anticipated expansion positions it to play a pivotal role in global value chains, with projections indicating a market size of USD 85 billion by 2030, generating substantial employment opportunities.
Navigating the “China Plus One” Model
China, a key player in the semiconductor industry, has faced challenges due to chip export controls imposed by the US. The geopolitical climate has led China to explore alternative approaches, including the “China Plus One” model, which aims to diversify supply chains away from China. India’s strategic partnerships with the US and Japan through MOUs on semiconductor cooperation align with this vision, seeking to establish a robust supply chain to address global chip shortages.
India’s efforts to position itself as a semiconductor alternative to China have garnered international attention. However, progress has been limited in establishing commercial-grade fabs. The exit of Foxconn from a semiconductor fab joint venture with Vedanta, despite substantial investment announcements, highlights the complexities India faces in attracting private sector players. Experts emphasize the need for India to address these concerns and create an environment conducive to semiconductor investments.
India’s Role in Semiconductor Industry Realignment
India’s position as an alternative semiconductor manufacturing hub is bolstered by its growing collaboration with Taiwan. Around 120 Taiwanese enterprises have invested significantly in India, contributing to a burgeoning assembly model for manufacturing mobile phones. While an FTA between Taiwan and India remains elusive, the potential for collaboration extends beyond semiconductors to industries like steel and chemicals.
Despite hurdles, India’s semiconductor progress remains promising, propelled by multilateral initiatives and partnerships. As Taiwanese companies shift manufacturing bases to Vietnam amid the US-China trade war, India’s emergence as a semiconductor destination gains prominence. An FTA with Taiwan, coupled with collaborations with industry leaders like TSMC, could pave the way for India’s expanded role in the global semiconductor landscape.
In Conclusion: Paving the Path for India’s Semiconductor Ascent
India’s semiconductor journey, while rife with challenges, holds immense promise. Strategic partnerships, diplomatic initiatives, and industry collaborations are
integral to India’s bid to become a trusted semiconductor manufacturing hub. By harnessing its technological prowess, geopolitical advantages, and diplomatic acumen, India has the opportunity to carve a significant niche in the semiconductor domain, offering a compelling alternative in the evolving global supply chain.
