India is set to embark on an ambitious journey of becoming a global leader in the semiconductor industry, with a projected domestic semiconductor consumption expected to cross $80 billion by 2026. Policymakers and politicians, including Prime Minister Narendra Modi, have emphasized the sector’s importance to India’s future. This article explores why chip manufacturing is crucial for India to become a major technological global power and how other countries have developed their chip manufacturing industry.
Global Leaders in Chip Manufacturing
The Netherlands
The Netherlands, home to ASML, the world’s largest supplier of photolithography systems for the semiconductor industry, is a global leader in chip manufacturing. ASML is the only firm in the world capable of making highly complex machines needed to manufacture the most advanced chips. After the United States (52%), Taiwan (16%), and China (12%), the Netherlands is the fourth largest in this industry worldwide, accounting for 9% of its global market capitalization.
USA, Taiwan, and South Korea
The USA, Taiwan, and South Korea have developed their chip manufacturing industry through strategic alliances, heavy investments in research and development, and robust domestic policies. For instance, Washington has been nudging East Asian partners Taiwan, South Korea, and Japan to form a “Chip 4” industry alliance to isolate China from the international tech ecosystem.
Largest Chip Manufacturing Companies
The largest chip manufacturing companies globally include Taiwan Semiconductor Manufacturing Company (TSMC), Intel Corp., and Qualcomm Inc., among others. TSMC is the world’s largest semiconductor foundry, providing 54% of the world’s chips. Intel primarily develops processors for personal computers (PC) and enterprise server markets.
Chinese Chips and Quality Standards
Despite being one of the world’s top five semiconductor foundries, China’s Semiconductor Manufacturing International Corporation (SMIC) only began to produce 14mn semiconductors recently. The quality of Chinese-produced chips is not only lower but also uncompetitive, even in China.
Supply Chain for Global Chip Manufacturing
Chip production is based on complex, globally distributed, specialized supply chains involving many stages in production. These include specialized materials, production equipment, design and related software, fabrication, testing, and packaging.
Investments Required in India
India requires huge investments in areas such as infrastructure development, policy formulation favoring semiconductor manufacturing, human capital development, and technology transfer. The government has approved a $10 billion incentive plan to establish chip and display industries in the country.
Technical Expertise in India
India has developed expertise in chip designing and delivering technical services around microchip design. However, it still lacks fabrication facilities which require huge investments. While India might not have native semiconductor firms, its plan under Prime Minister Narendra Modi relies on trying to attract foreign giants.
Demand for Chips in India and Globally
India’s semiconductor demand currently stands at around $24 billion and is expected to reach $100 billion by 2025. Globally, there has been a surge in demand for electronics due to the COVID-19 pandemic. For instance, 302 million PC units were shipped in 2020 with a 13.1% growth compared to 2019.
Chips are a Strategic Asset
Semiconductor chips are the heart of modern electronics, powering everything from smartphones to military systems. A country’s ability to manufacture these chips domestically reduces reliance on international supply chains, ensuring uninterrupted access to this critical technology. It also fosters innovation, as domestic production allows for quicker implementation of new designs. Furthermore, it provides economic benefits through job creation and export opportunities. Lastly, it enhances national security by preventing potential tampering or supply disruptions. Therefore, semiconductor chip-making ability is a strategic asset for any country.
Devices and Sectors where Chips are Used
Semiconductor chips are used in a multitude of devices and sectors. They are integral to computing, telecommunication, household appliances, banking, security, healthcare, transportation, and manufacturing. These chips are embedded in electronic devices ranging from computers and smartphones to advanced medical equipment and supercomputers. In consumer electronics, devices like mobile phones, laptops, game consoles, microwaves, and refrigerators operate with the use of semiconductor components such as integrated chips, diodes, and transistors. They also play a crucial role in sectors like artificial intelligence and products such as televisions, air conditioners, automobiles, high-speed trains, satellites, industrial robots, elevators, and drones. Thus, semiconductors have a wide-ranging impact across various industries and devices.
Conclusion
In conclusion, chip manufacturing is crucial for India as it can reduce dependence on imports and establish domestic manufacturing capabilities. With strategic planning and substantial investments, India can potentially reshape the landscape of the global semiconductor sphere.
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