How China Could Swamp India’s Chip Ambitions
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A lack of upstream industrial capacity is another hindrance. India’s chemical and gas producers, for example, already produce many chemicals required for semiconductor manufacturing. But India lacks the refining capacity to boost purity levels to semiconductor grade, according to an industry-funded report by the Washington, D.C.-based Information Technology and Innovation Foundation. Foreign sourcing can substantially raise costs, the ITIF says.
Protectionism—i.e., big tariffs on Chinese chips—might be one solution. But as Western nations have learned to their chagrin over the past two years with Russia, controlling trade flows of legacy chips is difficult. The incentives for corruption and gaming the system through third countries would be enormous. And even assuming a tariff system worked as intended, it would put the rest of India’s burgeoning electronics business at a serious disadvantage.
According to Ashok Chandak, president of the India Electronics & Semiconductor Association, Tata’s success will be critical to attracting other chip makers to India—and it will have to surmount big challenges so it becomes easier for those that follow. The ITIF says India is likely to commission two to three plants for mature-node chips within the next five years.
But China could pour cold water on those ambitions. Gaining a foothold in the less demanding area of chip packaging and testing—with the help of foreign firms like Micron—makes good sense for Indian companies. Spending scarce government funds babysitting cash-hungry infant chip-fabrication plants, rather than on infrastructure in general, could be a far riskier move.
