India currently does not have an ecosystem in place for advanced semiconductor manufacturing.

India may see a gradual reduction in the benefits of the US CHIPS Act

The goal of the US government’s Creating Useful Incentives for Semiconductor Manufacturing (CHIPS) and Science Act of 2022 is to incentivize technology companies to build semiconductor factories in the country. However, companies that accept federal funds to do so cannot build high-tech facilities in China for the next 10 years.

Satya Gupta, CEO and founder of the Electronic Products Innovation Consortium (EPIC) Foundation, said that while the US will benefit from these policies in the short term, in the medium term, three years or more, it could benefit markets. such as India. .

“US$50 billion plus incentives can be utilized by then and companies will be looking to expand globally and India would be a good option. By then, markets like India will also develop to a stage where these global firms will see the benefit of setting up advanced semiconductor manufacturing here,” he said.

The new US law, which was introduced on August 9, comes amid tensions with China. While the aim of the scheme is to strengthen the US manufacturing base, experts believe that the 10-year embargo on high-tech manufacturing in China will eventually drive firms to markets such as India, Europe and Vietnam.

The US scheme offers incentives totaling US$53 billion (about ₹4.2 trillion) to firms that build chip factories in the US. This is more than five times India’s ₹76,000 (approximately US$10 billion) chipmaker incentive program announced earlier this year.

According to Gartner’s April 2022 market research report, U.S. chip makers accounted for 33.2% of the $59.5 billion global semiconductor companies earned in 2021, among the world’s top 10 chip design and manufacturing firms. Samsung, Intel, SK Hynix, Micron, Qualcomm, Broadcom, MediaTek, Texas Instruments, Nvidia and AMD made up the top 10. Apart from Samsung, MediaTek and SK Hynix, the rest are American firms.

The White House said Micron and Qualcomm plan to build new facilities in the US. While Micron plans to spend $40 billion on U.S. memory chip manufacturing by 2030, Qualcomm will work with GlobalFoundries on a $4.2 billion U.S. chip manufacturing plan. Intel, which originally announced a $20 billion semiconductor plant in Ohio, said in June that its plan had been delayed pending understanding of the chip law. The company now plans to start work on its factory by the end of 2022, with production expected to begin by 2025.

India currently does not have an established ecosystem for advanced semiconductor manufacturing. However, conglomerates such as Tata group and Vedanta have shown interest in setting up chip operations here, and the government has also shown interest from some global companies. On September 8, Commerce Minister Piyush Goyal met with executives from US chip companies such as LAM Research and Applied Materials to explore greater collaboration with Indian companies.

In April, Applied Materials said it planned to invest $50 million in a new research and development (R&D) facility in India, while Mint reported last month that LAM Research plans to set up its second R&D facility in India this month.

“India has already implemented a Production Linked Incentive (PLI) scheme to attract global clients. Besides, it is not as if India has no existing semiconductor industry ecosystem – the Semiconductor Laboratory (SCL) in Mohali, Punjab manufactures semiconductor chips in collaboration with local and Israeli suppliers,” noted Vivek Tyagi, chairman of industry body Indian Electronics and Semiconductor Association ( IESA).

Rajeev Khushu, consultant and board member of IESA, said that semiconductor supply chain suppliers in India do not have the necessary quality to meet the global standards required for manufacturing the latest generation chips. For example, SCL still produces 180nm chips at its plant. According to Khush and Tyagi, this could lead to semiconductor factories popping up in India in the next five years as global technology firms focus on markets beyond Taiwan, Korea and China. advanced devices.

“India has already seen some interest from vendors to set up assembly, test, marking and packaging (ATMP) facilities in the country based on the semiconductor PLI scheme, which could precede the establishment of chip factories as this would require more investment. ” said Khushu.

Navkendar Singh, associate vice president of market research at International Data Corp (IDC) India, said: “China has been able to drive down chip prices due to widely available and affordable skilled labor and overall scale. production. This could be a factor that semiconductor firms face in the immediate future.”

Singh added that shifting chip production to other markets (including India and the US) could cause the company to incur higher production costs.

“It is also unlikely that any company will ever put all its eggs in one basket again, so India is unlikely to be the only beneficiary of the new US law. The overall impact could see India reap gains in semiconductors in the long term, but it will most likely not be the only country to benefit from the diversification of the semiconductor supply chain,” Singh added.

Sanjit
Sanjit

I am Sanjit Gupta. I have completed my BMS then MMS both in marketing. I even did a diploma in computer software and Digital Marketing.

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