Welcome dip into big bag of chips

India broadened its semiconductor ecosystem by approving four new chip projects on Tuesday. These approvals come bundled with a raft of financial incentives designed to seed a domestic semiconductor fabrication industry. India's policy push coincides with a global effort to make the semiconductor supply chain resilient, which aids technology transfer to new manufacturing bases. Seismic activity and epidemics have exposed global vulnerability to concentrated chip manufacturing, and India is among a clutch of nations that are trying to pull production onshore. The AI race adds a strategic dimension to the chip industry, where access to computing power is already being used as a lever. India should count 10 chip projects in various stages of approval and construction as validation of its timely policy intervention.

The range of semiconductors demanded by industry is wide, which opens the field to investors and plant location. The latest lot of approvals is for plants in Punjab, Odisha and Andhra Pradesh, with a broad divergence in their industrial infrastructure. Semiconductor manufacturing imposes its demands, such as uninterrupted power and water, besides various inputs like specialised gases and chemicals. The India Semiconductor Mission (ISM) has plans to extend support beyond fabrication and into key inputs. State governments proactive about semiconductor production find it to their advantage to use the autonomous ISM as a project clearance window.

Semiconductor fabrication pulls in a truly globalised vendor chain that manufactures highly sophisticated and very expensive gear. India, though, has an advantage in the pool of chip design workforce. The world's leading chip manufacturers have offshore research units in India. Apart from manufacturing cost arbitrage and a growing demand for chips from industries like automobiles and electronics, India offers a market for innovation in semiconductors. We could hit critical mass in chip manufacturing sooner than anticipated.