India currently has a fairly small chip-manufacturing industry, but prime minister Narendra Modi wants the country to become a dominant player in the sector in just a few years
By Matthew Sparkes
25 April 2024
India plans to pursue an older form of chip technology
Pradeep Gaurs/Shutterstock
As part of India’s transformation into a leading global economy, prime minister Narendra Modi has set a target for the nation to become one of the world’s five biggest computer chip manufacturers by 2029, from a base of almost nothing. With the rise of artificial intelligence and unstable geopolitics creating a global scramble to build domestic chip factories, how likely is it that India can compete?
Rakesh Kumar at the University of Illinois Urbana-Champaign says there are two main drivers for countries seeking semiconductor self-sufficiency. The first is a realisation, sparked by shortages during the height of the covid-19 pandemic, that chips are now vital to a nation’s security and industry. The second is a desire to carve out a slice of an enormous and growing industry worth $526.9 billion last year.
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Currently, Taiwan makes 68 per cent of the world’s chips, with one company – TSMC – accounting for the large majority. The looming threat of a Chinese invasion of Taiwan has sparked panic and a wave of investment. “Everybody is foreseeing different kinds of geopolitical games,” says Kumar. “If one or a couple of countries have ownership on it [chip manufacturing], then they can use it as a leverage.”
As such, building a local chip industry is logical, but it isn’t easy. One approach is attracting foreign investment, and capturing much of the chip manufacturing that currently takes place in China – Apple is considering moving a quarter of iPhone production from China to India by next year, for instance. But true silicon independence will require building an infrastructure of supporting suppliers and training skilled workers, along with large and continuing investment, says Kumar.
Even with massive government support, Indian chip factories may struggle to be competitive at first, lacking the efficiencies and scale of a mature industry, charging perhaps twice as much as Chinese alternatives, says Kumar. “Who’s going to buy the Indian chips? And who’s going to continue buying these for the five or 10 years it may take to become cost competitive?”