Imagine a day in your life without semiconductor chips. Planning to wake up with an alarm on your trusted mobile phone and then heat some food for breakfast? There is no phone, or laptops, TVs, cars, aeroplanes, trains, or even microwave ovens, without silicon. All elements of modern life are dependent on semiconductor chips. A day without silicon technology is a non-starter, literally and figuratively.
Semiconductor technology today determines everything from a citizen's daily life to a country’s economic competitiveness and national security. COVID-19, a black swan event, packed 10 years of technology adoption into a single one. Global chip shortages ensued almost immediately. As if this was not enough, the supply chains of electronic components were disrupted by the China-US chip wars. The Taiwan Semiconductor Manufacturing Company (TSMC), on the hotly contested island, supplies 56% of the global chip market. This is more than half of the processing power of your phones, cars, computers, microwaves, or the entire modern economy. The shortage is not hypothetical. Mercedes has had to stop production for a while due to a chip shortage. Closer home, Tata lost $0.74 billion in June’21 quarter.
Consequently, India has an unmanaged risk of a stressed semiconductor supply chain for our industries, especially the nascent mobile manufacturing industry, and the automotive sector that represents close to half of our manufacturing base.
Three Key Elements
As India evolves from being a ‘Jai Jawan, Jai Kisan’ nation to a ‘Jai Vigyaan’ modern economy, it aspires to be a key player in this global high-tech sector. The current shortage also presents an opportunity to make India’s economy resilient by developing our own chip R&D ecosystem and manufacturing base. The National Policy on Electronics, 2019, underscores India’s specific aspirations in a sector where we lag substantially. Will India be able to secure a semiconductor-resilient future for her people for years to come? If so, what is required? It turns out that there are simply three key elements that must redefine the narrative.
Government must support R&D in critical technology sectors, and enable private-sector competition in their consumer-facing applications.
Free market-led innovation is a favourite catchphrase of the western world but the truth is more complex. Evidence suggests that the government has a key role to play in developing an innovation ecosystem. Let us consider some examples. The Internet started with DARPA grants through sustained public sponsorship in the 1960s, before user-focused innovation was taken up by startups and private companies that now dominate the world. In parallel, US government investments in defence R&D founded the semiconductor and related sector, creating the unequalled Silicon Valley ecosystem.
Public Support and ISRO's Example
Innovative companies like Intel, Google, IBM, Apple, etc have innovated furiously to meet customer needs, keeping the US at the leading edge of global innovation, building upon deep public R&D support over the decades. Similarly, sustained public support from Taiwan to TSMC has led to a dominance of the company in the semiconductor fabrication (fab) sector.
Based on many examples in her book ‘The Entrepreneurial State’, Prof. Mariana Mazuccato of University College London lays out the essence of public-private engagement: “The key is that the government serves as a leader for firms to imitate, in an approach that is much more ‘hands on’, in that public sector officials are working directly with firms in identifying and pursuing the most promising innovative paths. In so doing, the government is able to attract top minds — exactly the kind of expertise that generates the dynamism that the government is often accused of not having.”
Has this been done in India before? A shining example is the Indian Space Research Organization (ISRO). The space sector was driven by the government to world-class success. At this point, the space sector has been deregulated to infuse stronger private sector participation and make it competitive with other space-faring nations.
Patient Ambition Trumps Quick Payoff
In the famous Marshmallow Test, four-year-olds were given a choice between immediate gratification with one sweet or a delayed one with two. The study monitored the kids into their 40s and found that the children who waited longer demonstrated a striking array of advantages over their peers in later years, leading to success across personal and professional lives. This now-famous Stanford University study showed that individuals who forgo short-term rewards in favour of higher payoffs in the future had consistently better life outcomes.
It turns out that countries aspiring to move from labour-centric agrarian and service industries to high-tech manufacturing have to make similar tradeoffs when it comes to investing in setting up knowledge-centric ecosystems.
South Korea took 15 years to develop the semiconductor memory industry with sustained support, while Taiwan took 21 years to attain global leadership in chip foundry manufacturing (called ‘fabs’). This took sustained political focus, industry-relevant education, and market discipline in public R&D investments.
The pertinent techno-strategic question is, can Indian public and private sectors grab the global opportunity to develop our semiconductor industry? A homegrown example inspires hope and confidence. India developed nanoelectronics research over 15 years from scratch in 2006 with heavy public investments in the Centers for Excellence in Nanoelectronics for large-scale infrastructure, research grants, aggressive faculty hiring, and student fellowships. This investment resulted in India being a top contributor to IEEE Journals by 2016. In 2021, the first memory technology developed at IIT Bombay by an author of this article (UG) was adopted for manufacturing at Semiconductor Lab, Department of Space, demonstrating the potential of translating domestic research to high-end manufacturing.
The global competition for semiconductor leadership will require comparable investments
Where Does India Stand?
In response to the semiconductor crisis, the US and EU started shoring up their domestic semiconductor manufacturing, heralding a U-turn from outsourced supply chains dependent on global suppliers. With the rise of China in semiconductors, the model of market-based supply of critical equipment was no longer working and was a national security threat. The US has recently declared a $52 billion slate of investments to energise the semiconductor ecosystem against Chinese dominance. Exceeding that, China plans to invest $1.4 trillion through its ‘chip funds’ starting. These are big bucks.
Where does India stand in these global chips wars?
A 2019 study by McKinsey titled India’s Trillion Dollar Digital Opportunity highlights that the sector will sustain 60-65 million jobs by 2025. On the other hand, the lack of a reliable semiconductor supply chain will threaten India’s economic growth.
What is the way forward? At stake is a $1 trillion opportunity, and India does not have an option but to grab it.
Reassuringly, many parallel initiatives are underway. The Ministry of Information Technology is attempting to attract global majors to manufacture in India. The recently finalised Semiconductor R&D Center study in 2021 that the authors have led, commissioned by the Office of the Principal Scientific Adviser, demonstrates that India’s strong human talent in electronics can be leveraged to develop a semiconductor R&D ecosystem, connected to a small-volume but scalable fab.
India must commit itself to not being left behind in this techno-strategic sector. The semiconductor race will require intensity, grit, and determination with sustained funding and agile leadership to compete with global leaders. The Prime Minister has articulated the imperative to bring science from the lab to the field, to lead India to the future she deserves. We have the examples, inspiration, and existing Indian models — we now need the risk appetite to grab greater opportunities.
(Udayan Ganguly is a Professor, IIT Bombay & Mudit Narain is Chief Technology Officer, Office of the Principal Scientific Adviser, Government of India. This is an opinion piece and the views expressed above are the authors' own. The Quint neither endorses nor is responsible for the same.)
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