India plans $15 billion second push for chipmaking. Here’s what to know

The assembly and testing plants are less complex than the semiconductor fabrication plant. The first of these three plants was approved in June 2023, and is being built by US-based Micron Technology. Tata is building an assembly plant in Assam to cater to specific clients. The third facility is being built by C G Power and Industrial Solutions of the Murugappa Group, in partnership with Renesas Electronics of Japan.

The govt’s commitment of money

The four projects will together cost more than Rs 1.48 lakh crore, and the central government will spend almost Rs 59,000 crore in capex subsidies. Here is a breakdown of how much each plant will cost, and the subsidy commitments made by the central government. State governments have sought to sweeten the deal by offering land and electricity to the plants at cheaper rates.

India currently has virtually no footprint in manufacturing semiconductor chips. The bulk of the global chip production happens in countries like Taiwan and the United States. The US has a chip incentive scheme with an outlay of around $50 billion, several times that of India’s. The European Union too is wooing chip manufacturers and has announced an incentive scheme of size similar to that of the US’s.

Domestic fabrication plants will boost India’s economic and strategic imperatives, given that chips are used in practically all downstream industries from rockets to power steering in cars to kitchen toasters.

In a global climate of geopolitical tensions, with the relationship between the US and China, two of the world’s most influential countries in the technology value chain, at an all-time low, India hopes to seek out opportunities to boost the local industry with help from government-funded schemes.

It is important to take a realistic view

It is important to note that the Tata-PSMC fab will not produce cutting-edge nodes, which requires a level of technology that is not available with either of these companies.

The entry barriers to chip manufacturing are quite high, as China, which has poured a lot of money into its Semiconductor Manufacturing International Corporation (SMIC), has discovered. An enormous amount of technological innovation is needed to manufacture chips of smaller node sizes, which is an area in which companies such as the Taiwan Semiconductor Manufacturing Company Ltd (TSMC) have a massive advantage.