It’s not too late for India to gain a global edge with high-end chips
PremiumThe opportunity is huge but we must create an entire ecosystem that can deliver innovative products
When India announced incentives worth ₹76,000 crore for a domestic semiconductor industry, sceptics were quick to argue how this was too late in a global market dominated by a few multinational firms based in even fewer countries. Did the government announce that scheme in fear of increased trade barriers and the impact of higher input costs on India’s big plans for renewables and electric vehicles (EVs)? If so, then it is unclear how its focus on chip manufacturing, likely to benefit only a few large business groups, will be of much help.
Further, cheaper chip alternatives from Taiwan and possibly also China are factors for India to consider. Right now, US semiconductor users are wary of the Chinese version of Atmanirbhar, “Made in China 2025", amid estimates that China aims to control most of the world’s semiconductor manufacturing capacity within four years.
One or more new fabs will not solve this immediate problem. It will take 5-7 years of sustained effort. In fact, it may be worthwhile to plan a two-step transition: First, fund local fabless companies to design substitute chips that reduce dependence on China in 2-3 years, and then migrate to next-gen products.
India could have had a leadership position had our policy on chips been consistent over the years since 1974, when Semi Conductors Ltd (SCL) was set up (it was later absorbed by Indian Space Research Organisation). Had there been a plan to develop a thriving ecosystem back then, we may have been beneficiaries of a US-China stand-off.
On the other hand, if India is eyeing the chips industry in view of future opportunities, then policy should focus more on creating a sustainable ecosystem of collaborative innovation, and not just on manufacturing. The industry is poised to pick up pace from next year to touch $53 billion by 2025, propelled not just by relatively new technologies like 3D printing, artificial intelligence, Internet of Things and blockchain, but also the rise of EVs, online games, cryptocurrencies and ever-increasing cloud use. This means any investment to beef up the ecosystem is never too late, sceptics be damned. It’s a rapid- obsolescence sector, and even if India joins today, whatever it missed will be obsolete in 4-5 years anyway.
With economies short of supply and high on the demand, our chip-makers will need to churn out value-added offerings to be globally competitive. Building a robust ecosystem that aligns all stakeholders—from policymakers, scientists, businesses and media to land owners, suppliers, customers and producers of complementary products and services—will hold the key to that.
Given India’s current position, using public funds not just for tax incentives, but also to foster collaborative innovation among key stakeholders, could prove valuable. The Shakti project at IIT Chennai that resulted in the creation of India’s first-ever indigenous RISC-V microprocessor, was a good example, though it was rudimentary in a market looking for faster, cheaper and more powerful chips.
Still, allocating funds to innovations even if these are in their trial phase, is critical. Developed nations provide grants to private researchers for projects that can generate value for society or ecosystems. In contrast, India exhibits impatience by offering no more than ₹10 lakh to a startup. It’s little wonder that most of these projects deliver quick but useless apps, while those like Rezonent, which was working on saving energy consumption by large SoCs (silicon on chips), a long-gestation project, often get starved of funds.
Policymakers should ask a few questions before extending support. What is the problem they want to solve? Who needs to be part of the ecosystem? What should be the governance model? How to capture more value from it? How to ensure long-term viability?
Here’s what the government can do to help create an innovation ecosystem that can create differentiated value and thus be competitive as a late entrant:
One, increase sharply the number of high quality integrated-circuit (IC) software and system design engineers we have, as opposed to the currently dominant IC design and testing engineers. Two, aid manufacturers in adapting to new processes that can save three months to market (the benchmark time is 19 months for a new design and 14 months for an upgrade). Three, create an open and collaborative environment where foundry and other suppliers can share information on production, future technology and expansion with manufacturers; as with suppliers, customers too need systems that let information be freely shared. Product co-creation is one way to achieve this between suppliers, manufacturers and customers. Four, ensure that the ecosystem has vibrant group of complementors, beyond just suppliers and manufacturers. Five, attract more players for application-specific IC/ASIC/ASSPs microprocessors, graphics ICs, and also software players for applications, programming, etc. Energy conservation efforts, for example, could go a long way. Lastly, India must cultivate global media relationships that could help us position our emerging industry as a producer of differentiated products of high quality and value. China mustn’t get to corner the global market.
M. Muneer is the co-founder of the non-profit Medici Institute and has keen interest in disruptive innovation. Twitter@MuneerMuh
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