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Homeasiasouth asiaModi wants to make India a chipmaking superpower. Can he?

Modi wants to make India a chipmaking superpower. Can he?

NEW DELHI – In his office in New Delhi, Mr Ashwini Vaishnaw, the Indian Minister of Electronics and Information Technology, keeps a 12-inch disc of silicon semiconductor on the wall, gleaming like a platinum record beside a portrait of Prime Minister Narendra Modi. Its circuits, measured in nanometers and invisible to the human eye, may be the most sophisticated objects ever made. It vies with oil as one of the most valuable traded goods on earth.

According to India’s government, the microprocessor chips that power all things digital will soon be fully made in India. It’s an ambition as unlikely as it is bold, and speaks volumes about Mr Modi’s belief that he can propel India into the top tier of advanced technology manufacturing.

In July, a legion of fawning foreign businessmen lined up onstage behind Mr Modi in his home state of Gujarat. About US$10 billion (S$13.6 billion) in subsidies are at stake, ready to fund 50 per cent or even 70 per cent of any company’s outlay.

Mr Anil Agarwal, chair of Vedanta, a British mining and metals group, told reporters to expect “Vedanta made-in-India chips” by 2025.

They have set their sights on a barren plain in Gujarat, Dholera, designated the future home of India’s first “semicon city”. It is the size of Singapore.

Slicing through sodden fields, ruler-straight new roads connect planning offices to power stations, freshwater canals from a diverted river and a gargantuan outline, traced in the dust, of an international airport.

Dholera’s vast grid is otherwise virtually empty.

Mr Modi is betting he can lure private companies here, the middle of nowhere even by Indian standards, from not only across India but also the world.

India’s traditional tech clusters around Bengaluru, a two-hour flight to the south, have established the country in the global semiconductor network by their work in designing chips, but not in making them. And in the last two years, the government has laid heavy subsidies into making the country an electronics manufacturer.

Not as easy as it sounds

Actual chipmaking is another challenge entirely.

Since 2020, Mr Modi has used “production-linked incentives” – the more you make, the bigger your government handout – to persuade mobile phone manufacturers to assemble more units in India than in any other country but China.

But such assembly work can be performed with semi-skilled labour in ordinary factories. Chipmaking, in its difficulty, occupies the opposite end of the spectrum.

Today, nearly all cutting-edge logic chips are made in Taiwan. As anxieties about China flare, and chips become more integral to every kind of technology, that seems increasingly risky to buyers and sellers alike.

Taiwan Semiconductor Manufacturing Company (TSMC), founded in 1987 by chip legend Morris Chang, has been struggling to help America get its own fabrication plants, or “fabs”, going in Arizona, with help from President Joe Biden’s subsidy-infused Chips Act.

India has no history of fabbing chips and virtually none of the hyper-specialised engineers and equipment needed to start.

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Still, it says it will make them here – and soon. It took TSMC and other Taiwanese companies decades, driven by government spending and countless billions in capital investment, to get where they are. China, Japan and Germany are struggling to get a toehold.

Mr Agarwal of Vedanta, the conglomerate that hopes to launch India’s first semiconductor foundry, believes he can start making chips in two years. To lead the charge, he has hired Mr David Reed, a veteran of chipmaking firms around the globe, including, like with Mr Chang, Texas Instruments, the American company that once was a world beater in chips.

Mr Reed, a natural leader with a genial manner, intends to use his connections within the tight-knit chipmaking community to build a staff. His task: lure about 300 foreign specialists from fabs in East Asia and Europe to come and live in rural Gujarat and build a complex from scratch.

He is having to offer his new hires three times their current salaries to take the plunge. They will be “mirrored” by an equal number of Indian staff, who will eventually take the reins.

Ultimately, the hardest part of the assignment for Mr Reed may be persuading established players within the East-Asian-centric ecosystem to move to a place where they and their families had never considered living.

The land-and-power infrastructure he finds in Gujarat will be appealing to his expatriate hires, but the housing, schools and nightlife are a work in progress.

On the other hand, the home-grown candidate pool makes him optimistic: More than 1.4 million engineers graduate in India each year, including many of the highest quality, just as Taiwan is running short of fresh talent.

Making microchips also requires a lot of bespoke ingredients.

Mr Vaishnaw, the government official in charge, said India’s biggest chemical plants were near Dholera and could pump out the specialised gases and liquids needed to run any chip fab. There are seaports and railheads to ensure high levels of connectivity.

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Modi’s supreme goal

Some business leaders – and not only Mr Modi’s naysayers – argue that India’s government, in identifying the logic-chip foundry as its goal, has bitten off more than it can chew.

Certainly, the time frame announced by Mr Vedanta is highly ambitious, if not implausible. That does not mean there aren’t gains to be made: Expanding India’s role within the world’s chip supply chain looks like a much better bet. Indian officials do not put it this way, but it’s a kind of Plan B to Mr Modi’s chipmaking moonshot.

For example, Micron Technology, a memory-chip firm based in Boise, Idaho, has committed US$2.7 billion to another industrial site in Gujarat, 96km from Dholera. It is supposed to become a locus for ATMP work, chip jargon for “assembly, testing, marking and packaging”. These are the advanced processes integral to making modern chips powerful.

Malaysia does some of that kind of work now, and India could nibble away at its market there while doubling down on chip design.

Whether these plans succeed or fail, they make clear a giant scale of ambition. They also make it clear that India sees a muscular role for the state, with a mixture of tariffs and subsidies to help its national champions off the ground and into global competition.

That kind of state capitalism puts it in company with China, the United States and other big countries that are engaged in versions of the same. And that, in the end, might be Mr Modi’s supreme goal. NYTIMES

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