India needs its own semiconductor ecosystem. If this was not evident before the Covid-19 pandemic, it is now — with the pandemic wreaking havoc on the microchip supply chain, setting off a cascading series of crises, big and small, across industries.
Chips, as Chris Miller points out in his brilliant book Chip War, were the real reason why the United States (US) was able to win (and end) the Cold War, and are also at the heart of the ongoing geopolitical jostling between the US and China. They also highlight Taiwan’s importance — it produces 37% of the world’s chips.
Around the world, countries (including the US) are writing big cheques to subsidise, incentivise, or kickstart domestic design and manufacturing of chips of all kinds. These are not investments whose return can be measured solely through a financial lens; the strategic advantages a country acquires by being in control of its entire chip ecosystem are invaluable. This ecosystem needs to span the entire chain, from design to manufacturing (or fabrication). Nor should a country’s ability to manufacture chips be seen from the perspective of competitiveness alone — as in, will India be competitive in the chip-making business? One answer to this is that we do not know (and the proof will come only after genuine attempts have been made by several companies). Another is that it doesn’t really matter because the strategic imperative pretty much outweighs everything else.
India’s efforts to kickstart its own chip fabrication business needs to be seen in this light. As does an analysis of the Foxconn-Vedanta breakup. The second needs to be seen purely as a commercial arrangement that did not work out (and the causes, while there be many, are actually irrelevant). It is in India’s interests in ensuring that something does work out — which probably explains why the government has asked Foxconn to evaluate doing this on its own.
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