The Indian government is seizing the global opportunity to reduce reliance on China by offering substantial incentives, totaling billions of dollars, to establish a complete semiconductor ecosystem on vast, undeveloped land. In his New Delhi office, Ashwini Vaishnav, India’s Minister of Electronics and Information Technology, proudly displays a 12-inch silicon semiconductor wafer on the wall. It gleams like a precious platinum record, positioned alongside a portrait of Prime Minister Narendra Modi. These semiconductor circuits, measured in nanometers and too small to be seen with the naked eye, are among the most advanced and intricate creations ever manufactured. They rival oil as one of the most valuable traded commodities globally. The Indian government’s vision is to produce microprocessor chips, the core components behind all digital technology, entirely within India. This aspiration, both audacious and improbable, reflects Prime Minister Modi’s unwavering belief in India’s potential to excel in advanced technology manufacturing. In July, a multitude of enthusiastic foreign entrepreneurs gathered on stage alongside PM Modi in his native state of Gujarat. Approximately $10 billion in subsidies is on the table, covering up to 70 percent of a company’s expenses. Anil Agarwal, the chairman of Vedanta, a British mining and metals conglomerate, announced plans for “Vedanta made-in-India chips” by 2025. They are eyeing a vast, empty area in Gujarat called Dholera, equivalent in size to Singapore. Straight roads, offices, power stations, canals for freshwater, and the outline of an international airport have been built in this otherwise empty grid.
PM Modi is taking a chance, hoping to attract private companies to this remote location, which is considered quite isolated even in the Indian context. The traditional technology hubs in India, particularly around Bengaluru, have positioned the country within the global semiconductor network through chip design expertise but not chip manufacturing. However, the government has recently invested heavily in subsidies to transform India into an electronics manufacturing hub. Since 2020, Modi has used “production-linked incentives” to encourage mobile phone manufacturers to assemble units in India, surpassing all countries except China. But chip manufacturing is far more complex. Presently, most advanced logic chips are made in Taiwan. With growing concerns about China and the importance of chips, this reliance on Taiwan seems risky. India lacks experience and specialized engineers.
Vedanta aims to commence chip production within two and a half years, recruiting experts from East Asia and Europe, offering three times their current salaries. Amenities in Gujarat are under development, but India’s abundant local talent is an advantage. To manufacture microchips, custom ingredients are essential. India’s largest chemical facilities near Dholera can produce the specialized gases and liquids required. Seaports and railheads ensure excellent connectivity. India’s tech industry is thriving. In late August, Chandrayaan-3 successfully landed on the moon’s south pole. India aims to showcase its robust digital-public infrastructure at the Group of 20 summit. The enthusiasm for India’s semiconductor manufacturing is linked to changing dynamics in China. China is no longer as attractive for investment, and India offers a reliable supply chain. While some argue that India’s logic-chip foundry pursuit is ambitious, it aligns with the nation’s goal to enhance its position in the global chip supply chain. This mirrors state capitalism adopted by major nations like China and the United States. India’s semiconductor ambitions, though challenging, demonstrate its determination to play a significant role in the global economy, fostering innovation and securing its place on the world stage.