The Daily Populous Saturday May 3rd, 2025 night edition
Authored by economist.com and submitted by BROWN-MUNDA_

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P ART-HIDDEN by hoardings and overshadowed by cranes, the buildings that will host India’s first commercial chip factory are slowly taking shape. The $11bn project is a partnership between Tata Group, one of India’s biggest conglomerates, and Powerchip, a Taiwanese manufacturer of semiconductors. The site they have chosen is in Gujarat, home state of Narendra Modi, the prime minister. Local politicians insist the factory—one of the first tenants of a mostly vacant industrial park two and a half hours south of the state capital—will eventually sit surrounded by suppliers and competitors; the plan, they promise, is to raise a “Semiconductor City” from the dirt. At a nearby visitor centre, an audio-visual show and a model town the size of a tennis court ram home that point.

Tata’s chip factory (or “fab”) is perhaps the most eye-catching result of an effort to promote Indian chipmaking that got under way in late 2021, when the central government announced $10bn of incentives for investors. Like many other countries, India was alarmed by chip shortages that came in the wake of covid-19, which it saw as a threat to its national and economic security. It is keen, in particular, to cut its reliance on cheap chips from China, with which relations are often fraught.

Yet politicians also want Indian firms to cash in on the semiconductor industry, the total global sales of which could almost double in value to about $1trn by 2030. And they think locally made chips will help boost Indian manufacturing. Apple already makes about one-fifth of its iPhones in India; it is said to be hoping that all the phones it sells in America will come from Indian factories by the end of 2026.

So far five big projects have got the green light. Most of these are facilities for “assembly, testing and packaging” of semiconductors: an end-stage of the manufacturing process that involves separating chips that have been printed elsewhere and wrapping them in a protective shell. That is far from the most lucrative part of the industry, but it is less technical and more labour-intensive than other bits of chip production, which makes it a good place for India to start. Other countries seeking to grab a foothold in this market include Malaysia, the Philippines and Vietnam. India’s first packaged chips could be ready by the end of this year.

Producing chips from scratch is a much sexier business, but also a far trickier one. For the moment Tata’s factory (which sits in a “special investment region”, called Dholera) is the only one of the new projects that will attempt to do that. It will not be minting cutting-edge semiconductors of the kind that stream from fabs in Taiwan. Yet the workhorse products it produces will nonetheless find plenty of uses, such as in vehicles, white goods and entry-level smartphones. Many of them may wind up in Tata’s own cars.

Not everyone is delighted by this progress. Politicians had at first dreamed of signing contracts with the very biggest names in chips, such as Intel; they have had to lower their expectations. Many ordinary Indians think the subsidies on offer are terrifyingly large. The central government is providing 50% of project costs for chipmakers and 50% of capital expenditures for chip packagers from its $10bn fund. State authorities are also chipping in another 20-25%. If an aim is to create more jobs, there are cheaper ways of doing that.

Yet this giveaway is similar to the way other countries kickstarted their chipmaking industries, thinks Rakesh Kumar at the University of Illinois Urbana-Champaign. At first sceptical of the government’s plans, he is growing more bullish as the push develops: “They are doing this methodically, which I really like.” It is not unreasonable for a country of India’s size and wealth to seek to nurture at least one commercial chip fab, argues Pranay Kotasthane of the Takshashila Institution, a think-tank in Bangalore. Without that, India is not just “out of the game”, he says: “It is not even in the stadium.”

It remains to be seen if the government will continue to support the industry over the many years it will take to become internationally competitive. Indian manufacturers may perhaps come to regret officials’ enthusiasm for fabs; it is possible to imagine a future government requiring them to use local chips, even if they are inferior. When it comes to exports, Donald Trump’s tariff wars are likely to give Indian chipmakers some advantage over Chinese ones—but they also risk causing a global economic slowdown that makes foreign tech firms much less willing to invest. The Trump administration would doubtless prefer Americans to buy Indian chips rather than Chinese ones, but what it really wants is for more microprocessors to be made in America.

Ideally, Indian politicians would be spending as much time thinking about how to remove obstacles that hold back Indian chip-design firms as they are on chip manufacturing. About 125,000 Indians already work in semiconductor design, most of them for big international chip companies that do a portion of research and development in cities such as Bangalore. These staff account for about one-fifth of the world’s chip designers—but very few of them toil for home-grown firms. A recent government scheme to give local entrepreneurs a leg-up has fallen far short. Unleashing their potential might be a quicker route to riches than throwing money at gargantuan fabs. ■

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LateralEntry on May 2nd, 2025 at 20:40 UTC »

Expanding chip factory production outside Taiwan is good for humanity. How do these chips compare with what TSMC is doing though?

BROWN-MUNDA_ on May 2nd, 2025 at 19:42 UTC »

SS: **Full Summary of "India’s New Chip Fab Rises from the Dust" – *The Economist

India is making its first significant move into semiconductor manufacturing with an \$11 billion commercial chip fabrication (fab) facility being built in Dholera, Gujarat. The project is a collaboration between Tata Group and Taiwanese firm Powerchip. Positioned in Prime Minister Narendra Modi’s home state, the factory aims to be the nucleus of a future “Semiconductor City.”

This initiative stems from a \$10 billion central government incentive program launched in 2021 to boost domestic chipmaking, prompted by global semiconductor shortages during the COVID-19 pandemic and a desire to reduce dependence on Chinese chips. India also hopes to capitalize on the anticipated doubling of global chip sales to \$1 trillion by 2030 and to support its growing electronics manufacturing sector — including Apple’s expanding presence in the country.

So far, five major semiconductor projects have been approved, mostly focusing on the lower-margin but less complex areas of chip assembly, testing, and packaging. Tata’s fab, however, is the only one aiming to manufacture chips from scratch, albeit not the most advanced ones. These chips will be used in products like vehicles, appliances, and basic smartphones, including Tata's own cars.

Despite the ambition, expectations have been tempered. Initially hoping to attract top global players like Intel, India has instead partnered with second-tier manufacturers. Critics worry about the massive subsidies—up to 75% of costs covered by central and state governments—and question the return on such investments when cheaper job-creation methods exist.

Nevertheless, experts say India’s approach mirrors how other countries launched their chip industries. Some analysts, once skeptical, now praise the systematic progress. Others warn that political pressure could eventually force companies to buy subpar domestic chips, and that geopolitical factors, like Donald Trump’s trade policies, could either benefit or hurt India's chip exports.

Finally, the article stresses that India should pay more attention to nurturing its already strong semiconductor design talent. Despite employing around 125,000 chip designers—about 20% of the global total—most work for foreign companies. A recent government scheme to promote local design firms underperformed, suggesting India might find faster gains by supporting design rather than heavily subsidizing chip fabs.