Having received $58.77 billion in foreign investment during the 2021-22 financial year, alongside Prime Minister Narendra Modi’s “Make in India” campaign to make India a workshop. India is the third most sought-after destination for manufacture with an expected potential export volume of $1 trillion by 2030. Already hosting industrial parks for car manufacturers including: Renault, Nissan and Hyundai and also for tech groups, among those, Dell, Samsung and Apple. To initiate “Make in India”, the Modi government has put $10 billion to incentivise manufacturers to set up new semiconductor fabrication plants.
India’s plan of entry has come at a perfect time. This is because there is growing trade and political tension with many economies, especially western, having to cut their supply chains from China. Although China has heavily invested in its semiconductor industry, the pandemic disrupted China’s chip output and forced economies to look for alternatives. As a result, India is starting to offer itself as an alternative to China. “From a geopolitics point of view, India is attractive,” says Rajeev Chandrasekhar, India’s minister of state for electronics and information technology. Also, the Israeli group ISMC has signed a letter of intent with Bangalore (a city in India) to build a $3 billion plant with the sole purpose of chipmaking. Also, Foxconn and Vedanta have come together to build another plant in western India.
This decision to provide an alternate option to China is risky. Firstly, this is because European countries as well as the US alongside many countries are subsidising onshore (overseas) chipmaking which will increase the global chip capacity. This means that if India don’t act quickly, the “Make in India” project will not be as significant to the chipmaking industry as its set to be and will end up not being as successful. Therefore, to achieve their goal they need to act especially quickly and decisively. The reason for such recent intentions in joining the market is due to the complexity of the semiconductor production. Therefore, the market has long been an oligopoly. However, after the Chips and Science act was passed in the US which grants $52 billion to go into research and development and also the Chips Act in the EU with €43 billion for semiconductors.
• Source: Boston Consulting Group
The graph above represents the distribution of semiconductor production. As you can see, in an ‘India-less’ industry, Asia accounts for roughly 60% of the Asia-dominant industry. Therefore, with India’s $10 billion entry the market will dominantly be Asia-orientated.
Conclusion - Projected growth:
With this $10 billion move, India is projected to grow massively both in the semiconductor and other manufacture sectors. Firstly, the appliances and consumer electronics (ACE) market in India is expected to grow to US$ 21.18 billion by 2025 from US$ 10.93 billion in 2019.Additionally, as per a report by NITI Aayog and RMI India, the electric vehicles financing industry in India is projected to grow to ~ US$ 50 billion by 2030.
India also have a young and upcoming population. Due to this, India has the potential to add over $500 billion to the global economy which is around 0.6%. This may not sound very impressive, however, for a single sector in one country, this is a very significant number.
India is a potential and slowly approaching superpower. What will happen to China if the semiconductor industry is taken over by India?
Sources:
Comments