By Andreas Kuehn, and Trisha Ray
Semiconductors are critical components to a country’s digital transformation. Yet most economies must satisfy their chip demand from technologically advanced countries and blocs such as the United States, China, the Netherlands, Japan, South Korea, and Taiwan. This is further complicated by the fact that semiconductor supply chains are heavily bottlenecked; global in scale yet geographically concentrated, semiconductor design and production require significant financial investments and highly specialized knowledge, infrastructure, and talent. The industries of emerging countries have historically not succeeded in developing any meaningful capacities due to the lack of necessary resources, capabilities, and conditions to manufacture cutting-edge technologies. Their role has been relegated to low-value suppliers at best, if they were integrated into the global technology supply chain at all.
The Indian government has initiated a new semiconductor manufacturing program with significant budgetary allocations, but it has yet to address the multifaceted policy, economic, environmental, and technological challenges for a developing economy to break into the production of high-tech technologies, ranging from significant financial investments, talent, critical energy and water infrastructure, and integration into the global supply chain. To examine the policies and their challenges, this chapter draws from in-depth, expert interviews with current and former government officials, trade associations, industry decision-makers, and technology experts, as well as a systematic document analysis of publicly available government and corporate documents. The inquiry focuses on the history and current policy efforts to establish India as a semiconductor hub. The chapter's analysis of these efforts finds five major factors that will determine the success of India’s semiconductor push, which in turn could provide direction for other developing economies with comparable policy pursuits:
1. Strong policy direction, as well as bureaucratic expediency to leverage ongoing “reshoring” of supply chains.
2. The pivotal role of partnerships with established semiconductor design and manufacturing hubs like the United States, the Netherlands, Taiwan, South Korea, or Japan.
3. Managing competing demands for basic infrastructure, like water and electricity, which directly impact the quality of life of citizens.
4. Leveraging existing (and abundant) semiconductor design talent in India, while also working on a strategy to acquire and develop skilled labor in other areas of semiconductor fabrication and facilities design.
5. How the combination of the above four factors helps position India vis-à-vis other developing economies that are already angling themselves as competitive alternatives to China for reshoring.
To read the entire book chapter, see pages 124-132. The chapter is part of a book published by Stanford University's Digital Technologies in Emerging Countries initiative and was edited by Marietje Schaake and Francis Fukuyama.