Array
(
    [content] => 
    [params] => Array
        (
            [0] => /forum/index.php?threads/how-china-could-swamp-india%E2%80%99s-chip-ambitions.19863/
        )

    [addOns] => Array
        (
            [DL6/MLTP] => 13
            [Hampel/TimeZoneDebug] => 1000070
            [SV/ChangePostDate] => 2010200
            [SemiWiki/Newsletter] => 1000010
            [SemiWiki/WPMenu] => 1000010
            [SemiWiki/XPressExtend] => 1000010
            [ThemeHouse/XLink] => 1000970
            [ThemeHouse/XPress] => 1010570
            [XF] => 2021370
            [XFI] => 1050270
        )

    [wordpress] => /var/www/html
)

How China Could Swamp India’s Chip Ambitions

Daniel Nenni

Admin
Staff member
How China Could Swamp India’s Chip Ambitions


When India’s largest conglomerate, Tata Group, broke ground on a $11 billion semiconductor factory this week, Prime Minister Narendra Modi said the country was poised to become a world leader in the sector.

He might be in for a rude awakening.

Tata isn’t going it alone, which raises the probability of success. It will partner with Taiwan’s Powerchip Semiconductor Manufacturing to make older-generation, mature-node chips, which have features measuring 28 nanometers or wider.

The problem is that China, whose ambitions in cutting-edge chips have been stymied by U.S. and European export controls, is pouring capital into legacy chip making on a breathtaking scale. That will compress margins for everyone—and make life especially difficult for new small-scale players.

China will add more chip-making capacity than the rest of the world combined in 2024, according to research consulting firm Gavekal Dragonomics: one million more wafers a month than in 2023—all mature nodes. Tata plans to make 50,000 wafers a month. Industry tracker TrendForce projects that China’s share of global mature-node production will grow from 31% in 2023 to 39% in 2027.

China’s aggressive expansion comes at a time when the market for legacy chips is already well supplied. The artificial-intelligence revolution is supercharging demand for advanced chips, but older ones are another matter. Utilization rates for producers of mature-node chips have fallen from nearly 100% in 2020 to 65-75% at present, according to Gavekal.


China’s government incentives—worth more than $150 billion—will help producers absorb losses. But India would struggle to shower such a capital-intensive infant industry with that kind of cash, especially given its already high government debt and enormous funding needs for infrastructure in general. Those infrastructure challenges represent a direct challenge to the chip-making process, too. Dependable water and power are essential—power outages not only disrupt operations but can damage equipment and wafers in production. The Tata project is already poised to absorb billions of dollars’ worth of state funding.

A lack of upstream industrial capacity is another hindrance. India’s chemical and gas producers, for example, already produce many chemicals required for semiconductor manufacturing. But India lacks the refining capacity to boost purity levels to semiconductor grade, according to an industry-funded report by the Washington, D.C.-based Information Technology and Innovation Foundation. Foreign sourcing can substantially raise costs, the ITIF says.

Protectionism—i.e., big tariffs on Chinese chips—might be one solution. But as Western nations have learned to their chagrin over the past two years with Russia, controlling trade flows of legacy chips is difficult. The incentives for corruption and gaming the system through third countries would be enormous. And even assuming a tariff system worked as intended, it would put the rest of India’s burgeoning electronics business at a serious disadvantage.

According to Ashok Chandak, president of the India Electronics & Semiconductor Association, Tata’s success will be critical to attracting other chip makers to India—and it will have to surmount big challenges so it becomes easier for those that follow. The ITIF says India is likely to commission two to three plants for mature-node chips within the next five years.

But China could pour cold water on those ambitions. Gaining a foothold in the less demanding area of chip packaging and testing—with the help of foreign firms like Micron—makes good sense for Indian companies. Spending scarce government funds babysitting cash-hungry infant chip-fabrication plants, rather than on infrastructure in general, could be a far riskier move.

 
These people have no experience assembly and manufacturing, seemingly at all.

~90% of CE manufacturing outside of China is "bring everything from China as a knockdown kit" and do the final assembly to skirt few prevents of tariffs.

Vietnam is by far ahead of India by 15 years, and almost none of largest manufacturers there buy a single locally made part.
 
These people have no experience assembly and manufacturing, seemingly at all.

~90% of CE manufacturing outside of China is "bring everything from China as a knockdown kit" and do the final assembly to skirt few prevents of tariffs.

Vietnam is by far ahead of India by 15 years, and almost none of largest manufacturers there buy a single locally made part.
I know. This may well not be a popular thing to say, but it's hard to think of anything India manufactures at scale today which is good enough/competitive enough to be exported globally. It seems unlikely that this is a coincidence. Some countries/cultures (Japan, South Korea, Taiwan, arguably Germany and the Netherlands amongst others) just seem to be highly successful in miniaturisation and precision manufacturing and others (most) don't seem to have whatever it is that it takes.

And it's OK for India not to do chip manufacturing if their competitive advantage is elsewhere (like chip design).
 
Some countries/cultures (Japan, South Korea, Taiwan, arguably Germany and the Netherlands amongst others) just seem to be highly successful in miniaturisation and precision manufacturing and others (most) don't seem to have whatever it is that it takes.
We’re also living in a world where many poorer countries can no longer look to manufacturing as the playbook for becoming wealthier. Not everyone can “afford” to manufacture in the face of China and other mercantile producers that use their immense scale and industrial policy, including massive subsidies, to drive an export-fueled economy.

Poor Nations Are Writing a New Handbook for Getting Rich​

Economies focused on exports have lifted millions out of poverty, but epochal changes in trade, supply chains and technology are making it a lot harder.


A lot has been written about the peril and possibilities of premature deindustrialization in much of the developing world.
 
I know. This may well not be a popular thing to say, but it's hard to think of anything India manufactures at scale today which is good enough/competitive enough to be exported globally. It seems unlikely that this is a coincidence. Some countries/cultures (Japan, South Korea, Taiwan, arguably Germany and the Netherlands amongst others) just seem to be highly successful in miniaturisation and precision manufacturing and others (most) don't seem to have whatever it is that it takes.

And it's OK for India not to do chip manufacturing if their competitive advantage is elsewhere (like chip design).
China does not manufacture much of its own either. The tragicomedy there is that much of "Made in China" assemblies and modules also come half finished, or already finished from Taiwan/Japan/Korea, but they stored and accounted for accounting purposes as assemblies in China.

Take smartphone camera modules for example. All materials come from abroad starting from the sensor, end ending with HDI PCB, and in China they are overmolded with epoxy into a single module.
 
Back
Top