English Article

Placing Semicon Diplomacy at the Heart of India’s Foreign Policy

Doing so would make sense, both strategically and economically.

Semiconductor chips are the lifeblood of the modern information age. They enable electronic products to compute and control actions that simplify our lives. The manufacturing cycle of a semiconductor chip from sand to a finished product, sees it change hands approximately 70 times across international borders. It is not difficult to imagine that the chip in the device closest to you was made by a Japanese engineer working on Dutch machinery in an American foundry in Taiwan to produce wafers which were shipped to Malaysia for packaging before being sent to India as a finished product . There cannot be a better example of peacetime global cooperation than the resolve involved in making the meticulous chip. These semiconductor chips are the drivers for ICT development and one of the key reasons for the current flattening of the world. The semiconductor is the cornerstone of all electronic products. However, the semiconductor manufacturing capacities are concentrated in a few geographies. Nearly all leading edge (sub 10nm) semiconductor manufacturing capacity is limited to Taiwan and South Korea, with nearly 92 per cent located in the former. Further, 75 per cent of the semiconductor manufacturing capacity is concentrated in East Asia and China. The concentration of capacities poses many challenges, leading several countries to be vulnerable to a few. The current decade presents a unique opportunity to India. Companies are looking to diversify their supply chain and for alternatives to their bases in China. The chip shortages due to covid-19 have hit automakers with a revenue loss of $110 bn in 2021. The Russia-Ukraine conflict and its implications for raw material supplies for the semiconductor value chain has also poised chipmakers to invest in strengthening the semicon supply chain. India must seize this opportunity and become an attractive alternative destination for semiconductor manufacturing. The way ahead is conceptualising a semicon diplomacy action plan.