Semiconductors: Indian govt needs to act faster on setting up fabs

The chip shortage and the geopolitical crisis over the past 20 months have made nations, who were earlier relying on other countries for their semiconductor needs, realise the importance of manufacturing chips domestically. The EU and the US have already come up with regulations to set up chip manufacturing facilities, and both have already bagged some big investments. Taiwan’s TSMC had also started building a fab in Japan in 2021, and recently Lithuania, too, bagged a $10-million commitment from Taiwan. Meanwhile India had rolled out a $10-billion incentive scheme in January 2022 to attract chips and display manufacturing firms in the country. But the government is still evaluating the five proposals it had received in the first round of applications (February 2022).

As firms in countries like the US, the EU and Japan finalise the locations to set up new facilities, the urgency of setting up a similar facility in India will dissipate substantially. “The delay in approvals may cause some of the current applicants to give up and may also deter some who may have been considering applying,” says independent semiconductor analyst Arun Mampazhy. But this may not be a completely lost cause if, in the next few weeks, the Ministry of Electronics and IT (MeitY) can announce its decision and take the process forward.

As the government decides on the applications, the relevance of setting up a fab in the shortest possible time is waning quickly. If history is any lesson, the country should remember that it lost Intel’s multi-billion-dollar project in 2005 due to a delay in firming up its semiconductor policy.

@nidhisingal