China vs USA
Introduction
China’s shipping sector was already in deep trouble with the recent US export controls until then when it is bound to put more stress on Global supply chains as the U.S. Commerce Department has imposed bans on the export of semiconductor technology to China aimed at kneecapping advancements in China’s microchip industry. US president Joe Biden- imposed bans, posing serious security threats, citing the probability of China using these semiconductor chips to build ultra-modern weapon systems that are powered by Artificial Intelligence which China can use against the USA itself.
The USA has also passed a 52-billion- dollar bill which allows domestic manufacturers to promote themselves with technological advancement in the field of chip manufacturing to cope with the increased load. As per Craig Beretta (ex-CEO of Intel), semiconductor microprocessors are the most complicated inventions by humans to date. Fossil fuels were the backbone of the first industrial revolution, and semiconductors will be the backbone of the fourth one. The ban is so strict that American employees holding prominent positions in Semiconductor companies based out of China has only two options left with them that are either to: continue working for the Chinese companies or to give up their American citizenship. Apple has put a hold on plans to use memory chips from China’s YMTC soon after the decision came out. The share prices of Chinese Tech Giants and Chip Companies with facilities plunged in response to the curbs imposed. In the past 20 years, China has become a leading semiconductor producer. In 2000, only 1% of the world’s semiconductor was produced in China, but by 2030 it is expected that this number will reach 25%. Even though after holding such a huge share in the chip industry, still, China is highly dependent on American technology for producing semiconductors. Now, experts cite this as a golden opportunity for India to snatch this semiconductor market share from China as now the tech giants and manufacturing companies will look towards India for setting up their facilities. Big companies such as Vedanta and Tata have already spoken about investing crores of rupees in India for doing the semiconductor business.
What is Semiconductor?
A semiconductor is a material that lies between insulators and conductors in terms of its conductivity. Insulators such as Glass can’t conduct electricity at all and on the other hand material such as copper and aluminium is conductors that can conduct electricity very well. The thin material of semiconductors such as Silicon, Germanium or Gallium Arsenide is used to make integrated circuits. These integrated circuits are known as microchips or microprocessors. Production of these semiconductor chips at a massive scale is a very complex task and requires high precision as well as quality standards, thus only a few countries in the world are capable of producing them. More than half of the semiconductors in the world are produced by a single company Taiwan Semiconductor Manufacturing Company (TSMC) itself. This company produces chips for companies such as Apple, Intel, Nvidia etc. Three major processes are involved in the chip-making process: Designing, Manufacturing and Assembly. The companies which do all the processes involved in chip making by themselves are known as IDM (Integrated Device Manufacturers). There are several other companies in Taiwan which produce these chips. Taiwan is the world’s largest semiconductor manufacturing hub with a 63% share followed by South Korea with a 17% share, then the USA with a 7% share and finally China with a 7% share. Advancements in these chips increase the computational power of our device. For Ex: Apple’s A16 bionic chip comprises 15 billion transistors capable of performing 15.8 trillion operations per second. American companies such as AMD, Intel, and IBM are responsible for bringing the revolution in these chips because of which America is also known as Innovative Hub in Semiconductor Technology. The USA is ahead of the entire world in designing these chips. Taiwan by itself was not enough capable of becoming a global leader in manufacturing. As it is backed by the USA, it can grow. Apart from that, the USA is well aware of the fact that in terms of geopolitics Taiwan will always support the USA and that’s the reason why US companies have no problem sharing their designs with Taiwanese companies and getting their chips produced there. It would have been a serious concern for these companies if these chips would have been produced in China as then these USA-based companies would have to be dependent on China for everything. Due to this same reason only, many companies are tense because of China and Taiwan's geopolitical issues.
Main Issue
On 12th October 2022 US security chief Jake Sullivan said that the USA will choke off China’s access to critical semiconductors technology. Many USA-based intelligence agencies have informed the government about, China with the help of supercomputing and AI is developing advanced hypersonic missiles and stealth weapon systems. Allegations have also been placed that China tried to steal their technology by hacking their computer. They tried to steal the design of the USA's ultra-modern fighter jet F-35 and were successful in that due to which China developed their very own J-31 jet. Apart from that, several allegations have also been placed on China for attempting to steal confidential information from the US government's database. In response to such attempts, the USA has decided that Chinese companies to be banned to get semiconductor technology. Barack Obama also stopped Intel in 2015 to stop selling their high-end chip Xeon to military centers in China. To tackle this, several fake companies made a purchase from them based out of China and finally the chip reached China's military bases. To stop this further, a permanent ban has been imposed on the sale of any of the chips to China whether it be any company or any organization. This means, that now even Elon Musk who is an American can’t also buy these chips for Tesla as they operate in China as well. Now, China can also develop these super smart and advanced chips by itself, but for that, they will need high-end software that uses the microchip designers known as EDA (Electronic Design Automation). The main problem is that knowledge of this software is only in America. Thus, they decided to stop selling chips, even the designing software, and also any manufacturing equipment to China. China can still develop these chips but would need years of research to reach the current level of advancement in the field. Young Liu the biggest semiconductor manufacturer in the world, Chairman of Foxconn (a Company that also manufactures products of Apple) said that India will play a vital role in the future of semiconductors. Especially after COVID-19, many countries want to move out of China for manufacturing purposes because of the losses they had to bear due to the lockdown. Foxconn has already set up its plant in India in response to the same.
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Steps Taken by India
Narendra Modi has announced that up to 76000 crores of advantages will be given to those manufacturing companies that will produce semiconductors in India. Under this scheme, India is all set to set up more than 20 semiconductor components manufacturing, design and display fab units (Companies involved only in designing the chip are known as Fabless Firms). Many companies want to come to India such as Singaporean group IGSS Ventures who have also signed MoU with the Tamil Nadu State Government as the state prepares to set up a 300-acre semiconductor park. Israel’s Tower Semiconductor Next Orbit ventures have signed alter of intent with the state of Karnataka government. A big announcement has been made that Vedanta and Foxconn will come together to invest rupees 160000 crores to set up a manufacturing company for semiconductors in India. Anil Agrawal, chairman of Vedanta group has said that with this India’s own Silicon Valley is a step closer. Earlier getting land for setting up manufacturing units for foreign companies was quite tough which has now been made easier by the steps taken by the Indian Government. Apple has also decided to move their manufacturing unit from China to India. Companies like Renault, Hyundai and Nissan are also manufacturing their cars in India. Dell is making their laptops and Samsung makes its TVs, Refrigerators and Washing Machines in India only. Wistron has also set up its plant in India. Now, the main thing to heed attention to is that only manufacturing plants are being set up in India. Innovation will still happen in the USA itself. India must look forward towards training students and professionals upon working on research and developing their semiconductor technologies.
Challenges in Setting Up a Manufacturing Plant in India
Challenges in Setting Up a Manufacturing Plant in India Production of semiconductors requires a constant electricity supply, temperature control, availability of a large amount of fresh water and controlled air quality. The factory should be kept strictly clean and there should not be any dust particles as even a slight exposure to dust will damage the chip. A few minutes of cut-off electricity will make the company face losses of lakhs and crores as the chips produced might get defective. People are afraid that India’s infrastructure is not enough boosted up to take up this load and India won’t be able to produce very advanced chips but rather only the basic ones. Many experts also suggest that instead of focusing on setting up a manufacturing plant, due to the availability of cheap labour in India we should focus more on labour-centric tasks such as chip assembly and package facility. Giving labour incentives job will help India to become a part of the global supply chain apart from giving jobs to people.
The future of India in the field seems quite interesting. It all depends on how the youth and government take proper steps to grab this opportunity. If proper things are done, it's not a big thing to say, that India will become the Semiconductor leader by the end of the 21st century.
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