India cannot afford not to have one
India must develop a semiconductor manufacturing industry, an industry that manufactures the machines that are used to produce chips and an industry that designs logic chips, memory chips and systems on a chip (SoCs).
It must set up specialized programmes in its best engineering research labs to extend the frontiers of microprocessors, say, for example, to replace electrons with photons. This is necessary to avert supply bottlenecks of the kind slowing down car manufacturing, to prevent balance of payments stress of the kind induced by excessive imports (as in the case of oil), to nurture a growing, brain power-intensive industry that will absorb a growing army of educated manpower, and, most importantly, to reinforce India’s strategic autonomy.
Today, America and China are locked in a battle over microelectronics. The US wants to slow down, if not choke off, China’s access to advanced microelectronics that will help it achieve strategic parity with the world’s dominant superpower. China is developing its own semiconductor manufacturing capacity and the entire ecosystem needed for the purpose. As all businesses go digital and artificial intelligence, augmented reality and virtual reality blend smoothly into routine business, the demand for chips would go up, from 40 nm-thick grandfather chips to the 3-4 nm hipsters rocking the latest pieces of hardware. Intel these days is outside and way behind. Taiwan and South Korea lead the world in chip manufacturing. The US has near monopoly over machines that etch the tiny circuits on transistors. One British company, Arm, has a near-monopoly over chips on mobile hardware. The world, particularly an aspiring world power such as India, cannot afford to be dependent on fragile or temperamental supplies of chips.
Instead of wasting money on production-linked incentive schemes for indigenous production of mobile phone plastic bodies, steel and the like, India must devote a few hundred billion dollars to developing capability in semiconductor design and manufacturing.