By Anand Parthasarathy

Early January was an upbeat time for India’s aspirations to be a  semiconductor manufacturing powerhouse. The Vibrant Gujarat global summit saw two candidates – the Tata Group and South Korea-based Simmtech – announce plans to set up semicon fabs and assembly units in the state. 
This came just four months after US chipmaker Micron broke ground in the same state for a  chip assembly, testing and packaging plant.

India’s Information Technology Minister Ashwini Vaishnaw suggested at the same summit that the first Made-in-India chip would come before the end of this year.

The government has launched a Semicon India programme with a budget of Rs 76,000 crores –around USD 10 billion, to encourage chipmakers to set up fabs and assemblies in India, offering to support 50% of the project cost.

The euphoria lasted till last week  till    a Wall Street Journal report ,widely circulated by   Reuters,   suggested that the US government was about to announce – likely during the State of the Union address on March 7 – billions of dollars in subsidies to encourage leading semiconductor companies to build their new factories in US.  The report named early beneficiaries – Intel, the Taiwan Semiconductor Manufacturing Company and possibly Samsung.

The US Commerce Secretary Gina Raimondo has already  committed to making a dozen funding announcements this year – reigniting the CHIPS legislation of 2022 which  has $ 52.7 billion in its kitty.

There are just so many companies with the competency to manufacture semiconductor devices. So it boils down to a game of numbers: which country provides the best subsidies.  And India perhaps realises it has to compete on its value proposition to potential candidates.   It is able to offer both central and state carrots.  Micron for example says it will receive “50% fiscal support for the total project cost from the Indian central government and incentives representing 20% of the total project cost from the state of Gujarat. The combined investment by Micron and the two government…will be up to $2.75 billion.”

But that is equally true of the US where states vie to attract industry with their own incentives, along with federal subsidies.

 The silent spectator in all this is China who is the unstated target as both India and the US work to reduce dependence on imports from China.  In a snide editorial, the Chinese government voice, Global Times commented: “Subsidies can't save US manufacturing. On the contrary, non-market measures are likely to create overcapacity. Instead of subsidies, what American manufacturing companies need is a strong market.”

In other words, China asks:  where will you sell all the chips you hope to make in the US? We are the bigger market.

That logic might possibly help India, because this is the world’s last remaining big market for mobile phones – the largest users of semiconductor processor and memory.

Meanwhile, a degree of coopetition – cooperation coexisting with competition -- characterises Indo-American outreaches. In June last year during Prime Minister Modi’s visit to the US, the two nations signed an MOU to cooperate on semiconductor supply chain and innovation.

This cooperation exists at the academic and nongovernmental level too:  the Fabless Committee of India’s Semiconductor Mission is chaired by   Indian-American Dr Arogyaswami Paulraj, Professor Emeritus at Stanford University and the inventor of the key MIMO (Multiple In-Multiple Out) technology that underpins   all cellular and WiFI devices and networks. His committee whets the proposals from startups who apply for government support for semicon-related innovation.

Meanwhile, while wooing global chip makers, the two biggest potential suitors  may be asking this week: Mirror, mirror on the wall, whose is the biggest incentive of them all?
This article has appeared in New IndiaAbroad