Is India entering a semiconductor ‘red ocean’?
semiconductors and electronics in the one year since President Joe Biden signed off on a law that promotes the sector. In June, US-based Intel said it would invest $33 billion in Germany to expand in Europe. The number of semiconductor fabs processing 300-mm wafers globally is projected to jump from 138 in 2020 to 180 in 2023 and 233 in 2027.
In this ocean, India too wants a place. Global competition to build chip manufacturing capacity is driven by governments. For example, the US government's CHIPS Act of 2022 provides $52 billion in funding for semiconductor research and manufacturing.
Last month, the European Union approved its own Chips Act, a 43-billion-euro ($47.5 billion) plan to develop more fabs, aimed at capturing “at least" 20% of global market share by 2030. China is working on a $145-billion support package for its semiconductor industry, according to a Reuters report last December, and is facilitating easier access to subsidies, according to an FT report earlier this year. Similarly, South Korea, Japan and Taiwan offer tax credits, subsidize set-up costs and provide other incentives to promote semiconductor manufacturing.
It's driven by both economic reasons (like creation of jobs) and geopolitical reasons (ongoing rivalry between the US and China). These twin forces are driving investments, despite the drop in revenues and excess inventory. There’s been an imbalance in the global semiconductor industry since it entails huge upfront investments.
Many of these investments took place in South East Asian countries and China. For example, while the US accounts for 34% of global demand for semiconductors, it accounts for only 14% of supply, according to McKinsey. More than half of US-owned fab capacity is
. Read more on livemint.com
