View: Govt must address geographical diversification in the chip sector
Industrial policy is once again gaining favour worldwide. Whether through the US' Inflation Reduction Act 2022 or the Mario Draghi report for the EU, 'EU Competitiveness: Looking Ahead', the West — the traditional stronghold of market-driven economies — appears to have embraced state intervention. Even IMF, in its World Economic Outlook 2024, acknowledges that industrial policy can be used to address market failures. Against this backdrop, GoI efforts to establish a domestic semiconductor chip design and production ecosystem deserve closer scrutiny.
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The key question is whether India's near-total lack of an advanced chip design and production industry represents a market failure. Before delving into this issue, it's important to note that India has several factors working in its favour:
Global expertise
Many Indian professionals work in chip ecosystem hubs across the US, Europe and Taiwan, bringing expertise that could be leveraged.
Improved infra India's physical and digital infra is rapidly advancing, offering the potential to support world-class business operations.
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