On September 26, Beijing time, it was reported that India, as the world’s fifth largest economy, hoped to become a chip power and get a piece of the global hot track. Like the United States, India has been seeking to establish a strategic alliance around semiconductors, and has also taken action to introduce chip manufacturing into the country and set incentives for the industry. However, there are neither large chip design companies nor industry-leading chip manufacturing companies. Why does India dare to have such ambitions?

If there is no leading local semiconductor company, seek the participation of foreign technology giants – this is one of the important strategies of the Indian government to develop the chip industry. Last December, India gave a green light to the US $10 billion incentive plan for the semiconductor industry to attract semiconductor and display manufacturers, aiming to make India a key player in the global supply chain. Recently, India has also committed to expanding incentives and plans to provide financial support up to 50% of the project cost to qualified manufacturers.

The huge capital investment, the time required to set up the factory, the uncertainty of business, tax and trade environment are the main obstacles to enter India to invest and build factories.

“Because of these problems, previous attempts in India have failed.” Some analysts said.

However, there are signs that things are changing.

The partner of Counterpoint Research, a technology consulting company, said that it is not impossible for India to become a global chip manufacturing center.

“As the world’s second largest population economy, India has a huge domestic consumer market in semiconductor”.

“In addition, India has a large number of English speaking engineering talents and (cheap) labor, making it cost-effective,” he added.

This kind of well-educated and cheap labor can help India stand out in the specific field of semiconductor supply chain – chip design, because this field requires a large number of skilled workers. “Semiconductor design requires a large number of skilled engineers, which is the advantage of India”.

In addition, an analyst said that eight of the world’s largest semiconductor companies have set up design institutes in India. Although it is still in its early stage, India is making efforts to develop the technology construction of domestic companies.

“What we are observing now is that the Indian government is trying to take the next step. However, although it has the design center of a multinational company, India does not have many intellectual property rights of its own. So the next step should be to establish an ecosystem to let Indian companies have some Indian IP (intellectual property rights).”

The Minister of IT and Electronics of India once said that there are nearly 55000 semiconductor design engineers working for different companies in India. As part of the semiconductor program, India has launched a design oriented program, “In the next five to six years, we will become the world’s great semiconductor design capital”.

Although analysts believe that India has certain advantages in developing chip design, the chip manufacturing industry is beset with difficulties.

The global semiconductor supply chain is dominated by manufacturers in East Asia, mainly from mainland China, Taiwan and South Korea, while India does not have any factories manufacturing chips.

India itself is well aware that the situation is not conducive to its ambition of developing semiconductors. The government has begun to make good to foreign chip manufacturers and announced a series of cooperation plans one after another. ISMC Digital, a consortium composed of investors, is planning to build a US $3 billion manufacturing plant in India. The Israeli company Tower Semiconductor will become the technical partner of the project. At the same time, Foxconn, which assembles iPhones for Apple, and Vedanta, an Indian mining company, have reached a cooperation and announced that they will build a chip manufacturing plant worth 19.5 billion dollars in India.

The above factory will become one of the first semiconductor manufacturers in India. India also hopes to attract giants such as TSMC and Intel to invest in India.

However, even if ISMC Digital is put into production in India, its chips belong to low-end chips. The advanced process chips of TSMC and other companies are different. When national competition intensifies, this may limit India’s potential to become a global chip manufacturing center.

“Many countries are attracting chip giants with generous incentive plans, so India may have to lower its expectations,” analysts added.