What may seem like a small step for Vedanta is a giant step for India in the semiconductor space

As they say order breeds order, chaos breeds chaos. Walking on this path, if a country takes a constructive step, the chances of it breeding exponential results get higher. India’s semiconductor journey is set to witness similar upheaval. Vedanta just announced a giant development in India’s semiconductor space.

Vedanta invests in Gujarat

Anil Agarwal-led Vedanta is one of the few industry leaders keen on changing the face of India’s semiconductor industry. The joint venture between Vedanta and Foxconn, a Taiwanese company more known for its involvement with Apple i-Phones, has signed memorandums of understanding (MoUs) with the Gujarat government. The MoU is regarding setting up of semiconductor and display FAB manufacturing units in the western state of India.

Vedanta chairman Anil Agarwal said, “We are delighted to announce that Gujarat will be the location for our display and semiconductor fab ventures. The state is well known globally for being a manufacturing hub and I hope that India’s upcoming, cutting-edge electronics ecosystem will thrive, with every state benefitting to develop their electronic manufacturing hubs. We are privileged to take one step further in supporting Prime Minister Modi’s vision of aatm nirbhar Bharat in this strategic sector.”

Vedanta – The enormity of the semiconductor plant

Vedanta has invested Rs 1.54 lakh crore for establishing the Semiconductor Units. According to reports available in the public domain, the joint venture had sought 1,000 acres of land on lease for 99 years. The venture also asked for some concessions with respect to water and electricity charges.

Semiconductor manufacturing is a water guzzling industry. In order to ensure that political changes do not affect the development of the nation, they asked the government to fix these rates for 2 decades. According to an analysis by Anil Agarwal himself, the Vedanta and Foxconn Semiconductor project will generate 1 lakh skilled jobs and simultaneously reduce our import dependence on electronic goods.

In his tweet, Vedanta Chairman also thanked Gujarat Government and Ashwini Vaishnav, Union Minister for Electronics and Information Technology for active cooperation.

Extremely Hard won battle

The grateful tweet is in fact indicative of the pain which Vedanta chairman endured to kick off the project. Neighbouring Maharashtra was also one of the states approached by the joint venture. In February this year, The Economic Times had reported that Maharashtra had been finalised for the investment as well.

Even by the end of July, reports of Vedanta choosing Pune electronic cluster as the final location of investment had emerged. However, the political instability seems to have forced the Joint Venture to abandon its plan in Maharashtra.

Gujarat model did the job

The primary reason behind political instability impacting semiconductor growth is that the investment requires a long time to bear fruit. This is one of the reasons why despite America offering lucrative deals to semiconductor manufacturers, companies are only partially investing in America. In fact, America’s own companies are looking to invest in India. What Joe Biden can’t provide to companies is being provided by Bhupendrabhai Patel in Gujarat.

The state is politically stable and the chances of return of BJP in upcoming assembly election are higher. The law and order is fantastic in the state. Companies get a lot of incentives for investing in Gujarat. People look forward to changes and continuously upgrade themselves according to the change.

The need for Aatmanirbharta

Except for political stability, all other controllable factors making the state an investment heaven are present in other states as well. Despite that the previous governments just did not see semiconductors as a viable job generator and GDP enhancer. Earlier India was largely dependent on imports of semiconductors chips for driving smartphones, radios, TVs, laptops, computers or even advanced medical equipment.

The imports mainly came from countries like the USA, Taiwan, South Korea, Japan and the Netherlands. Among these suppliers, the USA and China were at the trade war, mainly around originality of the manufactured chip produced in China. The trade war hampered supply in the pre-pandemic era. Then came the pandemic to give the final jolt. For a brief period, it felt as if the supply-chain crisis would crush technological growth. India was also hampered by it. It quickly decided to go Aatmanirbhar.

Development in India’s semiconductor story

Up until now, incentives worth Rs 2,30,000 crores have been provided to the sector. The biggest of them is the Rs 76,000 crore worth PLI scheme. As soon as the government announced the PLI scheme for semiconductors, it received offers worth Rs 1.53 lakh crores to set up semiconductor and display plants. 3 joint ventures were chosen to drive the semiconductor journey of India.

TATA Motors, the largest electric vehicle producer in India joined hands with Renesas Electronics, a Japanese chip maker, to design and develop semiconductor solutions. The second company to chip in was the aforementioned joint venture between Vedanta and Foxconn. Even foreign firms are now investing in India’s semiconductor potential. Dubai-based Next Orbit and Israeli tech firm Tower Semiconductor have formed a consortium named ISMC. It has already signed a deal with the Karnataka government to set up a plant in Mysuru.

Historical reasons behind India’s late start

In spite of these deals grabbing headlines, there is still a long way to go for India’s semiconductor journey. The primary reason behind this is that India was very, very, very slow to begin with. Part of the reason goes to the legacy of following socialist principles for more than 4 decades after 1947, while the other part is shared by the efforts to shed the legacy of Inspector Raj. When Taiwan, a small nation, was focusing on developing semiconductors, we were busy experimenting with Troglodyte Era telephone networks.

When the Internet finally started to expand in India, the policy paralysis of UPA2 did not allow our IT sector to go beyond certain clusters such as Bangalore and Hyderabad. Later when the Modi government came to the fore, his pro-development record in Gujarat infused some sort of confidence among the industrialists. But the problem was deeper and they needed further policy push.

Our needs and Taiwan’s hegemony

The extent of the poor state of India in the Global semiconductor market can be gauged from the fact that even to this day, India largely relies on imports of semiconductors. But, our needs are going to exacerbate in the upcoming years. EV and 5G push are two of the big revolutions requiring semiconductors. It is estimated that by 2026, the semiconductor industry of India would have grown up to $64 billion.

Clearly the need is immense. How are we going to fulfil them? Here is a part of the answer. Nearly 75 per cent of the global chip market is dominated by Taiwan and China. India’s dependence on Taiwan in Mobile phones is worse. 3 out of 4 chips available in Indian owned mobile phones are supplied by Taiwan. Given the fact that semiconductors are going to be more advanced in future, this is a dangerous trend. Currently, 92 per cent of most advanced semiconductors in the world are manufactured by Taiwan.

We are exposed to geopolitical uncertainty

Yes, Taiwan is our friend but China is not. There is a rivalry between China and the USA in establishing their control over Taiwan. Taiwan’s domination in Chips is one of the main reasons behind it. China wants to take over full control of Taiwanese political system by the end of 2030. In that scenario, expecting the Chinese to not choke our electronic industry is like living in a fool’s paradise.

This is the main reason why Aatmanirbharta in silicon manufacturing gets crucial. It sounds unbelievable but Silicon chips are going to define civilisational journeys in the future. The countries possessing advanced chips will make more efficient weapons and henceforth will have more command on land, sea and water, inside as well as outside its territory.

Miles to go

Moreover, in military circles, robotic soldiers are the new talk of the town. According to an estimate, 25 per cent of the British army will consist of robotic soldiers in an 8 year time frame, which is by the end of 2030. In the wake of the American Armed Forces facing manpower shortage, it won’t be a surprise if they start to manufacture robotic soldiers as well. They are now teaching their robots human values such as team play and other virtues.

There is no doubt that semiconductors are going to define the future course of humanity. Being a civilisational state, so old that anthropologists are having hard time comprehending the date of origin, Bharatvasrsh can’t afford to leave behind. Vedanta’s initiative is an excellent step in this direction, but there are miles to go before we even pause for rest.

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