While we are in another period of war threats due to the conflict between Russia and Ukraine, and a potential conflict brewing between China and Taiwan, another battle is taking place that has significant ramifications for our future. The global superpowers are in a war to gain digital supremacy in our world, at the helm of which sits semiconductors. These Semi-Conductors help manufacture Microprocessors that can perform a trillion Operations with few microseconds or even fewer Orders if that’s a supercomputer.
A few Months Back, the President of the United States, Joe Biden, announced a Ban on the export of all US semiconductor Technologies to China. The Ban is so strict that American citizens in important positions in these Chinese Semiconductor Companies are left with two options, either give up their citizenship or renounce their work in these MNCs. In the last 20 years, China has become one of the leading semiconductor Producers in the World. Talking to Stats, in 2001, 1% of the global Semiconductor manufacturing was done in China, and in 2030 the percentage is forecasted to be 25%. So, where does America come up in all this semiconductor business? Well, China depends heavily on American Technology for manufacturing such semiconductors. So, America is always apprehensive that the Chinese will use these semiconductors for manufacturing ultra-modern weapon systems which Artificial Intelligence would power. This would, in turn, endanger American Defense sovereignty, or global sovereignty, to be realistic.
Between this tussle over power, India can capitalize on this opportunity and take this manufacturing Market away from China. Companies like TATA and Vedanta have already announced that they will invest thousands of crores in establishing high-end semiconductor manufacturing facilities in India. But China won’t let things slip away that easily. So, who will win the semiconductor wars? Let’s Dig Deep into it.
In Scientific Terms, Semiconductors are those elements that lie between the conductor and an insulator in terms of Electrical Conductivity; speaking in crude layperson’s terms, These Semiconductors are used as Integrated Circuits or Microchips which are found in every electronic entity on this planet, smartphones, laptops, gaming consoles, or Supercomputers and defense Technologies, it’s like a brain to these entities. In the last 20 years, there has been an exponential increase in the pace at which these items have increased both qualitatively and quantitively. Now the catch in all these is that manufacturing semiconductor ICs is technologically one of the most advanced processes. It has various conundrums; firstly, it can take up to 4 months from designing to manufacturing assembly and finally to the end product. Plus, the sanitation constraints of such facilities add up to the complexities. So, these points sum up why only a few countries worldwide can make semiconductors on a large scale.
The interesting point is that there is one company responsible for more than 50 per cent of global semiconductor manufacturing; the company is a Taiwan-based MNC (Not China), Taiwan Semiconductor Manufacturing Company (TSMC); its significant Clients include Apple, Nvidia and Intel. Many Other Taiwanese Companies are also involved in this business, making Taiwan account for 63 per cent of the global manufacturing Market. Next in line are South Kore and China. With a drastic increase in Digitization all around the globe, the demand for semiconductors has also seen a sharp increasing trend. The question is who will manufacture the most semiconductors and advanced ones. The latest semiconductors have allowed for better computational power. So, the power of the device, in turn, also increases. For instance, the Apple A16 Bionic chip has 15 billion transistors which can perform 15.8 trillion operations per second. The chips are now becoming smaller with tremendous computational capabilities. So, what was considered a supercomputer in the 80s is a general electronic item today. The credit for the enormous advancements in the evolution of these semiconductors is attributable to the Americans. Intel, IBM and AMD have extensively researched and developed semiconductor technology. Consequently, America’s leading Designer in Micro Chips. Intel had already started Designing 14 mm Chips in 2014, while SMIC, China’s leading semiconductor manufacturer, could achieve this feat in 2019. The entire manufacturing part is not carried out in the USA. As discussed earlier, Taiwan is the leading semiconductor manufacturer in the world. This is because the Americans technically back it.
American Companies do all the R&D, and based on the inputs from America, Taiwan can be the manufacturing Giant. American Political interests also serve the purpose here because, in case of geopolitical tensions, Taiwan will also be on the American side. So long as the chips of major giants like Intel and Nvidia are manufactured in Taiwan, everything is good. But if the manufacturing space shifts to China, American geo-political interests would be perilous. And many companies are already worried about the tensions between China and Taiwan, as any military advancement between the two nations could have lasting adversities on American Interests. Chinese companies can use these technologies to make advance warfare. It is evident from the Israel Palestine Conflict that AI and Supercomputing can change the way we perceive modern Wars. On the 12th of October, US Security Chief Jake Sullivan Said that America would ban the export of Semiconductor Technologies to China, citing Security concerns. American Government and the established MNC fear the geopolitical Tensions between Taiwan and China. This could lead to a shift of semiconductor manufacturing to China in case of a Military Invasion.
American Intelligence agencies such as the CIA have officially cited to the government that China has been progressing towards manufacturing Stealth weapons and Hypersonic Missiles with the medley of supercomputing and artificial Intelligence. America has also noted that China has also been involved in a breach of sensitive military data; for instance, charges have been levelled that China stole the design of the American Fighter Jet F35 to create its alias, the Chinese J31. Breach of American Encrypted Government Data by the Chinese was also in the News Sometimes Back.
Although it might seem a child’s play that China got Hold of some software and just developed a colossal ultra-modern weapon system, things are not as naïve as they may seem. China, or any Country for that matter, would need a very advanced order of Microchips to get to this feat. Henceforth, the USA Government’s Decision to ban any exports of Technology to China. But the curious thing to notice is that instead of Mentioning the Military and its allies in Chine, America took to the Chinese Companies. If you have even the slightest idea about the Chinese political system, it is evident that the government has a firm hold on the Big Multinationals of China. According to Technology Expert Gregory Allen, China uses the Military Civil Fusion Strategy. This means that any Advanced AI Tech with these multinationals indirectly implies that it is already in the hands of the Chinese Military. President Obama laid an order in 2015 that prevented Intel from supplying its high-end Xeon Chips to a research Centre Under the Chinese Military. But the Chinese Military opted to get access to these chips via many mirror Companies. Thus, the US has wholly banned selling all Tech to China, including THE military, Chinese MNCs or American MNCs based in China. So, the question comes, what is the way forward to execute this decision? The first thing the USA did was that all direct sales of high-end chips were frozen. The counter question, a country of the economic mammoth of China can, of course, afford to build such high-end chips domestically. But high-end Designing software such as electronic design automation or the EDA, which designers use to get blueprints. This is the sole intellectual property of the Americans; there is hardly any semiconductor manufacturing facility that does not rely on American Tech and Equipment support on the Planet. Even getting hold of the US Equipment would not solve the problem because, for all the Maintenance and time to time, Updating will require on-site guidance from the Americans for Problem-solving and equipment repair. Again, one can counter that China is the manufacturing Capital of the World; why can’t it manufacture such equipment? The answer is that years of Research and Development have enabled Americans to be proficient in this Area of Tech. Starting from Scratch will take years of Intellectual work alone.
Every Cloud has a silver lining; this US-China Conflict is appearing, as of now, a significant opportunity for India. Let me Explain how. Young Liu, the chairman of Foxconn, the semiconductor giant which manufactures parts for China, has officially said that India has to play a significant role in the semiconductor Race. The below headline in Business standard two months back sums up the Statement’s intent.
During the COVID Pandemic disruptors, Companies and Investors have realized that dependence on Manufacturing in China could be similar to putting all eggs in one basket; Quiet is A risky purview instead of the current geopolitical scenario. Likewise, other companies, like Foxconn, are forecasting India as a substitute or to sound better the next semiconductor manufacturing Hub of the world. The government’s response to these propositions has been very encouraging. The Modi Government has announced investment Incentives of up to 76000 crores to all the companies who wish to set up their manufacturing facilities in India.
Many Companies have shown interest in expanding their businesses in India. Like the Singaporean Group, IGSS has signed an MOU with the Tamil Nadu Government. Israeli GROUP ISMC signed an MOU with the Karnataka Government. Both for setting up semiconductor manufacturing plants in India. Apart from these, the big news which made this topic appear before the masses was when the news came out that Foxconn and Vedanta said that they would make a factory costing 160000 Crores to manufacture semiconductors. Vedanta Chairman Anil Aggarwal said, and I quote- “India’s Silicon Valley is a Step Closer”. Historically, foreign companies have been difficult to acquire land in India. (Believe me, if you are from Bihar, you would not want to mess up with the locals on the land Issue). The Modi Government has made an effort to make this process easier. The Results of the legislature involvement are evident- Apple wants to shift its manufacturing from China to India. So, be it iPhone, Air Pods or beats headphones, they all will be manufactured in India. If we look at the automobile industry, Renault, Nissan and Hyundai have started manufacturing in India. Dell manufactures its laptops, and Samsung its refrigerators and TVs in India. We have come a long way into this state of affairs.
This is a very rosy picture that all this stuff will be manufactured in India (although the innovation will still be done in the USA). This, too, is a remarkable feat, bringing India to the top pedestal as a global leader in the manufacturing business, as we will be attending to Indian consumers’ demands and reporting Goods. Although, in all sanity, I’m afraid I have to disagree with this proposal. Let me explain in layperson terms; Any semiconductor manufacturing Facility needs controlled air, constant electricity supply and temperature to manufacture the micro-processing chips. In case of any interruption in electricity supply in such facilities, the company has to bear losses in the order of crores of Rupees. India’s Infrastructure is not well equipped to support such facilities; potholes, floods, and power cuts are still plaguing our country. So, even if India Takes up the semiconductor manufacturing business into its matrix, it won’t be possible to manufacture advanced microchips that are close to the obsolete ones like those found in our cars. So, we would be manufacturers but not global leaders. Chris Miller, the author of the book Chip war, argues that India should not manufacture semiconductor goods but invest in chip assembly and packaging costs. This is a labour-intensive job, and cheap labour is India’s forte.
So, it’s a win-win situation for India, as it would provide employment to its citizens and be a part of the global supply chain. Raghuram Rajan, the former Governor of the RBI, said that India should use its Software Tech skills to train the youth to design such Microprocessors. The semiconductor business is a high-risk, high-reward game; China jumped at the right opportunity to take a more significant chunk of the global market; it’s India’s Time to take some of it back with the right strategy.