Chip Goals: Why Tech Transfers Hold the Key

Generous government support is crucial but not enough for countries to move up the semiconductor value chain

- howindialives.com

When the government announced the production-linked incentive (PLI) scheme for semiconductors in 2021, with an outlay of around $10 billion, it was perhaps fitting that it was the largest of all schemes to promote hi-tech manufacturing in India announced by the government. The world over, governments love semiconductors, as a target for industrial policy.

Semiconductors lie at the core of modern life. Factories to make them can be extremely expensive—to the order of $20 billion or so for a single factory. The ultimate prize can be significant—building a scientific and technical ecosystem like Silicon Valley. "The success of Silicon Valley is one that many other countries would like to replicate," Chad Bown and Dan Wang point out in a 2024 article about the semiconductor industry in the Journal of Economic Perspectives. "They too want a self-sustaining ecosystem for generating, producing, and then regenerating cutting-edge technologies."

Governments have a critical role to play in this construct, and the Indian government has been trying to progressively position itself for that.

As a recent paper by Pinelopi K. Goldberg and others, about industrial policy in the semiconductor industry, points out: "...government support has been critical for the semiconductor industry's growth, particularly during its initial development phase. This support is evident across all major segments of the value chain, benefiting established leaders at the technology frontier, such as Korea and Taiwan, countries seeking to advance their industry, such as China and the US, and countries attempting to enter the market, such as India."

They add: "Since 2020, there has been a significant increase in government intervention, with China, the US, Japan, Korea, and India notably ramping up financial support for the industry."

Will those efforts bear fruit and see India rise up the semiconductor value chain?

Government Support