China Out, India In! Find out how India is dominating the chip-making industry.
Have you ever stopped to think about where your electronic devices come from? Chances are, many of them were made in Shenzhen, China – the city that has earned the title of ‘world’s factory’. According to the Times of India, this famous city produced a staggering 90% of the world’s electronics, from smartphones to televisions, till 2019. But how did Shenzhen become such an important powerhouse in the manufacturing industry? Well, that’s the magic of economies of scale which China has achieved over time.
But then the pandemic struck, and it did dampen the growth momentum of China. At the same time, the world faced a semiconductor crisis.
With an eye toward a triumphant return, China is now striving to establish itself as the world’s next semiconductor powerhouse and wishes to manufacture semiconductor chips in China. If it succeeds, China’s already impressive growth potential will skyrocket.
But how can other potential players let China have the entire cake? Hence, the US is trying to choke supply to Chinese chip makers.
What’s Happening?
It’s been almost a year since the story of the chip war first broke, with the United States urging the Netherlands to restrict sales of chip-making gear to China. And it seems that things have only escalated since then.
In October 2022, the US unveiled its most authoritarian export controls explicitly designed to prevent China from acquiring advanced semiconductors or progressing in its domestic manufacturing capabilities. This move was seen as a significant blow to China’s ambitions and an aggressive stance by the United States.
But now, the tide seems to be turning. The US has received support from key European players, giving them a major advantage in the ongoing chip war.
This latest development is a massive win for the US. But how?
How the US and Europe Together Choke Chip Supply to China?
Europe’s relationship with the United States will majorly impact the global supply chain. Why? Because Europe holds a critical advantage in advanced semiconductor manufacturing, it all comes down to one company – ASML Holdings.
ASML has a global monopoly in advanced chip-making equipment manufacturing, including their flagship EUV Lithography Tool. This amazing tool is the artist’s brush of the semiconductor industry, used to print patterns of tiny switches or transistors on silicon chips. It’s an essential piece of equipment that no semiconductor manufacturer can work without, including even the biggest names in the smartphone industry, like Apple.
This gives Europe massive leverage in the ongoing chip war. If any country wants to manufacture semiconductor chips, they can’t do it without buying machines from ASML Holdings.
With Europe’s close ties with the United States, this means that America is in a prime position to block China’s progress in the semiconductor industry and start a new era of global technological dominance.
As China is Out of the Game. Is India in?
With China’s global dominance in the semiconductor industry under threat, chipmakers are looking for new alternatives. And it seems that India is quickly emerging as a promising player in this game.
The United States and India have already reached an initial pact on increasing private-sector cooperation in the area of semiconductors, with both governments offering incentives to chip makers to make a new semiconductor supply chain and reduce dependency on China and Taiwan.
The semiconductor industry is already showing interest in India. Companies like Foxconn and Vedanta are setting up their semiconductor fabricating plant in India, which is scheduled to become operational by 2024. Meanwhile, other chip giants like Taiwan Semiconductor Manufacturing Company Limited (TSMC), Powerchip Semiconductor Manufacturing Corp (PSMC), Renesas Electronics, Intel and Advanced Micro Devices (AMD) are also exploring ways to set up factories in India.
With China out of the game, the opportunities for India are growing. So, it’s an exciting time for the semiconductor industry and India in particular.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
