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Only if India proves its worth as a global hub candidate for semiconductor companies…

The COVID 19 pandemic, amongst many other things, made us realise our dependency on electronic gadgets and the world of internet. Even though we’ve made our lives revolving around electronic gadgets a long time ago, the pandemic just only aided the realisation further. But what if I tell you, it can all be taken away from you? Yes, you read that right. It is because the world is currently facing a huge shortage of electronic chips. This shortage of computer chips has been unprecedented and let me tell you, it is not a piece of good news for us because these little chips run everything. Starting from consumer electronics to car manufacturers, every industry and individual would witness an impact of this shortage. However, before you lose hope, we’ve come bearing solutions and there is more to this than what meets the eye.

This unprecedented shortage of computer chips can leave its mark on the world in two ways- firstly, by driving up costs significantly and secondly by forcing companies to cut back on the production of their goods that require these chips. Unsurprisingly, none of these are good news for the world and we can see why, after all, our lives revolve around gadgets and ultimately, these little chips. And as we depend more on our phones and laptops, and as more people move towards the internet- we will need more and more electronic chips. The shortage has come up because of the fact that right now, production is limited to a few key players and suffice it to say, the demand is much more than the supply right now. So, while chipmakers are planning to spend extensively on expanding their output, there’s one simple proposal for them- Make in India. Wait there’s more. Make in India and get more than 1 billion dollars in cash incentives, says the government of the country. “The government will give cash incentives of more than $1 billion to each company which will set up chip fabrication units,” a senior government official told Reuters. With mandates in the private market to buy locally made computer chips, the government of the country aims at building production of computer chips in the country and as a result, has resorted to incentivize the local producers, as many of their make in India campaigns. This one can be a big game changer for the Indian subcontinent because if the government proves to be able to gain manufacturer trust, India can emerge as an attractive global hub for electronic chips, aiming to meet both domestic and international demand which are incessantly rising in the light of this global shortage.

“We’re assuring them that the government will be a buyer and there will also be mandates in the private market for companies to buy locally made chips,” said the senior government official. This comes in as an attempt by the government to ensure that the manufacturers can rely on buyer line-up and enough demand for the product. A more feasible way to ensure demand and private market assurances to the manufacturers is through the government’s decision to provide the suppliers who makes chips in India the tag on being “trusted sources”. Companies can also be directed to buy and use electronic chips made in India.  The said chips are believed to be in use for a very wide range of products, starting from CCTV cameras to 5G equipment and everything in between.

However, if the government wants to achieve the goal of making India the global hub for computer chips, it needs to do a lot more. It is because even though the government initiatives are appreciable, they’re not unique and certainly, not enough. It is because the governments around the world are barfing in the race with subsidies and incentive plans for chipmakers in their country, so the competition is not going to be easy.

Take, for example, the United States of America (USA) where President Joe Biden aims at boosting the US computer chip industry by 50 billion as a part of his two trillion-dollar infrastructure plan. The said target is planned to be achieved by a tax hike on foreign earnings of American companies, with the amount to be spent on two areas, namely product incentives, and research and design. The American president wants to create a national semiconductor technology centre. For research into semiconductors. Biden has been talking about dealing with the current shortage since the early days of his administration. So, with America aggressively getting on the field of computer chips, claiming its position as the global hub can be a difficult task for India. America is also discussing an agreement with Japan for critical chip components.

Wait, did we miss China?

How can we leave the largest producer of semiconductors behind? In 2020, more than 35 billion dollars flowed into semiconductors firms operational in Chinese territory. That is an increase of a whopping 407 per cent from 2019. Until recently, China depended on the US For semiconductors. Every year, it imported more than 300 billion dollars worth of chips from American suppliers. It was good business for American companies too, with them receiving about 25 percent of their sales orders from Chinese markets. But in December last year, the Trump administration banned technology exports to Chinese companies. Joe Biden is yet to lift these restrictions. So, Beijing has now embarked on a mission of self-sufficiency in semiconductors. Well, looks like it going well for them.

Again, the Indian nation at this point has a big opportunity laying in front of it to transform the country into a bigger one by dealing with problems such as rising demand and shortage of supply. If India proves its worth as a candidate for semiconductor companies, it can readily emerge as a key global player in the computer chip industry.

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