Bangkok, Munich While Tesla is still fighting the high import duties in India, the local manufacturer Tata Motors already has the electric car business on the subcontinent firmly under control: With its Nexon EV model, the Mumbai-based group has a market share of more than 60 percent – and is creating hardly able to meet the growing demand. Mainly because of the lack of semiconductors, production cannot be ramped up quickly enough.
In view of the problem that car manufacturers are suffering from worldwide, the Tata Group no longer wants to rely on foreign suppliers: the head of the conglomerate, Natarajan Chandrasekaran, is planning his own chip factory. “We need the security of being able to have all the components for high-quality vehicles,” he said a few days ago when a new electric car model was presented.
The group, which is one of India’s largest companies with annual sales of more than 100 billion dollars, is not alone with the plans: a number of international manufacturers have considered India as a possible new semiconductor production location.
The companies follow the call of Prime Minister Narendra Modi, who wants to attract the chip industry with subsidies worth billions. So far, the country has played practically no role in chip production.
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The government can already point to initial successes: The chip consortium ISMC wants to invest three billion dollars in the construction of a chip factory in the southern state of Karnataka, as the local government announced at the beginning of May. The project is expected to create 1,500 jobs. ISMC is a joint venture between Abu Dhabi-based Next Orbit Ventures and Israeli contract manufacturer Tower Semiconductor, which is currently being acquired by Intel.
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The Indian conglomerate Vedanta has signed a letter of intent with the electronics group Foxconn for the joint production of semiconductors in India. Investments of up to 20 billion dollars are planned for the factory, which will also produce smartphone screens in addition to chips.
The company is hoping for generous support for the project: According to media reports, it is asking the local government to make a 400-hectare plot of land available free of charge and to grant discounts on electricity and water. A subsidy can also be expected from the central government: in December it announced a subsidy program worth ten billion dollars.
Governments around the world are currently urging chip companies to produce in their own country and thus avoid the supply bottlenecks that have been going on for almost two years. The number two in the chip industry, Intel, has already initiated billions in publicly funded investments in the EU and the USA. “All market participants are now concerned with more resilient supply chains,” says Peter Fintl, chip expert at the consulting firm Capgemini. “In other words, everyone tends to be confronted with rising costs. Therefore, the chances are greater than ever that the necessary measures will be implemented on a broad basis in the industry.”
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Semiconductor manufacturers are responding to the global chip shortage with massive investments in additional capacity. According to the industry association Semi, the producers want to invest 446 billion dollars in the construction of new plants and additional production lines. For comparison: This roughly corresponds to the entire turnover of the industry in 2020. The industry association refers to the volume of projects that start in the years 2021 to 2023.
Chip industry doubles sales
According to market researchers, sales in the industry will almost double by the end of the decade. The good prospects are reflected in the plans of the corporations. According to IC Insights, manufacturers will spend $190 billion on new plants and machines this year. That is a good third more than in 2021.
However, the companies do not have to shoulder the huge sums alone. In the US, President Joe Biden introduced legislation that would provide $52 billion in aid to the industry. The European Union (EU) has earmarked 43 billion euros in subsidies.
In Germany, the settlement of Intel in Magdeburg will probably be supported by the state with a good five billion euros. The federal government wants to use 14 billion euros to encourage further chip companies to invest in Europe and Germany, said Federal Minister of Economics Robert Habeck (Greens) last week.
“Semiconductors play a key role in the world,” said India’s Prime Minister Modi at an industry conference at the end of April. The government estimates that the chip market in India will grow to $63 billion by 2026, up from $15 billion in 2020. “We recognize that proper government support is critical for the industry to thrive.” said Modi. In addition to Vedanta and ISMC, the technology company IGSS from Singapore is currently trying to get government subsidies to start chip production in India.
So far, Malaysia has been the favourite
So far, Malaysia has been the preferred location for Western chip companies who want to produce cheaply in Asia, but deliberately avoid China. Because the US is beginning to restrict high-tech exports to the country. And in corporations there is a growing fear of being robbed of their own know-how in China.
The country wants to counter the chip shortage with its own semiconductor production. Foreign corporations are interested.
(Photo: Reuters)
India hopes to be able to achieve successes similar to those in the mobile phone industry: With the help of targeted subsidies, the government has managed to lure scores of manufacturers such as Samsung, Xiaomi and several Apple suppliers to the country. However, it is anything but certain that the model can be repeated in the chip industry. Rakesh Kumar, a professor in the Department of Electrical Engineering and Information Technology at the University of Illinois, is skeptical. “India lacks the specialized hardware ecosystems and skills that chip manufacturing needs,” he commented on the effort.
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