Amidst China facing intensified restrictions, is India’s expanding semiconductor industry changing global trends in the chip sector? However, India has a long way to go as China stockpiles equipment to fulfil its tech ambitions, says report.
Recent events in the Indian semiconductor industry highlight a potential shift in global tech dominance, according to a report by the Economic Times. As China strives to protect its semiconductor industry, is India progressing stably towards building its own chip ecosystem?
Last week was memorable for the domestic chip sector. Prime Minister Modi and Singapore’s Prime Minister Wong signed an MoU for a semiconductor partnership. Simultaneously, Maharashtra approved a $10 billion investment in a semiconductor fab by Tower Semiconductor and Adani Group. Earlier, the Union Cabinet greenlit a ₹33.07 billion OSAT facility by Kaynes Semicon in Sanand, Gujarat.
In contrast, China, which has developed a substantial chip-making capacity over the past decade, faces challenges in protecting it from restrictions imposed by the US and its allies.
Furthermore, talks are underway for the India Semiconductor Mission (ISM) to receive up to $10 billion in additional funding, as the initial $11 billion is nearly exhausted. Several other semiconductor projects, including those by Tata Group, Micron, CG Power, and RRP Electronics, have already been approved.
While India approved major chip plants and considered additional investments in its semiconductor sector, Bloomberg reported that China has threatened severe economic retaliation against Japan if it imposes further restrictions on chipmaking equipment sales and servicing to Chinese companies.
According to the report, Toyota Motor has privately warned Japanese officials that China might respond by restricting Japan’s access to essential minerals for automotive manufacturing.
Besides, the US, having aimed to undermine China’s thriving chip industry a few years ago, has since imposed numerous restrictions on the export of chip-making equipment to China, which relies on the US and its allies for these supplies.
In July, Japan started to limit exports of 23 types of semiconductor manufacturing equipment, aligning its technology trade restrictions with the US efforts to restrict China’s capacity to produce advanced chips.
Last month, Advanced Micro-Fabrication Equipment (AMEC), a Chinese chip equipment manufacturer, filed a federal lawsuit against the US Defence Department, challenging its designation as a ‘Chinese Military Company.’ AMEC, vital for China’s semiconductor industry and key clients like Semiconductor Manufacturing International Corp, was added to the Department of Defence’s list of Chinese military companies in January.
According to a report from the NYT last month, the Biden administration is pushing to expand restrictions on advanced semiconductor exports to China despite resistance from allies and the tech industry. New rules aim to limit technology transfers, including machinery with American components, and strengthen export controls by urging allies like Japan and the Netherlands to tighten their restrictions.
The effort to restrict chip technology exports to China started under Trump, with the Netherlands halting ASML’s advanced machine sales. The US later imposed a global ban on advanced chip shipments and restricted machinery exports from American companies like Applied Materials, Lam Research, and KLA.
Last year, the Netherlands and Japan imposed restrictions on exporting advanced machinery to China, while the US tightened regulations further. Despite these measures, China’s advanced chip expertise and reliance on Western technology for cutting-edge innovations might mean the restrictions are too late, potentially driving China to innovate more independently.
In the first seven months of this year, Chinese imports of semiconductor manufacturing equipment hit a record high as companies stockpiled in anticipation of further restrictions. ASML’s sales to China surged 21% in Q2, making up nearly half of its total revenue, as China advances its semiconductor technology using older, unrestricted systems. SEMI projects Chinese chipmakers will increase their monthly output by 14% to 10.1 million wafers by 2025, nearly a third of global production, following a 15% rise this year.
Chinese tech giants and startups are stockpiling high bandwidth memory (HBM) chips from Samsung Electronics in anticipation of US export restrictions. According to Reuters, this surge in demand has made China account for about 30% of Samsung’s HBM revenue in the first half of 2024.
These actions reflect China’s efforts to advance its technology goals despite escalating trade tensions with the US and Western nations, impacting the global semiconductor supply chain.
While China’s semiconductor market was valued at $180 billion in 2023, India’s market is expected to more than double to $109 billion by 2030, up from $38 billion in 2023. Ajit Manocha, president of SEMI, said India needs at least ten more semiconductor chip fabrication companies to establish operations in the next decade.
