India was called the ‘graveyard of foreign investment’ by Xinhua News Agency. Chinese state media said that India’s semiconductor ambitions should be viewed sceptically because of New Delhi’s ‘discriminatory business practices’.
The state media also argued that the US Chips and Science Act and the subsequent Micron deal signed just before Indian Prime Minister Narendra Modi’s US visit is part of Washington’s strategy to contain China.
As the ‘chip war’ fever catches the imagination of India’s politicians, diplomats and industry leaders, the age-old problem of talent, infrastructure, and fast-transforming technology ecosystem will plague the country’s vision, according to Chinese state media.
“India is also known as the ‘graveyard of foreign enterprises’, IBM, Samsung, Xiaomi and other companies were issued a ‘fine’, and the reason for being penalised were almost always tax-related,” said the Guancha.
Though New Delhi has slowly brought about changes to the investment regulatory environment there is a long history of protecting certain sectors from foreign investment. New Delhi is now making efforts to change the perception of the business environment in India through targeted invitations to foreign companies to invest in the semiconductor industry.
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China mocking India
Modi recently inaugurated the second edition of SemiconIndia in Gandhinagar, Gujrat and offered an unprecedented 50 per cent financial assistance to firms for setting up semiconductor manufacturing facilities in India.
A Guancha article alleged that India hypes up its ability to attract semiconductor companies and doesn’t deliver on its promises. It mentioned that the Modi government had announced the semiconductor subsidy back in 2021, but the subsidy meant for the semiconductor and display fab ecosystem was yet to be unrolled to the companies.
The article also alleged that politicians in India were quick to announce new investment agreements with Foxconn, but each time, the agreement hadn’t matured.
The Chinese commentators want the Taiwanese company to stop obsessing about business opportunities in India.
“Foxconn’s future lies in the acceptance of ‘one country, two systems’ in a peaceful and prosperous world, there is no other way,” said Chinese political commentator Sima Nan about its investments in India.
India’s aspiration to attract semiconductor manufacturing is a prominent topic of discussion in Chinese state media.
The discussions circle around Modi’s multiple meetings with Foxconn Chairman Young Liu to bring part of Apple’s supply chain to India and establishing semiconductor manufacturing base.
The state media has mocked India’s ability to attract a supply chain-like semiconductor. And the failure of the Foxconn-Vedanta joint venture was cited as an example of India failing over the long run to attract semiconductor business.
“The ‘Elephant India’ has inadequate fundamental strength, and the ‘semiconductor dream’ is fading away,” wrote a social media user.
Some Chinese social media users even mocked Indian Minister of State for Electronics and Information Technology Rajeev Chandrasekhar’s comments about India’s plans to catch up with China on the semiconductor front. “Overblown! Who gave you the confidence?” said a user.
Modi’s SemiconIndia conclave was trending on Chinese social media. The hashtag “Modi claims to establish a semiconductor supply chain, who can be more reliable than India” trended on Weibo.
Behind the commentary in China about India’s lack of ‘strength’ to get part of the semiconductor supply chain is the geopolitical balancing act being pursued by Washington. Chinese media has suggested that the US is propping up India as the next alternative for the semiconductor supply chain to contain Beijing’s economic growth.
The US’s Chips and Science Act has been called a ‘bid to contain China’s technology development’ and an attempt to recruit allies to be part of the plan.
When the US Secretary of Commerce Gina Raimondo visited India in March, the Chinese state media wrote that the US was propping up India because it isn’t confident about over-dependence on Taiwan for semiconductors — hoping to project discord between Taiwan and the US.
Guancha quoted Raimondo’s remarks to LiveMint in March during her visit to say that Taiwan should be wary about losing its edge in the semiconductor business to India.
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India’s unrealistic goals
Despite support from the US, New Delhi has a steep learning curve ahead.
China’s experience with semiconductors should be a lesson for India. Throwing money at the problem won’t get you a domestic supply chain of semiconductors. Since the 2000s Beijing has incresingly subsidised its semiconductor manufacturing but it hasn’t yielded spurring growth in the domestic industrial base.
The story of Chinese semiconductor Wuhan Hongxin Semiconductor Manufacturing Co. (HSMC) tells you the wild ride Beijing has gone through. HSMC was a legitimate-sounding semiconductor company, it was rumoured that the top leadership had close ties with the Chinese Communist Party. The firm was a joint venture between Wuhan’s Dongxihu district and Beijing Guangliang Lantu Technology.
It later turned out that the company’s leaders were scam artists who carried business cards saying “TSMC – Vice President”, an attempt to create the impression that they had links to Taiwan’s famed semiconductor company, TSMC.
HSMC convinced Wuhan’s local government to invest in the joint venture but it turned out to be nothing more than a sham. It got three years of funding but was unable to produce even a single chip.
The story of HSMC tells us a few things. China’s Achilles heel has been the ability to secure the talent to scale semiconductor production. India will face the same problem of right-sizing the talent that can work on producing the correct yield of semiconductors. The latest semiconductor subsidy announced by Modi will get many good, bad and ugly players wanting a piece of the pie.
The Chinese state media have correctly pointed out the tough road ahead for India in its semiconductor ambition. Timelines being thrown around to turn India into a semiconductor base in two years are unrealistic.
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Lessons from Taiwan
Taiwan took decades to master all the small pieces of semiconductor supply and continues to walk on the fire to maintain its edge.
Taiwan’s success story was made possible by its ability to rely on the Taiwanese diaspora in the US and elsewhere. The diaspora has since become the catalyst of an innovative ecosystem, which thrives in the current geopolitical environment. Semiconductors are as much a people’s story as much as the story of technology and finance.
New Delhi is trying to attract the relatively dated 40 nm semiconductor fabrication in India with an aspiration to become completely self-reliant. Reaching the higher nodes of semiconductor supply chain is the end goal that New Delhi wants to pursue – but only obliquely acknowledges.
“Self-reliant India will ipso facto be self-reliant in semiconductor production,” said Minister of External Affairs S Jaishankar. His enthusiasm about semiconductors is tempered by caution about the geopolitical dimension of technology.
India’s goldilocks ‘political science moment’ may last only for a short while, until and unless the ecosystem of companies fight their turf to maintain their edge.
Undoubtedly, China would like to see India fail in its quest to join the semiconductor supply chain. Micron Technology’s investment plan in India has only hardened Beijing’s views that the US wants to prop up India against China by helping New Delhi’s economic growth.
China would seek to disrupt India’s semiconductor ambitions as Beijing views Modi’s enthusiasm for a ‘chip war’ as part of Washington’s containment strategy.
The author is a columnist and a freelance journalist. He was previously a China media journalist at the BBC World Service. He is currently a MOFA Taiwan Fellow based in Taipei and tweets @aadilbrar. Views are personal.