India needs a broad range of suppliers to succeed in chips

India will have to attract a wider range of semiconductor suppliers to succeed in building a robust chip industry in the country, according to the leader of an influential trade association.

“They need to really increase the emphasis on the ecosystem because, without an ecosystem, growth will be limited,” Ajit Manocha, president and chief executive officer of the trade group SEMI, said in an interview on Thursday. “They need to encourage smaller and medium-sized companies to come and set up the shop in India.” 

Governments around the world are investing aggressively to build domestic supplies of semiconductors, the foundation of everything from smartphones to artificial intelligence. India’s effort is considered something of a long shot given the advantages of countries like the US, China and even Malaysia.

Indian Prime Minister Narendra Modi has set up a $10 billion fund to help attract global chipmakers such as Taiwan Semiconductor Manufacturing Co., the leading provider of chips for the likes of Apple Inc. and Nvidia Corp. Manocha said that, if Modi wins a third term, the country is very likely to expand the program beyond $10 billion to help create a comprehensive ecosystem. 

But no major semiconductor firms have committed to significant investments in India so far, partly due to challenges with infrastructure, including a stable power supply. The two most high-profile projects are a $11 billion site by the Tata Group in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp. to make mature chips and a $2.75 billion assembly and testing facility by US-based Micron Technology Inc. 

The critical role that smaller companies play in the chip ecosystem is reflected in TSMC’s efforts in the US, where it has pledged to build three advanced chip plants. The Taiwanese company has helped bring dozens of vendors to Arizona to support its operations. 

Manocha, who spoke from the sidelines of the India-Taiwan Semiconductor Forum in Taipei, said that India is on the right track. The Tata and Micron projects can act as catalysts for the country’s plans to build a technology foundation in the country.