India strategic move on “Chip” to break Chinese monopoly

7.5 lakh people waiting for a new car after they booked months back in India. Auto industry sources said that almost all the car companies have pending orders of lakhs and lakhs. This is not related to one or two companies. The reason for the delay is the lack of semiconductors (chips). Many customers are canceling bookings as they are unable to deliver the cars on time as promised. The auto industry around the world, including India, is facing a shortage of chips. For this reason, automakers say they are unable to increase production to meet demand. Industry groups expect disruptions in chip supplies to continue until at least June 2022.

The surge in sales for electronic devices during the pandemic created a huge demand for semiconductors. COVID-19 is the main reason behind the shortage and lockdowns in many countries forced the people to move indoors and companies stopped production. That made people buy gadgets to entertain and educate during the lockdown period. There is a massive global shortage of chips and almost everything is run on these chips. 169 industries including many sectors are suffering from a shortage of chips and the auto sector is leading among them. They are unable to make cars and are predicted to lose 210 billion dollars this year because of chip shortage. Amid all odds, India steps in to solve the chip crisis. New Delhi has come up with a bold proposition for chipmakers. The Indian government has offered $10 billion incentives to chip-making companies.

But the companies should make their chips in India. If New Delhi is right in this proposal, it will check Beijing’s monopoly in chip-making. China has a maximum global share in key aspects of the chip business and reportedly 35% of world chips are manufactured or assembled in China. The auto sector accounts for 3% of global economic output when it comes to India it is 6.4% of India’s GDP. New Delhi is trying to use the global crisis as its opportunity. Government is ready to pay 50% of the project cost if any chip-making company established its units in the country. Reportedly, around 100 Indian companies working on chip design could benefit from the Indian government proposal. Israel’s tower semiconductor, Taiwan’s Foxconn, and consortium from Singapore have shown their interest in setting up their units in India.