Semiconductors for Bharat: Why India Must Manufacture for Its Own Market

Kristy Hsu, who is the Director of the Taiwan ASEAN Studies Center/Chung-Hua Institution of Economic Research, argues that India needs to focus on a handfulof semiconductors production that meets the needs of the domestic market and thus projects along the line of pragmatism instead of the best chip technologies. To ensure technological self-reliance, national security, and economic growth, India must manufacture semiconductors for its own market. With the world's most-traded products after petroleum being semiconductors, the vulnerability of a global supply chain was highlighted during the 2022–2023 chip shortage, when deliveries of goods like cars and laptops were significantly delayed

It is suggestive of the emergence of the global semiconductor industry in the 21st century as a pillar of economic freedom, technological independence, and autonomy in strategy. The discussion of the manufacturing priorities of India has been taking on a new dimension as India aims to establish itself as a salient player in this sphere. Here, Hsu offers a realistic position: countries like India ought not to pursue the goal of creating the elite among the semiconductor transistors but rather create machines that match the needs of the local market. This arguably opposes the currently dominant discourse that presents technological advancement as national prestige, rather than following a market-based, demand-based policy set agenda. The non-homogeneous and fast-digitalizing economy of India, including automotive, telecommunications, consumer electronics, and industrial automation, requires a significant amount of mature-node products instead of state-of-the-art processors. India can enhance the local demand by aligning its semiconductor ambitions with the local demand to speed up the industrial growth, lessen the import reliance, and build a robust supply-chain ecosystem.

How India's Semiconductor Production Can Fuel Innovation

India’s semiconductor production can drive innovation by creating a robust tech ecosystem that supports industries like electronics, automotive, and AI. Local manufacturing would reduce dependency on imports, lower costs, and enable quicker adaptation to market needs. By investing in research and development, India can foster homegrown technologies, positioning itself as a global hub for cutting-edge innovation.The current article is a critical questioning of the suggestion made by Hsu, as well as placing it in the modernity of the Indian semiconductor scenario, and projects a strategic path forward that projects economic caution, ecosystem improvement, and policy consistency as the foundations of a viable, self-sustaining semiconductor future.

Argument of Kristy Hsu

In her argument, Kristy Hsu suggestedthat the semiconductor strategy of new economies like Indiashould behome-oriented chip production.

Semiconductor Sovereignty
The Director of the Taiwan ASEAN Studies Center of the Chung-Hua Institution of Economic Research, Kristy Hsu, questions the existing success of a country in the semiconductor industry based on whether they manufacture the most technologically advanced chips or not. In her speech, Hsu supported her argument that states must first focus on producing chips that would serve domestic market demands instead of competing in the high-end sector controlled by a few players in the international market. The basis of her analysis is the historical experience of Taiwan, whereby the coordination of policy with market demand was seen as opposed to technological supremacy, but in the light of things, Taiwan emerged as a global hub of semiconductors.

Taiwan's Pragmatic Model
The Taiwanese success in semiconductors is the result of not only manufacturing the most sophisticated chips but also implementing an ecosystem, the development of which is directed to the needs of heterogeneous markets. Hsu proposes 5 key conditions of sustainable semiconductor investment, which include: local customer, infrastructural completeness, supply chain strength, policy consistency, and talent. With these determinants, the preparedness of the ecosystem is prioritized at the expense of the ruthless technological ambition. In the case of India, the application of this model would involve the focus on the production of chips used in automotive systems, consumer electronics, and the telecommunications industry, which resorts to mature nodes and reflects a feasible domestic demand.

India Strategic Imperative
The aspirations of India to a semiconductor industry are often expressed within the context of global competitiveness and technological parity. Still, the critique by Hsu initiates a redefinition of this paradigm. Since the predicted 2030 market size of semiconductors is projected to be 100 billion dollars, the greatest opportunity India has is to generate the potential of producing chips that support its domestic digital economy, in legacy smart-card nodes, as well as Internet-of-Things devices and industrial automation. In line with local consumption trends, the alignment of manufacturing goals with local production consumption would help India to reduce importation levels, strengthen the finance-chain stability, and foster inclusive industrialization.

Future Policy
This argument by Hsu has a lot of policy effects. This suggests that the semiconductor roadmap of India must put semiconductor ecosystem development, such as semiconductor design, semiconductor testing, and semiconductor packaging, at a higher level rather than focusing on the recent development of an advanced node fabrication. The partnerships between the government and the business, the targeted incentives, and the skill development programs should be designed in a way that the market-relevant production is supported. This pragmatism increases the economic feasibility and also establishes India as a reliable ally in the global supply chain, thus sparing unnecessary expansion of its technology quest.

Semiconductor Landscape of India

The semiconductor aspirations of India are on the rise; even so, India will have to tailor its manufacturing policy to the domestic market requirements in order to attain economic feasibility and strategic importance.

Existing Landscape and Policy Tides
India's semiconductor industry is going through a change process, which has been propelled by the 10 billion dollar incentive package by the government called the India Semiconductor Mission (ISM). This project is aimed at bringing in the international players and developing local capacity in terms of design, fabrication, and packing. Although this policy is keen, India has no developed fabrication ecosystem, and it still heavily relies on imports of the essential parts. Lack of operational fabs is a serious obstacle to the up-scaling of advanced chip production. India, as Hsu points out, should balance its ambitions with a realistic vision of what it can accomplish and what the market desires.

Mapping Domestic Demand
The domestic market of India is heterogeneous, with much demand for the mature-node chips that are used in consumer electronics, car automotive systems, smart cards, and industrial automation. They lie on 28nm to 65nm technologies that are less capital-intensive and more accessible compared to sub-10nm nodes. The increasing dependence of the automotive industry on embedded systems and electric-vehicle systems provides a stable opportunity for demand for legacy chips. Equally, the Indian digital inclusion innovations, Aadhaar, UPI, and smart infrastructure, demand secure and scalable chip solutions not involving cutting-edge technology.

Strategic Fit More than Technical Esteem
Indirectly aiming for competitiveness with the rest of the world at the advanced nodes like TSMC or Samsung might prove to be financially unfeasible for India in the short run. It is better to put the emphasis on chips that can benefit the domestic industry because quicker returns will be achieved, the reliance on imports will be lower, and the supply-chain resilience will be increased. Mature node fabs are also more flexible to small and medium enterprises (SMEs), the main drivers of the electronics manufacturing ecosystem in India.

Development of the ecosystem and market alignment
India will need to invest in the development of ecosystems to include domain, testing, packaging, and nurturing talents in order to be able to meet needs at home. The partnership between the state and the corporations, academic cooperation, and infrastructure preparedness are necessary to facilitate fabrics that correspond to market-specific nodes. Furthermore, policymaking structures need to encourage demand-induced innovation as opposed to prestige-induced competition. The statement that Hsu has presented demonstrates how important strategic realism is: the future of the semiconductor industry in India does not consist in pursuing the most innovative chip but in producing those that have the greatest significance to the citizens of India and their manufacturing sectors.

Economic and Strategic Rationality

The strategy adopted by the semiconductor industry in India should focus more on economic viability and strategic resilience rather than competition on the basis of prestige, thus, in line with the argument by Kristy Hsu for market-responsive manufacturing.

Economic Efficiency and Capital Prudence
State-of-the-art semiconductor manufacturing requires huge investments of capital, often well above $10 billion per fab plant, not to mention the cost of operation and elaborate supply chains. In the case of a developing economy like India, this expenditure might not have equivalent returns, especially on a domestic demand that is largely focused on mature-node chips. The argument made by Hsu highlights how economic pragmatism helps India lower the capital intensity, decrease the time to market, and avoid the sunk costs of competing in the sub-10nm technology. The approach makes it easier to radically scale it and allows more industrial involvement, especially the participation of small and medium enterprises (SMEs).

Supply Chain Resilience and Strategic Autonomy
The economic dependence of India on imported chips, particularly those in the East Asian region, exposes it to geopolitical shock and disruption of supply. An exit-oriented, practical manufacturing strategy towards the domestic market raises the strategic independence. India relies on the automotive, telecommunications, and smart infrastructure sectors, which also form the backbone of the digital economy of the country, using mature-node chips. Localizing the manufacture of these parts will enable India to protect itself against the global shocks, minimize the foreign-exchange outflows, and create a robust supply chain. Based on the experience of Taiwan, Hsu has put forth his model, which shows how a business can align its strategies to the demands of the market to create long-term stability rather than going overboard in the field of technology.

Inclusive Industrial Growth
The elite-focused chip-making is likely to lend resources to a smaller set of higher capital-intensive segments, and hence impede a wider industrial involvement. On the other hand, a market-driven policy secularizes access to semiconductor capabilities. The legacy nodes are better suited to varied applications, including smart cards, Internet of Things, and embedded system development, to allow MSMEs and start-ups to innovate without undesirable cost setups. This inclusiveness aids job creation, regional growth, as well as technological dispersion. The Indian electronics manufacturing industry, which is one of the leading contributors to the GDP and employment, can benefit from an Indian chip strategy where affordability and accessibility are the main priorities over prestige.

Policy Coherence
The framework by Hsu prescribes coherence of policies that will align incentives with the market realities. India should not fall into the trap of aping the world's power and rather focus on developing its own semiconductor ecosystem that suits its economic framework. This can be achieved through making investments in design, testing, packaging, and specialization.

Recommendations

The development of a strategy in the semiconductor industry in India needs to be followed by a series of focused policy responses and a realistic road indicator that could harmonize the priorities of manufacturing with the demands of the domestic market and the preparedness of the ecosystem in general.

Market-Relevant Manufacturing
The policy tools need to be shifted away from the prestige-based incentives to the demand-based support tools. Instead of the government giving incentives to focus on sub-10nm fabrication, the government should incentivize fabs that manufacture mature-node chips (28 nm to 65 nm) that are relevant to the domestic economy (e.g., automotive market, consumer electronics, smart infrastructure, etc.). The concentration of attention removes the intensity of capital and speeds up the process of deployment. According to Kristy Hsu, matching the production to the local demand to the response highlights the importance of having differentiated incentives that represent the nature of the Indian economic structure and the state of the industry.

Integrated Semiconductor Industrial System
Fabrication itself will not ensure semiconductor self-reliance. The investment should be done intensively in the whole value chain of India, such as design, testing, packaging, and materials. The collaborative efforts between academia, startups, and industry can be promoted using semiconductor clusters with shared infrastructure, research, as well as logistics support. The India Semiconductor Mission must expand its scope to include ecosystem enablers like Electronic Design Automation (EDA) tools, libraries of IPs, prototyping labs, and so on.

Institutional Capacity and Talent Development
Semiconductor competitiveness depends on the prowess of its labor force. India ought to intensify the technical education in microelectronics and materials science, and chip design with specialised curricula and industry-academia relationships. Knowledge transfer and innovation can be achieved faster through the establishment of Centres of Excellence in partnership with the leading global institutions. Furthermore, the regulatory bodies should be authorized to facilitate the process of approvals, the application of standards, and the harmonization of inter-ministry activities.

Global Positioning and Strategic Partnerships
Taiwan, Japan, and the United States are some of the countries that India should seek strategic alliances with in order to gain access to technology, training, and market connections. These relationships can help India to be integrated into the world supply chains and maintain its autonomy. It can be through joint ventures, technology licensing, or collaborative research and development that India can jump some steps without necessarily incurring the cost of replicating fully developed infrastructures. The strategic roadmap should be realistic in the sense that it should allocate home priorities and international integration and therefore be able to assure India to be a reliable node in the semiconductor value chain.

Conclusion

Finally, the suggestion by Kristy Hsu qualifies as an opportune and viable roadmap to the Indian goal of semiconductor achievement. Rather than aiming at technological cream skimming with high-tech node production, India should focus on the output of chips that will meet the needs of the domestic market and help in streamlining its industrial life. Such a strategy is consistent with economic conditions of minimizing the capital intensity and speeding up the scalability, and at the same time, it will improve the strategic freedom and resiliency of the supply chain. India can promote productive industrial development and be able to become a consistent participant in world semiconductor value chains by focusing on the production of mature nodes, the development of the ecosystem, and the development of talents. This strategic recalibration should also be captured in the policy roadmap, which should be focused on the demand-driven incentives, comprehensive infrastructure, and international cooperation. Given that India is going through the semiconductor journey, market-relevance-focused pragmatism will be more sustainable and effective than the competition, which is guided by prestige. The insights by Kristy Hsu thus form an eye-opening way forward on creating a robust, independent, and economic semiconductor strategy specific to the Indian context of development.