India's chip design talent is a genuine strategic asset, but expecting it to transform the economy is unrealistic
There seems to be a logical inevitability of India’s technological journey, from the rise of Internet-enabling services (ITAS) companies leading to India’s critical role in the services sector in the 1980s, with Bengaluru turning out to be the nerve centre of the new sector, to the emergence of the semiconductor industry, with an emphasis on the manufacture of indigenously designed chips in Artificial Intelligence (AI)-powered industries like electrical vehicles (EVs), smartphones, and for emerging AI data centres.
Factors for growth of semiconductor industry
Industry reports show that India has three lakh chip design engineers, 20 per cent of the global workforce. It is not surprising that the Modi government has been assiduously pursuing the emerging industry, which should give India an advantage in the global economy of the next decade. India’s share of the global semiconductor market is also expected to rise from three per cent in 2026 to nine per cent in 2031. Government support for the semiconductor segment is seen as crucial to the industry's growth.
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The growth of the semiconductor industry will largely depend on the expansion of electric vehicles – two, three, and four-wheeler vehicles – and the increased market for smart phones, especially the 5G ones. Both these sectors depend on designed chips to run the devices.
The third major factor in the growth of the semiconductor industry would be the expansion of AI data centres.
Electric vehicles and power generation
The growth of electric vehicles in the automotive sector will remain a work in progress for a decade or more. It is understood that the fossil-fuel-driven vehicles will remain a key factor for years to come because of exigencies. The demand for increased power generation will remain a key challenge despite the impressive growth of renewable energy sources led by solar power.
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Renewable and non-conventional sources still face system challenges. For example, the storage of solar power remains a problem. Of course, it will get solved over time, and initially at the cost of efficiency. But that is part of the technological evolution.
Limited number of jobs
More than 20 years ago, Infosys’ Nandan Nilekani made the sober observation that India’s IT industry cannot solve India’s job problem because it cannot provide more than a million jobs. The same would hold true for the semiconductor industry as well. The number of chip designers that India can absorb will be a very small proportion of chip design engineers that it can churn out.
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India should focus on the strategic advantages it can derive from the strength of its chip design engineers, while keeping in mind that its numbers will be very small. India can become a global hub of the semiconductor industry without substantially affecting the economy at large or people’s lives in terms of jobs. And the semiconductor industry cannot be blamed for it.
Not a magic wand
The government’s push for the sector is well-intended. It would be, however, unrealistic to expect the semiconductor industry to transform the Indian economy and turn it into a developed one. It will be a key factor in achieving the goal. But it cannot serve as a magic wand for the country and the economy.
It could, however, serve as a necessary and useful brick/chip in the larger economic edifice. It would be misleading to believe that the semiconductor industry can make India a developed economy.
Budget smartphones
Carl Pei, the founder and CEO of Nothing, who wants to turn CMF into a standalone Indian manufacturer of budget smartphones, has made the pertinent observation that India would need to create its own brand of smartphone, and to do that it would need to set up an in-house design element which is capable of generating continually improved devices.
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Pei is tempted to use the Indian base because he sees the potential of the Indian market size. And he thinks he can succeed in pushing the brand he hopes to create in India because of its cost competitiveness. This takes us back to the basic question: why, with a relatively vast pool of chip-design talent, has no Indian manufacturer taken advantage of it?
Investing in R&D
To create a branded AI product either in terms of chip design or an AI software model along the lines of American tech biggies like OpenAI, Anthropic, or advanced chip-makers like Nvidia, Indian companies would need to invest in research and development (R&D), which would require a long gestation period. American AI giants have spent enormous time and money to reach the breakthrough point. Even tech veterans like IBM have been doing the same.
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The IT giant Microsoft just collaborated with OpenAI and gained the advantage of the new product. Indian IT biggies like TCS, Infosys, and Wipro have not jumped on the AI bandwagon, which they should have. It looks like they are waiting to adopt the AI models entering the market instead of building their own AI product.
Indians’ lack of patience
It looks like the Indian government wants to step into the gap and support start-ups in the emerging AI field, and the first step is to support India chip-design ventures. The government is tempted to pursue joint venture plans with foreign companies that already lead the market. This is a pragmatic approach, but India may again miss the chance to carve out an advantageous position.
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In the 1980s, Rajiv Gandhi wondered aloud as to why Indians lacked the killer instinct to win in the sports arena. This could be extended to the technology arena as well. What holds Indians back from reaching the tech frontier and beating others to it? The answer seems to be that the Indian government and private enterprises have little patience for long-term research efforts, and they want results quickly.
Research breakthroughs come after many failures, and you have to get through difficult phases to reach success.
(The Federal seeks to present views and opinions from all sides of the spectrum. The information, ideas or opinions in the articles are of the author and do not necessarily reflect the views of The Federal)
