India and Thailand are currently engaged in a fierce race to attract semiconductor-manufacturing investments and secure their positions on Asia’s chipmaking map. As the chip war between China and the United States intensifies, both countries are vying for the opportunity to become significant players in the global supply chain. With the Indian government’s recent initiatives and Prime Minister Narendra Modi’s address at the SemiconIndia 2023 industry event, India seems determined to position itself as a reliable partner and a conductor for semiconductor investments. Moreover, Thailand is also making significant efforts to draw semiconductor companies through tax breaks and the development of a local industry. This article will delve into the strategies employed by both countries and the challenges they face.
India has made substantial progress in its bid to become a chipmaking hub. The government’s Modified Programme for Development of Semiconductors and Display Manufacturing, approved in 2021, serves as a catalyst for attracting companies engaged in various semiconductor-related activities. With an expenditure of Rs. 76,000 crores, the program entices firms involved in silicon semiconductor Fabs, Display Fabs, Compound Semiconductors, silicon photonics, sensors, semiconductor packaging, and semiconductor design. Furthermore, the approval of Micron Technology’s proposal to establish a semiconductor unit with a capital investment of Rs. 22,516 crores reinforces India’s commitment to becoming a major player in the semiconductor industry. Micron’s manufacturing facility will focus on the production of DRAMs, Flash memories, and Solid-State Devices. The entry of American players like Micron and the collaboration between Taiwan’s Hon Hai Precision Industry (Foxconn) and Applied Materials indicate a significant shift in perception towards India’s potential as a semiconductor hub.
Challenges for India
Despite the progress made, deep-rooted concerns about India’s infrastructure, particularly its electricity supply, persist. These concerns were exemplified by Foxconn’s decision to cancel a separate semiconductor tie-up in the country. However, industry experts believe that the tide is changing, and India’s infrastructure challenges can be overcome. Noboru Yoshinaga, the executive vice president at Disco, a Japanese chipmaking equipment maker, acknowledges that American players setting up shop in India indicate a shift in perception. The partnership between India and Japan, with its expertise in front-end processes and chipmaking equipment, is further evidence of India’s potential to succeed in the semiconductor industry. A memorandum of understanding signed by the two governments in July indicates their commitment to promoting semiconductor supply chain cooperation.
Similar to India, Thailand is keen to draw semiconductor companies and has implemented policies to attract investments. Recognizing the significance of semiconductors as critical goods, the Thai government has expanded corporate tax breaks for chip companies. Companies engaged in front-end processes can now enjoy tax exemptions for up to 13 years, a substantial increase from the previous limit of eight years. The focus in Thailand is on attracting companies involved in designing semiconductors and etching wafers, which are considered more technologically advanced than back-end processes like dicing and packaging. Thailand is also positioning itself as a hub for electric vehicle (EV) assembly plants and suppliers. With EVs expected to contain more semiconductor devices than traditional gasoline-engine cars, having a local EV industry provides Thailand with an advantage in attracting semiconductor manufacturing capacity.
Competition and Shifting Alliances
India and Thailand are not the only countries actively pursuing semiconductor manufacturing investments. Many governments are closely monitoring the shifting stances of chip companies and making efforts to attract them. Thailand, in particular, is seen as a neutral country where chip companies can find refuge from the ongoing tensions between China and the United States. Both India and Thailand must remain vigilant about the strategies employed by their competitors to ensure they can maintain a competitive edge in the race to become semiconductor hubs in Asia.
India and Thailand are making significant strides in their efforts to attract semiconductor manufacturing investments. India’s ambitious programs and partnerships with countries like Japan demonstrate its determination to establish itself as a major player in the semiconductor supply chain. Thailand’s focus on tax breaks and the development of a local industry, particularly in the EV sector, showcases its commitment to becoming a semiconductor hub. However, both countries face challenges, such as infrastructure concerns and competition from other nations. The semiconductor race in Asia is far from over, and it will be intriguing to observe the developments and alliances that unfold in the coming years.
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