Tech This Week | Forget TikTok, what India must give attention to is semiconductors
When you have been following a news, developments around TikTok are hard to look from. The iphone app has been connected with Twitter, Apple, and Microsoft. Closer home, reports have surfaced claiming that ByteDance is in talks with Reliance for investment in the short video app. While news around TikTok’s future is catchy, it takes away from the more significant shifts that are occurring in the global technology landscape.
I am specifically discussing semiconductors.
As things stand, the global semiconductor landscape is too essential and diversified for India to lose out on. In case you are not familiar, semiconductors will be the foundation of modern day of technology. Advancements in the semiconductor space make possible virtually everything, including smartphones, washing machines, toasters, cars, and each and every little bit of advanced military equipment. Even though the world is not looking, semiconductors are being used as a means for the US and China to activate in hi-tech warfare.
The world not looking seems to participate a larger pattern. Nonetheless it could be hard to pin down you will want to enough people pay attention. Maybe it’s as the industry is definitely in the backdrop and the supply chain worked just fine for the most part. Or because semiconductors aren't always seen as a finish product, but part of smartphones. Or for the reason that customers of semiconductor chips aren't anyone else, but instead companies like Apple and Huawei, who subsequently make consumer products. Or possibly it is each of the above. Most of these reasons also make clear why TikTok is indeed prevalent in the discourse, aside from being truly a hugely divisive app.
But as the world is not looking, the battle for future years of semiconductors appears to be heating up. The US placed sanctions which makes it harder for China to manufacture its own chips. Intel recently claimed that it was considering outsourcing its manufacturing (presumably to Taiwan). Huawei admitted that the supply of high-end Kirin smartphone chips will run out soon.
When you are just hearing about all this for the first time, it might be hard to create sense of what's happening. The way I conceptualise all this is to look at choke points in the supply chain. I want to explain. The semiconductor manufacturing process is a complex one with multiple stages. Broadly, they are procuring recycleables, designing the chips, fabricating the chips, packaging, and testing the ultimate product.
Each one of these stages has smaller sub-stages with their own dependencies. For example, specialised companies create niche machines that permit chip manufacturing companies to create smaller yet more powerful chips. Similarly, specialised companies manage and license intellectual property to multiple companies that design semiconductor chips. In almost all of these stages there’s a single player (or a few) that have global dominance. Where such dominance exists, it can be utilised by countries just like the US and China to create each other suffer.
For example, ASML Holdings, a company located in Veldhoven, Netherlands, may be the only company that supplies cutting edge photolithographic machines (that works extremely well to etch patterns on chips). Similarly, the Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan, may be the world’s biggest foundry (a company that manufactures chips).
Putting pressure on TSMC never to sell to Huawei is excatly why the latter is in a fix. Also, ARM Holdings (owned by Softbank) is omnipresent as a technology provider of processor IPs present in practically every smartphone. Similarly, Samsung and SK Hynix in South Korea and Micron Technology in america together hold roughly 97 per cent of the DRAM world market
The big takeaway from how these pinch points are being used and the way the high-tech warfare is developing is that China is wanting to create a semiconductor industry of its as the US aims to create it as hard for them as possible. Taiwan is the current leader in manufacturing and is likely to remain that thanks to TSMC.
What you would notice from the backdrop presented above may be the insufficient involvement India has in today's semiconductor value chain. And that is a real problem. There have been murmurs upon this front. Piyush Goyal, Minister of Commerce and Industry, has called after the industry to set up a chip manufacturing unit in India. The Ministry of Electronics and IT (MeitY) also published a programme that outlines incentives that give attention to electronics manufacturing (of which semiconductors certainly are a subset).
However, none of the above has translated right into a significant shift that puts India at a comparative advantage in terms of semiconductor manufacturing. At this point, maybe manufacturing is not the right sector to find yourself in. Perhaps design, testing, or packaging could possibly be better suited as regions of investment for India. But also for any of those ideas to move, it is necessary to shift focus to the semiconductor industry, rather than disproportionately assigning it to TikTok.
Because down the road, the more critical point of leverage India holds against China won't be the opportunity to manipulate ByteDance’s revenues. Instead, it will be the opportunity to make a direct effect in the semiconductor space that China (and the world) holds so dear.
