Asia Pacific is the largest chip manufacturing region in the world. With over 80% of manufacturing outsourced to Taiwan, China, Singapore, South Korea, Malaysia and Japan, can India make a share out of pie?
Post globalization China and India have become the hot favorites across industries for outsourcing of non-core activities. Even some of the core activities have been outsourced to these countries and together these two countries have attracted around $100 billion of FDI in the year 2006 with 85% of this taken by China alone.
Taiwan and China have become the sweet spots for global chip manufacturing and over half of world’s communication semiconductor devices are manufactured in these two countries alone. India recently announced its semiconductor policy and expects the same will attract an investment of around $10 billion. The country’s first fab-city has also been set up at Hyderabad but only two companies have announced setting up plants there. They are SemIndia and HSMC. These both have clients from various areas including communications. Infact they have been able to attract some of the major players like Broadcom, Qualcomm, etc.
Admittedly, it is very difficult at present for Indian manufacturers to offer serious competition to China which has already established its presence in all the manufacturing industries including chips. Indian chip manufacturers cannot fight on cost. And quality is somewhat equi-perceivable. India has to integrate its relevant core competencies with the communications chip manufacturing to give more value to fabless chip vendors.
Over the past few years the only relevant field where India has been able to make a mark is the software industry. If the expertise is channeled into chip manufacturing, India can be in a better position to attract more and more customers.
Companies like HCL that have substantial chip software expertise are now trying to offer bundled services that include software as well as chip manufacturing.