You might not know, but a dangerous war is going on in our world right now.
And I’m not talking about the Russia-Ukraine war.
This war is about one of the most advanced technologies of our time.
Semiconductors, also known as microchips.
India vs China: Who Will Win the Semiconductor War
“In our semiconductor wars, we have taken a new turn.”
This month, President Joe Biden banned the export of US semiconductor technologies to China.
This ban is so strict that the American citizens
who occupy the most important positions in Chinese semiconductor companies
have only two options left-
Either they work for these Chinese companies or they renounce their American citizenship.
In the last 20 years, China has become one of the world’s leading semiconductor producers.
In 2000, 1% of the world’s semiconductors were produced in China.
But in 2030, this number will be 25%.
Despite this, China is very dependent on American technology to produce such semiconductors.
America is afraid that China can use these semiconductors to produce ultra-modern weapon systems that are powered by artificial intelligence.
Weapons that it can use against America.
This is why the US has banned the export of semiconductors to China.
Let me tell you something.
There’s one country that can benefit from this war.
That is India.
Because India has a great opportunity to snatch the semiconductor market share from China.
Big companies like Tata and Vedanta have said that they’ll invest crores of rupees in India for the semiconductor business.
But obviously, China won’t let this happen so easily.
So who will win this semiconductor war?
That’s what I want to tell you in this article.
A semiconductor is a material that comes between insulators and pure conductors.
An example of an insulator is- glass that can’t conduct electricity.
Pure conductors are materials like copper and aluminium; that conduct electricity very well.
This is why a thin material of the semiconductor is used to make integrated circuits.
These integrated circuits are called microchips or microprocessors.
Semiconductors are used in almost all modern consumer electronic items.
Smartphones, laptops, gaming consoles, microwaves or supercomputers are used in modern weapons.
In the last 20 years, the use of such devices has increased drastically in our world which is why the importance of semiconductors has also increased.
A semiconductor is somewhat like the brain of any device.
Manufacturing a semiconductor is one of the most technologically complex processes in the world.
To manufacture a semiconductor, several steps are involved.
It can take up to 4 months from design to mass production.
It’s important to maintain cleanliness in the factories where semiconductors are made because even a little speck of dust can ruin a microchip.
Since this process is so difficult, there are very few countries that can make semiconductors on a large scale.
You might not know, but there is only one company that manufactures more than half of the world’s semiconductors the Taiwan Semiconductor Manufacturing Company.
It’s one of the biggest companies in the world.
Chips for companies like Apple, Intel, and Nvidia are made by this company.
Many other Taiwanese companies manufacture semiconductors.
Due to this, Taiwan is the world’s largest semiconductor manufacturing hub.
Then comes South Korea, US and China.
As the world’s digitization is increasing, the demand for semiconductors is also increasing.
The fight over semiconductors is not just about which company or country manufactures the most semiconductors.
The fight is also about who will make the most advanced semiconductors.
The latest semiconductors increase computational power.
This means that the power of any device increases, whether it’s your laptop or a modern-day weapon system.
For example, Apple’s A16 Bionic chip has 15 billion transistors that can perform 15.8 trillion operations per second.
It is because of this cutting-edge technology that many of us like Apple.
But we don’t need to remain just customers of Apple.
As the size of these chips is decreasing, their processing abilities are increasing.
The device that was a supercomputer for us in the past, is now treated as a basic electronic device.
We need to give credit to the American companies for the evolution of semiconductors companies like Intel, IBM, and AMD have innovated in this technology, which has made America an innovative hub in semiconductor technology.
India vs China: Who Will Win the Semiconductor War
The US is leading the world when it comes to designing software for these chips.
Intel first began producing 14nm processors in 2014, but China’s most advanced chip manufacturer, SMIC, achieved this in 2019.
Now, this is about the design of these chips.
But the whole manufacturing process doesn’t take place in the US.
As we discussed earlier, Taiwan manufactures the most chips in the world.
Taiwan can do this because it has US support.
The US researches bout the design of the chip and then tells Taiwan how to manufacture the chips.
Because of this support, Taiwan has grown so much in this industry.
The US also knows that Taiwan will always be on the side of the US in the geopolitical fight.
That’s why American companies are comfortable with their chips being manufactured in Taiwan.
But they would be in a lot of tension if these chips are being manufactured in China.
Because if they are manufactured in China, it means that US companies are dependent on China.
That’s why many companies are in tension over the geopolitical issues between China and Taiwan.
Because if Taiwan’s situation gets worse, then who will give chips to US companies?
These are pictures of an Israeli military operation where drones with strong target accuracy were used.
For example, this AI drone can fly towards an area, target specific objects, and destroy a high-explosive warhead.
This entire drone was programmed by artificial intelligence.
Behind these drones was artificial intelligence technology.
Artificial intelligence is used in many weapons systems today.
But defence experts believe that in future weapons, AI and supercomputing will play an important role.
Our future depends on your support.
That’s why the US wants the semiconductor technology to be kept away from the hands of China
On 12th October, US security chief, Jake Sullivan said that.
America is putting a ban preventing the export of important technologies to China.
Technologies that China can use against the US.
Because many American intelligence agencies like the CIA informed the US government.
that China is using supercomputing and artificial intelligence to develop hypersonic and stealth weapons systems.
And for some time, China has even tried to steal American technology.
For example, America said that China tried to hack their computers to copy the American Fighting Jet F-35.
After copying this, they made their J-31 jet.
There was also news that China is trying to decode the encrypted messaging systems of the US government.
Because of this, the US government feared that their secrets could unfold before China.
But it’s not like China got software from the USA and copied- passed and now, China has ultra-modern weapons systems.
This is not that easy.
China needs advanced chips and production technology to make such ultra-modern weapons systems.
That’s why the US government decided that they would neither let the chips nor the technology of the chips fall into the hands of China.
But you might have noticed that the US did not ban the Chinese military, but the Chinese companies.
Because according to the US, the Chinese military and Chinese companies have a strong connection.
According to security and technology expert Gregory Allen, China follows a strategy of military-civil fusion.
This means that the best AI technology with the Chinese companies ultimately goes to the military as well.
That’s why in 2015, President Obama banned Intel from being able to sell its high-end Xeon chips to a research centre of the Chinese military.
No American company could directly sell to the Chinese military with this policy in place but the Chinese military made a lot of fake companies buy such chips.
That’s why the US government decided that they will not sell the semiconductor technology to the whole of China.
But how will they do this?
The first step is that they will not sell any high-end chips to China directly.
For example, due to the recent ban, any advanced AI chips can not be sold to any Chinese organization be it the military, a Chinese company, or an American company in China.
But can’t China make such advanced chips on its own?
It can, but China needs advanced software for this.
A software that microchip designers use to make complicated blueprints.
They are called Electronic Design Automation.
But the knowledge of such software is mainly with America.
America said that they won’t sell chips, designing software, and manufacturing equipment to China.
There’s no semiconductor manufacturing facility in the world that doesn’t rely on US technology.
And this situation is not such that once you buy US equipment, the problem is solved.
You’ll need the US regularly for on-site guidance, problem solving and equipment repair.
Now you’ll think that -China is a factory of the world.
China can also manufacture semiconductor equipment.
But the problem is that the US has researched this for many years.
China needs to start from scratch, which can take years.
Thankfully, the US-China conflict can benefit India.
For example, this is Yong Liu, the chairman of Foxconn – the world’s largest semiconductor manufacturer.
Foxconn is the company that also manufactures Apple products.
And about 2 months ago, when the US-China semiconductor war was going on, Yong Liu said that India would have to play an important role in the semiconductor industry.
This is especially true because, after Covid-19, many companies realized that they can’t rely on China for their supply chain.
Because if China shuts down, they won’t be able to sell their products anywhere.
This is why many companies, including Foxconn, are looking towards India and the Indian government has recognized this.
This is why the Modi government has said that it will give incentives worth 80,000 crores to those companies that manufacture semiconductors in India.
And now, many companies want to come to India.
India vs China: Who Will Win the Semiconductor War
For example, the Singaporean group, IGSS, has signed an MOU with the Tamil Nadu government.
The Israeli group, ISMC, signed an MOU with the Karnataka government.
And the biggest news came from Gujarat.
Foxconn and Vedanta said that they would make a factory costing 1,60,000 crore to manufacture semiconductors.
This is why Vedanta chairman Anil Agarwal said India could make its own Silicon Valley.
Historically, it has been very difficult for foreign companies to acquire land in India.
This is why they can’t set up a company.
But the Modi government has tried to make this process easier for them.
And they want to increase India’s manufacturing capability as well.
This is why you must have read the latest news
about how Apple wants to shift its manufacturing from China to India. Whether it’s the iPhone 14, Airpods, or Beats headphones- they’ll all be manufactured in India.
This graph shows us how Apple is reducing its dependency on China.
Besides, companies like Renault, Nissan, and Hyundai are also manufacturing their cars in India.
Dell is manufacturing its computers and Samsung is manufacturing its TVs, refrigerators and washing machines.
We must realize that all these things are only being manufactured in India.
The actual innovation still happens in the US.
But manufacturing such technology is a very important first step.
This is why India can become a global leader in electronics.
And all this manufacturing is not only for Indian consumers but also for export.
But everyone is not convinced by this.
As we said, you need particular conditions to manufacture semiconductors.
For example- a constant electricity supply, controlled air quality, and temperature control.
If the supply of electricity is interrupted for even a few seconds while manufacturing a semiconductor, then the company can suffer a loss of millions.
And many people are not convinced that India’s infrastructure can support such an industry.
Some people are afraid that because of this, India won’t be able to manufacture advanced chips but rather, very old chips that are still found in cars.
Due to this, India may be manufacturing, but won’t be able to become a global leader in electronics.
Christopher Miller, who wrote this book, said that India shouldn’t manufacture semiconductors.
Instead, it should invest in chip assembly and packaging facilities where labour is required.
Because India’s advantage is low labour costs.
By focusing on labour-intensive industries, India can provide jobs to its people as well as participate in the global supply chain.
Raghu Ram Rajan, the former chairman of RBI, agrees with this.
He says that India shouldn’t manufacture semiconductors like China, but rather, train its software and design engineers so that they can learn to design semiconductors.
Entering the semiconductor industry means that the risk is high but the reward is also high china had gone ahead of India in this war because it had reacted first in this situation.
But this is probably India’s time and India can regain some control of this industry.