Semiconductor Speed Bumps On India's Electric Vehicle Highway

Semiconductor Speed Bumps On India's Electric Vehicle Highway

The US has made the access of modern and advanced chip technology harder for China, meanwhile China has made its ambitions clear by further expanding its production facilities, India, one of the rising names in this space has to navigate through the myriad intricacies.

Juviraj AnchilUpdated: Thursday, February 08, 2024, 02:26 PM IST
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Semiconductor |

The US has made the access of modern and advanced chip technology harder for China, meanwhile China has made its ambitions clear by further expanding its production facilities, India, one of the rising names in this space has to navigate through the myriad intricacies.

The Battle of Chip

The Chip/Semiconductor race has many facets, while India is ambitious about becoming a major player in the sector, it is still starting from scratch, as it does not really have history, in the manufacturing of the same. Nevertheless, it is trying to make ripples in the sector, with its strides. Several strategic locations are in the radar for the establishment of chip fabrication units in India, with a particular focus on states like southern states Karnataka, Tamil Nadu, Telangana, and the home state of the Prime Minister, Gujarat. An indication of the same was seen when, Micron Technology, a US-based memory-chip firm committed USD 2.7 billion to an industrial site in Dholera, Gujarat.

The EV Conundrum

Another main facet of this race is the consumption of these chips, through their use in most objects that are used in today's day. But one segment that stands out, not just due to the technological advancement, but also due to its role as an aid in fighting climate change, Electric Vehicle. The world has seen a significantly change, with regards to the adoption of electric vehicles.

India is no exception to this trend, despite it's unique situation as a developing economy, the country is moving towards it's green commitments with some rigor. Electric vehicle (EV) sales growing by 82 per cent in March 2023 compared to the previous year. Overall sales increased by 157 per cent from FY2022 to FY2023. The electric two-wheeler market is seeing significant growth, with over 1 lakh EVs sold every month in H2 FY2023. This has also coincided with a drop in the sale of other petrol/diesel run wagons.

India's Unreliable Reliance

As manufacturing of these coveted chips is in it's nascent stage in the country, it is open to the complexities of the global chip and EV market. This is where the cold war of the semiconductor race between US and China and the global anxieties connected to it, leave India in a tricky position. As meeting it needs would entail untangling the web. Recently, the EV-Ready India dashboard had projected a 45.5 per cent Compounded Annual Growth Rate (CAGR) in electric vehicle sales between 2022 and 2030, indicating a surge from the 6,90,550 electric two-wheelers (E2Ws) sold in 2022 to a 1,39,36,691 E2Ws expected to hit the Indian roads by 2030.

For this change to turn into reality, the resources have to be in place, and in pursuance to the existing circumstances, China has been limited from accessing modern and advanced technology, as the US imposed Curbs on AI Chip Exports to China. The Biden administration took it a step further and had announced the tightening export controls on semiconductor chips used for artificial intelligence and the equipment used to manufacture them. Meanwhile, the largest manufacturer of these modern-day gems, Taiwan and TSMC, and its fortune is perennially on the ledge, as China's territorial ambitions continues to keep stakeholders on their toes and in abeyance. China on its part had come out against the curbs, and recently started a new plant in its commercial hub of Shanghai. These developments have induced anxieties in many, as China apart from being a production powerhouse, the factory of the world, it also has access to the rare metals that are needed for the manufacturing of these chips, in addition the Asian giant's increasingly cordial relation with African countries, which are potential to these elements adds to the woes.

China is India's largest trader, with over USD 95 billion worth of commodities and service transactions between the two biggest economies of Asia. However, India has had the highest trade deficit from its trading relations with China, which amounts to almost USD 70 billion. This comes despite India's frosty relationship with its neighbour to the north, thanks to border disputes along the Himalayas, starting from west to Arunachal Pradesh in the East. Amidst the political and diplomatic confrontation, India has only grown more reliant on China, and any further reliance on the 'dragon' will not only affect the power dynamics between the two, but also affect India's equation with the worried-west especially the US, as India has grown closer the later.

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