#14. Microchips: India’s entrance
January 24, 2022
Oh have I not talked about microchips in 3 seconds? Let me catch you up. India recently announced $10bn in incentives to vie for chip supremacy. Much of what we’ve heard with regards to geopolitical chip plans has been east v. west - or really China v. US/Europe. But this is east v. east. India v. China.
The never-ending COVID era has shown how fragile many supply chains are as lead times and prices explode, but it has exposed a critical infrastructure gap for much of the world. Only 2 countries meaningfully supply the base necessity of the worlds computing needs: China and Taiwan.
India’s tried this before without much success, but it seems this time they’re providing the right incentives and drawing interest from major manufacturers, including Intel. But, speaking of YOLO, India’s huge incentive package shows how seriously it takes this seminal moment. And India is a particularly important entrant. It costs 30% more to produce microchips in the US compared to China, largely because of labor costs. India has had its labor rights woes it will need to close the likes of Intel. However, cheaper labor costs coupled with massive incentives may be a much more significant catalyst than much of the west can offer.
Speaking of the west, voices are growing, particularly from Jacob Helberg, about the importance of building up chip manufacturing capabilities among the US and its allies. The US does have its bipartisan CHIPS Act that was passed easily in the Senate six months ago (!). But that’s been held up in the House who want to write their own bill because…ego (then run for Senator next time congresspeople). The CHIPS Bill would provide $52 billion in incentives to bring chip manufacturing onshore. And the CHIPS Act would have a significant impact on US dependence on China. So much so that China is reportedly pushing US Execs, companies, and lobbying groups to fight against the USICA, which contains the CHIPS Act. However, Intel has now committed to spending $20 billion on new plants in Ohio even prior to the CHIPS Act passing, that’s on top of its interest in India.
“Hey China,🖕” - Intel execs
With India’s entrance into the microchip battle, we may have a future where India pumps out volumes of chips as the as the world’s manufacturer while the US acts as the R&D lab it should, supporting next gen chip development that isn’t ready for full-scale production.
Make no mistake, this is a manufacturing war for the future of computing. The private sector aren’t the warring actors, they’re the prize. Nations are the warring actors. Welcome to modern warfare.
