What’s the news?

• The United States’ CHIPS Act, which authorizes substantial funding over five years to boost its semiconductor industry, celebrates its one-year anniversary.

Central idea

• Industrial policies have become pivotal tools for nations to secure competitiveness, innovation, and national security. The CHIPS Act exemplifies such an endeavor, allocating $52.7 billion to bolster the American semiconductor sector. While not a blueprint, this Act offers essential lessons for India’s semiconductor strategy.

What is the CHIPS Act?

• The CHIPS Act, or the Creating Helpful Incentives to Produce Semiconductors for America Act, is a United States federal law that was enacted in 2022.
• It aims to address various challenges and concerns related to the semiconductor industry in the United States.
• The CHIPS Act was introduced to boost American competitiveness, innovation, and national security in the semiconductor sector. It recognizes the strategic importance of semiconductor manufacturing and technology leadership for economic growth and national defense.

Notable features of the CHIPS Act

• Significant Funding: The CHIPS Act authorizes $52.7 billion over five years to boost American competitiveness, innovation, and national security in the semiconductor industry.
• Cooperation Across Government: The Act involves cooperation and coordination between multiple government arms, with separate funds allocated to different departments, including the Department of Commerce, the Department of Defense, the Department of State, and the National Science Foundation.
• Lead Agency: The Department of Commerce is designated as the lead agency responsible for administering the $50 billion CHIPS for America Fund, which focuses on accelerating semiconductor manufacturing and research within the United States.
• National Semiconductor Technology Center (NSTC): A nodal agency, the NSTC, is created to collaborate with industry and educational institutions to develop a competent semiconductor engineering workforce and promote growth in the field.
• Investment Principals and Financial Structuring Directors: The CHIPS Act establishes a CHIPS Program Office (CPO) responsible for assessing project viability and attracting private sector investments. Investment Principals and Financial Structuring Directors are hired to catalyze private sector involvement.
• Future Research Focus: The Act doesn’t solely focus on immediate manufacturing needs. It allocates funding, such as the $11 billion investment in future research, which includes areas like advanced packaging techniques, to ensure the country’s competitiveness in the long term.
• Industrial Policy Template: The CHIPS Act provides a valuable template for effective industrial policy in the semiconductor industry, showcasing institutionalized administrative capacity that supports continuity beyond changes in government.

India’s semiconductor policy

• MeitY’s Leadership: MeitY plays a pivotal role in formulating and executing India’s semiconductor strategy. The ministry’s oversight spans various aspects, including manufacturing, assembly, design, and compound semiconductors.
• India Semiconductor Mission (ISM): Within MeitY, the India Semiconductor Mission (ISM) has been established to focus on manufacturing, assembly, and displays. ISM aims to foster indigenous production capabilities by collaborating with industry and academic institutions.
• C-DAC for Chip Design: The Centre for Development of Advanced Computing (C-DAC), another MeitY initiative, focuses on chip design. By investing in research and development, C-DAC aims to enhance India’s expertise in chip design and innovation.
• Chips2 Startup (C2S) Program: MeitY’s C2S program collaborates with universities and colleges to cultivate a skilled semiconductor engineering workforce. This initiative emphasizes the importance of industry-aligned training programs to cater to the sector’s specific needs.
• Manufacturing and Export Incentives: To attract investment and promote domestic manufacturing, India offers incentives such as the Production Linked Incentive (PLI) scheme. This encourages semiconductor companies to establish manufacturing facilities in India.

Lessons for India

• Whole-of-Government Approach: India’s semiconductor strategy should adopt a whole-of-government approach, similar to the CHIPS Act, to ensure coordination and continuity across different government departments and agencies involved in semiconductor-related initiatives.
• Collaboration and Coordination: Like the CHIPS Act, India should emphasize collaboration between industry, academia, and government to build a skilled semiconductor workforce and ensure alignment between education and industry needs.
• Certification of Training Programs: Instead of directly running training programs, India should focus on certifying quality training programs offered by universities and private training institutes to ensure a competent workforce in the semiconductor sector.
• Long-Term Vision: India’s semiconductor strategy should not only address immediate manufacturing needs but also outline a long-term vision for sustained growth and leadership in the industry.
• Public-Private Collaboration: India should encourage public-private collaboration to attract private sector investments and leverage the expertise of both government and industry for semiconductor development.
• Flexibility in Policy Implementation: India’s semiconductor strategy should be adaptable, allowing for adjustments based on changing industry trends and challenges while aligning with the nation’s goals.

Conclusion

• The CHIPS Act serves as a template for effective industrial policy in the semiconductor sector. By analyzing its strengths and weaknesses, India can learn valuable lessons for structuring its own strategy to achieve competitiveness, innovation, and national security in semiconductors. Effective execution and a comprehensive approach are key takeaways for India’s policymakers.

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