TN GIM 2024: Govts should be wary of spending too much in wooing semiconductor fabs, says Chip War author

Professor Chris Miller, author of 'Chip War: The Fight for the World's Most Critical Technology'

Governments should be wary of spending too much in wooing semiconductor fabrication plants as the marginal dollar is best spent on other parts of the chip value chain, Chip War author Chris Miller said on January 7 at the Tamil Nadu Global Investor Meet (GIM) 2024.

"Because fabrication is so expensive, you got to ask yourself: do I have comparative advantage in spending hundreds of millions of dollars? Some countries may have the advantage in spending money. But, in general, governments should be skeptical of the idea of spending a lot of money on fabrication. It could be in certain circumstances. But your marginal dollar is best spent on other parts of the supply chain," Miller said.

"Politicians in every country like the ribbon cutting for a fab. But there's more money made in chip design every year than fabs. While it is good for countries to have a domestic fabrication base, they shouldn't over-index on fabs," he added.

Meanwhile, the Tamil Nadu Semiconductor and Advanced Electronics Policy 2024 announced today states that the state government will offer up to 50 percent of additional financial incentives to semiconductor projects selected under the Centre's $10 billion chip subsidy plan.

If a semiconductor project selected by the Centre sets up its manufacturing in Tamil Nadu, it will also be eligible for more incentives to train personnel, stamp duty, land and electricity concessions. Further, global marquee research/design entities in chips and electronics will also be eligible for up to 30 percent payroll reimbursement for 3 years if they employ the state's residents. The payroll subsidy shall be capped at Rs 20,000 per employee per month.

"There are more people working in chip design in India than anywhere in the world. The labour force is very deep. The growth of electronics will also lead to more interest in setting up assembling and test facilities here. Finally, local industries like automobiles everywhere want more and more suppliers within the country," Miller said.

"Taiwanese firms are looking at China and saying our prospects of future growth here is limited. The Chinese want to replace us and anyway the Chinese economy is slowing. So, they need to find new markets. And India is one of the biggest markets that they can approach," he added.

At the event, the author shared an anecdote that he could not meet anyone when he was in Taiwan as most of the industry executives were visiting India.

Chip War, authored by Miller and published in October 2022, is an epic account of the decades-long battle to control microchip technology — something that is indispensable to the modern world, from missiles to microwaves, smartphones and the stock market.

While India has launched a $10 billion chip subsidy scheme to attract semiconductor makers to the country, the noted author said that pursuing chip design holds more promise as a strategy.