MC Interview | Semiconductor will be the next engine of jobs for the country: Ashwini Vaishnaw on India's steel moment

Prime Minister Narendra Modi has always cared for the middle class. You have seen how the income tax limit was changed, with no income tax up to Rs 12 lakh . That was a very big relief for the middle classes.

The same thing is now happening with the GST relief. It's a huge rate rationalisation, which will bring major savings in the lives of our middle class in their family budgets and simultaneously it will boost demand as well as consumption.

If you look at this from an economic perspective, our economy today is worth about Rs 330 lakh crore. About Rs 202 lakh crore represents consumption, and about Rs 98 lakh crore represents investment. So that totals about Rs 300 lakh crore, which is consumption and investment combined. Another Rs 30 lakh crore comprises all other items together.

With this GST rationalization and the impact of income tax relief, consumption is likely to increase by at least 10 percent over the next few months. This will have a significantly positive economic impact on the economy.

The reduction in rates on electronic appliances and electronic items is going to provide a significant boost to demand for all electronic items, and it will also help our aspirational families.

Among lots of bright spots one of the grey areas is the Trump tariffs. Do you see any impact on the Trump tariffs on the willingness of big companies in the semiconductor sector, many of which are from the US, to invest in India? India has a huge success story with Apple. Have you seen any hesitation from Apple?

When we look at Apple’s investments, semiconductor investments, and electronics manufacturing, let us reconstruct the entire landscape by identifying the fundamental reasons why people are investing here.

First and foremost is India's design capabilities. India has very strong design capability. Our GCCs are performing very well. About 10 to 15 years ago, what used to be back-office work has now changed.

Today, our design teams are designing complete products, a huge growth along the learning curve. This design capability is what practically every global manufacturer looks at when deciding whether to establish operations in country A or country B.

Point number two is the policy stability. You look at the entire world today, there is huge turmoil, there is turbulence, policy decisions are changing overnight. So, under such circumstances, the stability that India offers, that's huge. That's what is attracting a lot of investors to our shores.

Third point, our talent pool whether it is in manufacturing, whether it is in rapidly upscaling any production, that talent pool is attracting people.

The fourth and most important point is the trust that India has garnered over the last 11 years through our Prime Minister's foreign policies. Today, the world trusts us as a country that respects intellectual property rights, operates as a vibrant democracy, and believes in long-term growth rather than taking short-term measures. This trust is clearly visible across every sector, which is why company after company wants to set up a base here.

In the last few days, there has been a lot of speculation on whether IT exports will come under pressure or whether outsourcing by American companies to India will come under pressure and this is a big concern because it's a big engine of jobs, big engine of white-collar jobs. How worried should we be?

We are constantly, continuously engaged with all the global players who have their GCCs in India, who have many of their services in India. We are also continuously engaged with governments of the different geographies, whether it is US or Europe or Japan or the Southeast Asian countries. Everywhere we are continuously engaged, and our effort is that this vibrant industry which is growing at a rapid pace, and which is providing good, high-quality employment to our people, that continues to remain intact and grow.

On the other hand, we are also building up our base in manufacturing. So today, I can say with a level of satisfaction that in last 11 years, our electronics manufacturing has grown six times. Our electronics exports have grown eight times. Our smartphone market share globally has crossed 20 percent and one by one we are getting every component into our country.

Prime Minister Modi recently said that while oil was black gold, chips are the new digital diamonds. India so far has 10 ongoing projects worth $18 billion in the semiconductor space. If you can tell us about where we are in the semiconductor journey because you also announced India Semiconductor Mission (ISM) 2. Can you give us a sense of what the corpus is likely to be?

Starting from January 2022, when the ISM policy was announced on 1st January 2022, we have come a significant distance by now. Today we have 10 units as you said. Out of that, in 5 units, construction is going on.

The plant in Assam also is progressing very well. If you look at this entire thing, we have attempted to cover practically every sector. Automobile sector, telecom sector, consumer appliances, your strategic and defence sectors, power electronics which goes into electric vehicles, power electronics which goes into trains and larger vehicles.

The goal here is to make sure that we learn about this industry in our country in a proper way. To do a 20–25-year sustained growth, the foundation should be very strong.

That foundation has three elements. First is making sure that our talent pipeline is very strong. Second, the ecosystem should come here which means the 500 odd chemicals which go into manufacturing, 50 odd gases which come, which are used in semiconductor industry, the thousands of different types of equipment which go into this, the level of precision, which is required for this, that is the second phase.

The third phase is making sure that each of these units that we approve have a clear market and demand. Having demand, having that market linkage is very important, otherwise you create a fab and how do you fill it.

ASML joining our Semicon is a big vote of confidence.

Today, the world looks at India as a major semiconductor destination taking shape because of the clear policies and because of the laser-sharp execution.

In our ISM 2.0, we will be focusing significantly on developing the ecosystem further which means the equipment manufacturers are very very important for us. The equipment or the machines which go into manufacturing semiconductors, that capital equipment should be manufactured in India and designed in India.

Given the recent signs of thawing relations, do you foresee any meaningful India-China collaborations in semiconductor manufacturing or electronic supply chain soon?

A global value chain is a natural characteristic of the semiconductor industry and of the electronics industry too. We do respect this reality of the global value chain, and we respect the way this industry works. So, wherever the value is added, finally the benefits should come to our people, benefits should come to our industry.

India banned on TikTok and other Chinese apps years ago after the Galwan episode. Is there any rethink on those bans?

There is absolutely no proposal which has come from any quarters. I have only seen it in some news reports and social media.

Will we see Chinese investors coming back? Because they were big investors in the technology space before.

We will see, as it happens.

But there is no objection from the government side on that?

Policies will be clearly shared with everybody as they are. We are a very transparent country.

In terms of indigenous GPU development, the government was talking to the likes of NVIDIA, AMD, Intel. Can you give us a sense of that?

To be a product nation, we must look at the entire spectrum of products and we must identify the items which are useful for society and our economy and our long-term growth.

So, we have identified about 25 products. 25 chipsets which can really be useful for our economy in a very significant way. There are many chipsets out of this which are large volume chipsets. For example, chipsets which go in the CCTV cameras, chipsets which go in the lights and many other items which are day-to-day use. Value is less but the volume is large. There are a few chipsets like microcontrollers, like IoT sensors. Those are the ones which have middle value and middle volume. These go into the industrial products.

Then we have selected a few which have high complexity, low volume but high value. And there we have taken microprocessors as one of our key items that we need to develop.

The journey started over a few years back, and so far, the results have been good. In ISM 2.0, developing these chipsets and getting closer to our goal of becoming a product nation will be a major focus.

Will semiconductors be the next engine of job creation for India?

It will be, because like the steel industry—if you have a steel industry, you can have automobiles, you can have truck manufacturing, you can have bridges constructed, you can have houses built. Steel is a foundational industry. Similarly, semiconductors are a foundational industry.

If you have semiconductors, you can expand your automobile manufacturing, you can expand your consumer electronics manufacturing, your TV manufacturing, your appliances, your refrigerators.

Practically every manufacturing sector today in the modern world has an element of chips and semiconductors in their manufacturing and design processes. All of that will get a major boost because of this. Other countries have seen this benefit. Once that foundational industry is established, many other sectors get the multiplier benefit from it.

Can you also give us perspective about where we are when it comes to AI?  

The AI mission, which we launched about one and a half years or slightly more than that, has made rapid progress.

One of the key elements of our AI mission was to get GPUs available. We are happy to share that 34,000 GPUs are already empaneled, another 6,000 in process, so that means against a 10,000 target, 40,000 GPUs we can provide to our development community.

Second, India is one of the largest adopters of AI globally is India and that is reflecting in the application layer.

Third is the very fundamental layer of developing our own LLM. One of them, most probably Sarvam, will be the first one to come off the mark with a reasonably sized, well-trained, Indian language-trained model, data which is not having the bias of many other models. That model will be ready hopefully by the beginning of next year.

Our approach is a techno-legal approach. We think that to make AI safer, we must have technological tools, we must have technology developed to counter the threats and the possible harms of AI. That is why our AI safety institute is basically a virtual institute which has many other institutions part of this entire network.

Are we going to see more economic reforms? I think there is a committee headed by Amit Shah, of which you are the convener.

The Prime Minister has consistently pushed us into simplifying the lives of our common citizens, simplifying the lives of our MSMEs, making sure that the archaic laws which are not useful today are removed, making sure that the compliances which are not required are removed.

We must now make a sustained effort at reforming every sector, and that would mean our manufacturing capabilities must be freed up from the cobwebs of laws which the Congress regimes created from 1950 all the way to 1990. We must get our entrepreneurs to use their energy in developing solutions for the country and for the world.

Can you give us an update on the DPDP Act? It was passed 17 months ago. But in terms of, when the final rules will be notified and enforced, because businesses are spending on compliance preparation already.

We had multiple consultations with practically every stakeholder. At one point of time, we were practically ready to publish the rules.

That is the time when the media came up with their concerns. We had almost three months' consultation with them, and we clarified to them. And now it's practically ready.

They have given a set of questions which they would like some sort of FAQ to be published. We are working on that, and practically it's done

We should be able to publish it well before the next session of Parliament.

You also met significant stakeholders from the gaming industry a few days ago, days after the Real Money Gaming Ban in India. What can we expect there in terms of what will happen next?

So, we have requested the gaming companies to make sure that the entire transition is very orderly. And that's why we had very good open discussions - all the gaming companies, all the federations were present.

We had made a lot of effort to have some sort of self-regulatory body and make sure that the harms which are coming to the society and increasing at an exponential rate should be contained.

Yes, we need economic activity. It's very important that we must have that economic activity, but it should be aligned to what our society needs.

Government wants the gaming industry to develop e-sports, become a champion in e-sports.

India should become a champion. Social games are part of, integral part of our lives. So, we want those to be developed, but we want the society to be protected from these harms, especially the middle classes to be protected from those harms.

You’ve answered the question on tariff on services. But the IT services sector, does seem to be facing a certain amount of stress in terms of job losses and all that, which are job cuts. Any views that you have on that?

We are very closely consulting the industry and talking to them and making sure that whatever skills, upskilling and the changes in skills which are required are being done.

In AI, we have taken a very large skilling program. And whenever times change, the government and industry must work together to make sure that the transition is orderly. That's our objective at this point.

We have big success in the PLI scheme, smartphones, semiconductors to some extent perhaps, pharmaceuticals, but manufacturing as a share of GDP has not really moved in the last, you know, for a fairly long period, still around 15%. What can be done to raise this share?

So, there are three layers, manufacturing, the first and foremost is design, getting the product thought through, all those elements of engineering and product design. Second layer is manufacturing the finished products. Third layer is the layer where the capital equipment, materials and all other things which go into manufacturing, that can, which is the support part of it.

We are definitely working in every sector, we are working on each of these three layers, and we have seen successes with telecom where we were never a manufacturer in the past.

Our products are now going to practically every part of the world. Electronics, we were never an electronics manufacturing company, but major electronics expands to 8 times the maximum exports.

Yes, our constant efforts are there to increase manufacturing, whichever sector, every sector is working in making sure that manufacturing activity increases.