India wants to be the next Taiwan in chips, but its dream is misguided

 Its government would be better off saving its money and luring more suitable partners in testing and assembly.

For more than two decades, India has maintained the fantasy that a major semiconductor manufacturer will set up shop on its shores, kicking off the nation’s journey along an inevitable path toward chip glory. It never happened, but there’s now a very clear script for how it might be done, if only government and industry leaders would take a more pragmatic approach.

In the latest incarnation of the dream, officials in India and Taiwan are apparently in talks to lure a new factory worth up to $7.5 billion. The local government is likely to foot half the bill to build and kit out such a project, Bloomberg News reported. While Taipei is eager to build closer ties with New Delhi, facilitating the construction of a chip fab in South Asia is not high on its priority list. That’s not due to Taiwan being particularly protectionist, but because it can’t see much point in the exercise given India's lack of expertise in the field.

Nevertheless, eager to continue the dialogue with an increasingly important partner, Taiwan may take the bait and start scouting for candidates.

What it’s likely to find is that the challenges facing the establishment of an Indian chip-making industry today are the same ones as the turn of the century. A reliable and stable electricity supply is the most crucial component of semiconductor manufacturing, but one which the nation struggles to provide. The process is so delicate that even the briefest blackout or power surge can trigger a halt that takes hours or days to reset. Abundant water supply, transport infrastructure, and experienced staff are among the other stumbling blocks.