India & US to Boost Local Manufacturing as China Shrinks in Chip Output

China witnessed its largest decline in chip manufacturing last month, with India and the US doubling down on local manufacturing of semiconductors. The shrink was credited to the pandemic-induced restrictions and dwindling demand. 

The production of integrated circuits (ICs), as reported in the South China Morning Post, sank 24.7% year-on-year to 24.7 billion units—marking it as the largest single-month decrease since 1997. China witnessed a decline for the second consecutive month in chip manufacturing—with the output nosediving from 16.6% to 27.2 billion units as of July 2022. 

The local output of microcomputers fell 18.6% to 317.5 billion units in August 2022—noting a contraction in the domestic manufacturing activity for the first time in three months. 

According to business database platform Qichacha, statistics show that around 3,470 chip-manufacturing companies “went out of business in the first eight months of the year”. 

A report by the India Electronics & Semiconductor Association (IESA) and Counterpoint Research shows that the Indian semiconductor component market is likely to reach $300 billion in cumulative revenues by 2026. With initiatives such as ‘Make in India’ and production-linked incentive (PLI) schemes, the country is expected to witness a boost in local sourcing of semi-components in the coming years. 

In order to achieve self-reliance in the field of semiconductor manufacturing, the government of Gujarat has also partnered Vedanta and Foxconn with an investment of INR 1.54 lakh crore. 

Under the PLI scheme, the Indian government announced an investment of INR 76,000 crore separately for the development of a semiconductor and display manufacturing electronics ecosystem. 

US President Joe Biden has inked into law the Chips and Science Act, which will provide nearly $52 billion in semiconductor production incentives.