More than 90% of the world's most advanced semiconductor chips are made in Taiwan. About four decades ago, it was a small town known for its tea plantations. Today, it is the birthplace of global excellence in chip manufacturing. The city of Hsinchu and its famous technology park, about 80 kilometers from Taipei, is a key driver of Taiwan's economic resurgence. The story of Hsinchu provides an important reference for India's promised chip city, Gujarat's Dholera, an area the size of Singapore, where New Delhi is pinning its hopes on creating its own Silicon Valley. At first glance, the scenery belies the notion that Hsinchu is part of the so-called "Silicon Shield" of Taiwan, a strategic city with rows of two-wheelers neatly arranged on the roads, 24-hour convenience stores, multi-cuisine restaurants, parks, schools, universities, large residential areas and plenty of trees. In addition to the tree cover, the signs on large buildings throughout the city also give a sense of why Hsinchu has become one of the most important places in the global economy. Not all of the names are popular, but they are all important. Although Hsinchu is not Taiwan's diplomatic or financial center, it may be Taiwan's most global city. Taiwan produces more than 90% of the world’s most advanced semiconductor chips, and Hsinchu is home to TSMC, the world’s most valuable chip company, which accounts for a large portion of that output. MediaTek, another Taiwanese company that designs chips, is also headquartered there. So are companies like Wistron, which briefly made iPhones in India before selling its factories to Tata, and UMC, Taiwan’s first chip company. Companies registered in the Hsinchu Science Park account for about 6% to 8% of Taiwan’s gross domestic product and about 12% of the trade-dependent island’s exports. More than 150,000 people, nearly 1% of Taiwan’s population, work in Hsinchu, where residents have the lowest average age on the island. In the 1980s, as Taiwan was seeking to turn around its fledgling economy after a major fuel crisis, government officials set up a high-tech special zone in Hsinchu to attract more businesses. It brought the world’s best technical talent to what was then a poor tropical island. At the time, many engineers with ties to Taiwan lived in places like the United States, Japan, and Europe. But when the government called on them to return to Taiwan and make Taiwan a tech manufacturing hub, many of them came back to take the plunge. Morris Chang was one of them, who moved to Taiwan in 1985 after a long career in the U.S. chip industry. Two years later, at age 55, Chang founded TSMC.The company pioneered the contract manufacturing method for making chips, without having to design any chips. This has proven to be a revolutionary business model, paving the way for fabless companies such as Apple and Nvidia, which are TSMC's largest customers today.

Before TSMC was established, the government of Taiwan played a crucial role. In addition to subsidies for building factories, about a decade ago, the Industrial Technology Research Institute (ITRI) was established, obtaining chip manufacturing technology transfer from the American Radio Corporation.

Advertisement

After the technology was perfected, it was realized that the government should exit chip manufacturing and transfer the technology along with the tools to private companies, thus giving birth to United Microelectronics Corporation, which was founded in 1980. TSMC was also incubated and spun off. A few years later, it graduated from the Industrial Research Institute.

India has a large pool of chip design engineers, but currently lacks the sufficient workforce to employ cutting-edge manufacturing factories. The government hopes that when India enters the chip industry, its vast pool of non-resident engineering talent will return to the country. However, India must also ensure a high quality of life.

The importance of Hsinchu to Taiwan's economy and its people has altered the distribution of wealth in the region.

According to the latest data, residents of Hsinchu City have been the highest in terms of average annual household income in Taiwan for the fifth consecutive year in 2021. Their average annual income in 2021 was about $49,000, close to 4.1 million rupees. Most people live in nearby areas such as Hsinchu and Baoshan, working in one of the several semiconductor factories in the Science Park or in related industries that provide materials for chip production.

The town and its industrial operations are essentially self-sufficient. The water needed for chip manufacturing comes from the Baoshan Reservoir, about 20 kilometers from Hsinchu, and all major natural gas suppliers are located nearby. It has two main universities—National Yang-Ming Chiao Tung University and National Tsing Hua University—which are considered top schools for semiconductor education, ensuring a steady stream of talented semiconductor engineers graduating each year.

Hsinchu could serve as a blueprint for India.

Today, Dholera faces many of the same issues as Hsinchu did four decades ago. Many engineers who moved to Hsinchu during its construction were disappointed with the state of the infrastructure and the overall wilderness surrounding the area. Of course, the rise of Taiwan's semiconductor industry, led by TSMC, has changed the fate of Hsinchu and its people in Taiwan.

Dholera and India both need a similar champion. Although the government has ensured that core infrastructure is in place—a vast network of roads and power stations—most of Dholera remains barren land, with only a few factories sporadically appearing. Large areas show little sign of human activity, with no residential communities, parks, schools, or restaurants.CG Power is constructing a Tata-PSMC foundry and packaging plant that could bring about significant changes and potentially stimulate India's long-stagnant semiconductor industry—although these projects will take some time to materialize.

An international airport is under construction near Doraera to serve foreign tourists and future factory workers, as well as to transport materials and components needed to service various industries in the region. For instance, gases crucial for the chip manufacturing process will come from Dahej, which is about a four-hour drive from Doraera.

Although Hsinchu serves as the ideal blueprint the government wants to establish in Doraera, there will be some differences. For example, people working in the city's factories will live in Ahmedabad, over a hundred kilometers away. Therefore, it is unlikely that Doraera will see the emergence of schools, convenience stores, and restaurants like those in Hsinchu.