Central Idea

• The recent visit of Prime Minister Narendra Modi to Washington DC has solidified the US-India technology partnership, marking technology as the new frontier in geopolitics. One crucial aspect of this partnership is the joint commitment to diversify the global semiconductor supply chain, which lies at the heart of the rivalry between the United States and China. This op-ed examines the significance of this collaboration and its potential implications for India’s semiconductor industry.

*Relevance of the topic

*India Semiconductor Mission (ISM) builds a vibrant semiconductor and display ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design

Semiconductors: The New Strategic Resource

• Technological Dependence: Semiconductors are essential components in various advanced technologies, including smartphones, computers, artificial intelligence, and defence systems. Countries heavily rely on these technologies for economic growth, national security, and global competitiveness.
• Critical Infrastructure: Semiconductors are considered critical infrastructure due to their role in powering and enabling essential sectors such as telecommunications, energy, transportation, healthcare, and finance. Disruptions in semiconductor supply chains can have far-reaching consequences.
• Limited Manufacturing Capability: Only a few countries possess the advanced manufacturing capabilities required to produce semiconductors. These manufacturing processes involve complex fabrication plants and specialized equipment, making it difficult for new entrants to establish a foothold in the industry.
• Global Supply Chain: The semiconductor industry relies on a global supply chain, with various stages of production taking place in different countries. Certain regions, such as Taiwan, South Korea, and the United States, play a dominant role in semiconductor fabrication, assembly, and testing.
• National Security Concerns: The control and security of semiconductor supply chains have become matters of national security for many countries. Dependence on foreign sources for critical technologies raises concerns about vulnerabilities, potential disruptions, and the risk of compromising sensitive information.
• Economic Competitiveness: Semiconductors contribute significantly to a country’s economic competitiveness. Advanced semiconductor industries can attract high-value investments, foster innovation, and create skilled job opportunities, contributing to economic growth and technological leadership.
• Technological Sovereignty: Countries view the development of indigenous semiconductor capabilities as crucial for technological sovereignty and reducing dependence on external sources. Achieving self-sufficiency in semiconductor manufacturing enables greater control over technological advancements and mitigates potential risks.

India-US iCET Initiative

• Announcement: The India-US Initiative on Critical and Emerging Technologies (iCET) was announced during the Quad summit held in Tokyo in 2022. It reflects the shared commitment of India and the United States to enhance cooperation in critical and emerging technologies.
• Areas of Cooperation: The iCET initiative focuses on fostering collaboration between India and the United States in various domains, including semiconductor technology, resilient supply chains, cybersecurity, artificial intelligence, and other critical and emerging technologies.
• Bilateral Engagement: The iCET initiative involves regular bilateral engagements between India and the United States to discuss and advance cooperation in the identified areas. High-level officials, including National Security Advisers and counterparts from relevant ministries, participate in these discussions.
• Semiconductor Collaboration: Within the iCET framework, India and the United States have expressed a commitment to collaborate in the development of a semiconductor design, manufacturing, and fabrication ecosystem in India. The aim is to enhance India’s capabilities in the semiconductor sector and promote the growth of a skilled workforce.
• Skill Development and Workforce: The iCET initiative also emphasizes the importance of skill development and workforce training in critical and emerging technologies. India and the United States seek to promote the development of a skilled talent pool capable of driving innovation and contributing to the growth of these sectors.

US-China rivalry in the context of semiconductor chips

• Technological Leadership: Both the US and China recognize the strategic importance of semiconductor chips in driving innovation and economic growth. The United States has long been a leader in semiconductor design and manufacturing, while China has made significant efforts to catch up and become more self-sufficient in chip production.
• Intellectual Property Concerns: Intellectual property theft and forced technology transfer have been areas of concern in the US-China rivalry regarding semiconductor chips. The US accuses China of engaging in unfair practices to acquire advanced chip technologies and intellectual property, undermining the competitiveness of American semiconductor companies.
• Trade Tensions: The US-China trade tensions have had a significant impact on the semiconductor industry. The US government-imposed restrictions on Chinese technology companies like Huawei, limiting their access to American-made chips and semiconductor equipment. This has had implications for China’s domestic chip manufacturing capabilities.
• Export Controls: The United States has tightened export controls on semiconductor-related technologies to prevent their transfer to China, citing national security concerns. These controls have restricted Chinese access to advanced chip-making equipment and technologies, impacting China’s ability to develop its semiconductor industry.
• Self-Sufficiency Goals: Both the US and China have set goals to enhance their self-sufficiency in semiconductor chips. The US has aimed to bolster domestic chip manufacturing capabilities, reduce reliance on foreign suppliers, and secure its supply chain. China’s Made in China 2025 plan emphasizes developing indigenous semiconductor technologies to become a global leader in chip production.
• Geopolitical Implications: The semiconductor industry’s geopolitical implications are significant. Control over chip technologies and supply chains can provide a country with economic advantages, technological superiority, and potential leverage in trade disputes or geopolitical conflicts. The US and China view the semiconductor industry as crucial for maintaining their global influence and national security.

India’s Semiconductor Challenge

• Lack of Domestic Manufacturing: India has limited domestic semiconductor manufacturing capabilities. The country heavily relies on imports to meet its demand for semiconductors, which poses challenges in terms of supply chain vulnerabilities, dependence on foreign suppliers, and potential risks to national security.
• Absence of Chip Ecosystem: Building a complete chip ecosystem involves not only semiconductor manufacturing but also the development of ancillary industries, specialized infrastructure, and a skilled workforce. India currently lacks a comprehensive chip ecosystem, which is crucial for attracting investments and fostering innovation in the semiconductor industry.
• Power and Water Supply: Semiconductor manufacturing requires uninterrupted and uninterruptible power supply, as well as a steady and ample supply of pure water. India faces challenges in providing 24×7 power and water supply, which are critical infrastructure requirements for establishing semiconductor fabrication plants (fabs).
• Skill Gap: Developing a skilled workforce for the semiconductor industry is essential but poses a challenge in India. The complex nature of chip manufacturing requires specialized expertise, and India needs to bridge the skill gap by investing in training programs, educational institutions, and research and development initiatives.
• Investment and Collaboration: Attracting major international chip makers to establish fabrication plants in India has proven to be challenging. While the government has allocated funds for the semiconductor industry and incentivized investments, India needs to enhance its value proposition to attract big players and forge international collaborations.
• Regulatory Framework: Creating a favorable regulatory environment, including policies, intellectual property rights protection, and ease of doing business, is crucial for the growth of the semiconductor industry. India needs to address regulatory challenges and provide a supportive framework to encourage investments and foster innovation.
• Free Trade Agreements: India’s reluctance to enter into free trade agreements, such as with Taiwan, has hindered its efforts to attract major chip manufacturers. Such agreements can provide advantages in terms of technology transfer, market access, and attracting investments from established players

Way ahead

• Strengthen Domestic Manufacturing: India should continue to invest in semiconductor fabrication plants (fabs) and create a conducive environment for both domestic and foreign companies to establish semiconductor manufacturing facilities. This requires robust infrastructure, reliable power supply, access to advanced equipment, and a favorable regulatory framework.
• Skill Development and Research: The focus on skill development should continue, with emphasis on nurturing a skilled workforce specialized in chip design, manufacturing, and fabrication. Collaborations between industry and academia can play a crucial role in promoting research and development, knowledge sharing, and fostering innovation in the semiconductor field.
• Strategic Partnerships: India should actively pursue strategic partnerships and collaborations with global semiconductor companies, industry associations, and research institutions. These partnerships can facilitate technology transfer, access to advanced manufacturing processes, and market opportunities. Government incentives and support can further encourage international players to invest in India’s semiconductor ecosystem.
• Enable Ancillary Industries: To create a comprehensive chip ecosystem, India needs to develop ancillary industries that support the semiconductor sector. This includes nurturing electronics manufacturing capabilities, promoting indigenous demand for chips, and fostering a supportive environment for related industries, such as packaging, testing, and materials.
• Policy Reforms: The Indian government should continue to focus on policy reforms that promote a favorable business environment for the semiconductor industry. This includes streamlining regulatory processes, protecting intellectual property rights, improving ease of doing business, and providing incentives for research, development, and investment in the semiconductor sector.
• International Collaborations: Strengthening collaborations within the Quad framework, particularly with the United States, Japan, and Australia, can provide access to expertise, technology, and market opportunities. Engaging with other semiconductor-rich countries, such as Taiwan, South Korea, and Israel, can also open avenues for knowledge sharing, partnerships, and technology transfer.

Conclusion

• The US-India technology partnership, with a focus on diversifying the semiconductor supply chain, holds immense potential for India’s growth in the industry. While India faces challenges in establishing a robust chip ecosystem, investments from companies like Micron Technology, along with collaborative initiatives, can pave the way for a more self-reliant and technologically advanced India. By positioning itself in the global chip war, India has embarked on a journey that promises to shape its technological landscape and strengthen its ties with the United States.

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