LESS THAN a fortnight before Prime Minister Narendra Modi is expected to travel to the US, Washington on Monday announced a “new partnership” with India to explore semiconductor supply chain opportunities, which will include a “comprehensive assessment” of India’s existing semiconductor ecosystem, regulatory framework, workforce and infrastructure needs. That will serve as the “basis for potential future joint initiatives” to strengthen and grow this critical sector, the US said.
Modi is expected to travel to the US between September 21 and 24 to attend the Quad leaders’ summit, the Summit of the Future and a diaspora event.
“The US Department of State will partner with the India Semiconductor Mission, Ministry of Electronics and IT, Government of India, to explore opportunities to grow and diversify the global semiconductor ecosystem under the International Technology Security and Innovation (ITSI) Fund, created by the CHIPS Act of 2022,” the US State Department said in a statement on Monday.
“This partnership will help create a more resilient, secure and sustainable global semiconductor value chain,” it said.
Outlining the broad contours of the partnership, the statement said: “The initial phase includes a comprehensive assessment of India’s existing semiconductor ecosystem and regulatory framework, as well as workforce and infrastructure needs. (US) State (department) anticipates that key Indian stakeholders, such as state governments, educational institutions, research centers and private companies will participate in this analysis steered by the India Semiconductor Mission. The insights gained from the assessment will serve as the basis for potential future joint initiatives to strengthen and grow this critical sector.”
Underlining that the US and India are “key partners in ensuring the global semiconductor supply chain keeps pace with the global digital transformation currently underway”, it said: “Manufacturing of essential products ranging from vehicles to medical devices relies on the strength and resilience of the semiconductor supply chain. This collaboration between the US and India underscores the potential to expand India’s semiconductor industry to the benefit of both nations.”
In August 2022, US President Joe Biden signed the CHIPS Act, a US law that appropriated new funding to boost domestic manufacturing and research of semiconductors. “The CHIPS Act also created the ITSI Fund, which provides the US Department of State with $500 million ($100 million per year over five years, starting in Fiscal Year 2023), to promote the development and adoption of secure and trusted telecommunications technologies, secure semiconductor supply chains, and other programs and initiatives with our allies and partners,” the statement said.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act is intended to lure microchip manufacturing back to the US after decades of companies offshoring the technology. Although the country produced close to 40 per cent of the world’s semiconductor supply in 1990, that statistic has slipped to just 12 per cent. Taiwan, on the other hand, produces more than 60 per cent of the world’s supply of semiconductors and more than 90 per cent of the most advanced chips, according to US-based think tank Council on Foreign Relations.
Given the critical importance of semiconductor chips in almost everything, from missiles to mobile phones and cars to computers, the partnerships with Singapore and US have geo-strategic and geo-economic importance.
Supply disruptions during the Covid-19 pandemic and the geopolitical tensions arising out of China’s aggressive moves in the Taiwan Strait and the South China Sea have brought urgency to India’s efforts to develop its own semiconductor ecosystem. The global chip industry is dominated by companies from a very small number of countries, and India is a late entrant into this high-tech and expensive race.
The India Semiconductor Mission was launched in 2021 with a Rs 76,000 crore chip incentive scheme, under which the central government offered half the plant’s capital expenditure costs as subsidy.
In February, the Cabinet approved semiconductor-related projects adding up to investments of about Rs 1.26 lakh crore. That same month, the government announced a partnership between the Tata Group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) to set up a semiconductor fabrication plant in Gujarat. The Cabinet has, so far, approved five semiconductor units, including four assembly units, under the incentive scheme.
