India in the global 'semiconductor' war
The US ban on China's semiconductor manufacturing components and technologies has kicked up a storm. But this situation suits India, as the US and its key allies like Japan also want to prevent China from becoming a semiconductor hub.
Ankush Pandey
The US ban on components and technologies that make up China's semiconductors has kicked up a storm, triggering a fresh round of retaliation and countermeasures. This retaliatory policy of imposing tariffs has disrupted global supply chains and complicated geopolitics.
The Biden administration has made strong legislative interventions to maintain US dominance in chip manufacturing and related supply chains during 2022-2024.
The US invented semiconductors, but now produces only about 10 percent of the world's supply. The sanctions imposed by the US Commerce Department are aimed at limiting exports and controlling Chinese manufacturing of advanced computing chips, supercomputers and advanced semiconductors. Reacting to the US sanctions, China has also taken two retaliatory steps.
China banned the export of germanium and gallium necessary for the production of semiconductors to the US. Beijing also complained about this to the World Trade Organization (WTO). Earlier, China had banned the export of rare metals to Japan, citing historical issues between the two countries.
In addition, China started giving subsidies of more than $150 billion to the domestic IT industry. Other countries are also taking the subsidy route. Europe, Japan and India are also starting subsidies on semiconductors.
With the shift in semiconductor manufacturing, the production and supply of chip manufacturing materials will also increase. In this rivalry for technological superiority among superpower countries, India sees a significant opportunity to leapfrog in the semiconductor industry.
Micron Company, already suffering from China, is setting up a testing and packaging center in Gujarat with an investment of more than $83 million. Taiwan's TSMC and Foxconn companies are entering the semiconductor industry in India.
are actively negotiating for entry. The escalating US-China semiconductor war has come as an opportunity for India to phase out the shift of global industry, upgrade India's capabilities and restructure the supply chain.
The Indian leadership recognizes that without a strong semiconductor industry, India cannot be a significant player in the Fourth Industrial Revolution. In 2021, the Modi administration launched the India Semiconductor Mission (ISM) with the goal of building a semiconductor industry in India and connecting it to the global semiconductor value chain. One of the biggest challenges to India's economic policy is the growing trade imbalance, especially with China.
Semiconductor imports contribute significantly to India's trade imbalance Which has increased by 92 percent during 2021-2023. ISM The aim is to reduce dependence on imports and develop this strategic industry Self-reliance has to be promoted. The US-China technological war has put Indian This has created an imperative for policy makers to build this industry.
He believes that the current geopolitical and geo-economic trends are in favor of the US, because the US and its major allies, such as Japan, China They want to prevent India from becoming a semiconductor hub. One of their key strategies is to create a supply chain based on like-minded countries, And Indian policy makers are positioning India as a natural fit for those liberal countries.
partners that dominate the semiconductor industry. During the Semicon India 2023 conference, Prime Minister Modi also talked about building 'reliable value chains' among like-minded democratic countries.
The US emphasised the importance of the US in the US. India is striving to enhance its partnerships and collaboration with other like-minded countries to boost its chip manufacturing industry. India has strengthened its chip collaboration with the US, Japan and Taiwan.
India established a strategic partnership with the US in January 2023 through the Critical and Emerging Technology initiative, which aims to strengthen resilient semiconductor supply chains. Additionally, the Indian government has also facilitated institutional collaboration between the India Electronics Semiconductor Association and the US Semiconductor Industry Association by creating a task force to identify immediate and long-term opportunities for complementary semiconductor ecosystems.
India aims to become a leading semiconductor power and to achieve this goal, it understands the need to develop a strong semiconductor talent pool. This will meet India's rapidly growing domestic demand and meet the growing global demand for semiconductor talent. With nearly 20 percent of the world's semiconductor design engineers, India is already a significant supplier of workforce to this industry. Additionally, many science and engineering students from Indian universities work for leading global semiconductor companies.
In addition, India hosts research and development centres of nearly one-fourth of the world's top 25 semiconductor design companies. The Indian government has launched several initiatives to further strengthen its position as a semiconductor talent hub. During the Modi-Biden summit, it was announced that US company Lam Research will train 60,000 Indian engineers through its 'Semiverse Solution' to accelerate India's semiconductor education and workforce development goals.
The Modi administration has changed India's 'industrial strategy', which now closely resembles Korea's tried and tested 'strategic industrial policy'. Learning from the Korean and Taiwanese experiences, the Indian government has identified the semiconductor industry as a 'strategic' sector to boost it. The central government has provided incentives under the PLI scheme.
The new PLI scheme is for private players, but the subsidy is linked to their performance, such as production and exports. The technological rivalry between the US and China could provide a level playing field for India.
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