US and India strike semiconductor partnership deal ahead of Modi’s visit

Washington on Sep 9 announced a "new partnership" with India to explore semiconductor supply chain opportunities, ahead of Prime Minister Narendra Modi's expected visit to the US.

The partnership will include a "comprehensive assessment" of India's existing semiconductor ecosystem, regulatory framework, workforce, and infrastructure needs. According to the US, it will act as the "basis for potential future joint initiatives" to develop and expand this vital industry.

This occurs just a few days after Singapore and India formed an ecosystem cooperation for semiconductors during Modi's visit last week.

PM Modi is scheduled to visit the US between Sep 21 and Sep 24, for the meeting of the future, the Quad leaders' meeting, and a diaspora gathering.

“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 Sep 9.

“This partnership will help create a more resilient, secure, and sustainable global semiconductor value chain,” it added.

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.”

“The 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,” it added.

Emphasizing 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,” it added.

US President Joe Biden signed the CHIPS Act, a US law that appropriated new funding to boost domestic manufacturing and research of semiconductors in Aug 2022.

“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.

After decades of firms offshore the technology, the goal of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act is to bring microchip production back to the United States.

Even while the nation generated about 40% of the semiconductors used worldwide in 1990, that percentage has since dropped to barely 12%.

However, according to the US-based research tank Council on Foreign Relations, Taiwan manufactures more than 60% of the world's supply of semiconductors and more than 90% of the most advanced chips.

The alliances with Singapore and the US are strategically and economically significant since semiconductor chips are used in practically everything, including computers, mobile phones, and missiles.

The Covid-19 pandemic-related supply difficulties as well as the geopolitical tensions resulting from China's aggressive actions in the South China Sea and Taiwan Strait have made India's ambitions to establish its own semiconductor ecosystem more essential.

Companies from a very limited number of nations control the global chip market, and India entered this costly and high-tech race far later than its competitors.

With the introduction of the ₹76,000 crore chip incentive scheme in 2021, the union government subsidized half of the plant's capital expenditure expenses as part of the India Semiconductor Mission.

The Cabinet approved projects connected to semiconductors in Feb, totaling approximately ₹1.26 lakh billion in investments.

During the same month, the government declared that the Tata Group and Powerchip Semiconductor Manufacturing Corporation (PSMC) of Taiwan will collaborate to establish a semiconductor manufacturing facility in Gujarat.

Under the incentive program, the Cabinet has so far approved five semiconductor units, including four assembly units.