India’s Strategic Approach: Turning US-China Chip Conflict into Opportunity

India’s Strategic Move to Turn US-China Chip War into Opportunity Gains Momentum

US-India Talks on Semiconductor Supply Chains and Manufacturing

US SIA and the India ESA have even set up a task force to explore private initiatives in semiconductors.

With India being the world’s fifth-largest economy, the country has been paying extra attention to its semiconductor industry in recent months, announcing various plans and collaborations to boost its domestic chip sector.

Since there are no domestic semiconductor companies in India, the country’s objective under Prime Minister Narendra Modi’s administration is to get global leaders to invest there.

According to experts, this has boosted India’s economic competition with China, which has been engaged in an ongoing trade war with the US. India has been making efforts to attract chip production to the nation while also seeking to form strategic alliances around semiconductors.

However, India lacks chip-producing fabs or semiconductor manufacturing facilities. As a result, the government launched a $10 billion government incentive scheme that can cover up to 50% of project expenses in an effort to entice foreign chipmakers.

There have been a flurry of announcements in the Indian semiconductor industry related to chip manufacturing. In September last year, Foxconn, the Taiwanese firm that assembles Apple’s iPhones, and Indian mining company Vedanta teamed up to build a US$19.5 billion chip-making facility in the western state of Gujarat.

The joint venture applied for the Indian government incentives to set up a semiconductor fab in Gujarat. The target is to manufacture 40,000 wafers a month in around two and three years.

ISMC Digital, a consortium of investors, is planning to build a US$3 billion fabrication plant in the southern state of Karnataka. Tower Semiconductor, an Israeli company, would be the technology partner on that project.

Even Tata Group has shared its intentions to begin semiconductor chip manufacturing in India very soon. According to media reports, Chairperson Natarajan Chandrasekaran of  Tata Sons said last year that the company plans to build a “semiconductor assembly testing business” and is in talks with major companies. The aforementioned factories would be among the first semiconductor manufacturing plants in India.

United States wants to get involved to increase collaboration in high-tech areas such sophisticated weapons, supercomputing, semiconductors, and other high-tech domains.

In February 2023  at the India-US Initiative on Critical and Emerging Technology’s inaugural conference, manufacturing and “bilateral collaboration on resilient semiconductor supply chains” were topics of discussion.

A task team to investigate private initiatives in semiconductors was also established by the India Electronics and Semiconductor Association and the US Semiconductor Industry Association.

Security advisor of US, Jake Sullivan, stated that the goal was for technological partnerships to be the “next big milestone” in the US-India relationship, following a 2016 agreement on nuclear power cooperation.

He described the effort as a “big foundational piece of an overall strategy to put the entire democratic world in the Indo-Pacific in a position of strength.”

The intentions of the Biden administration are clear – to strengthen its connections with Asian allies and offset China’s dominance in cutting-edge technologies. According to Commerce Secretary Gina Raimondo, the US is also considering collaborating with India on certain manufacturing jobs to boost competition against China.