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India and US Team Up on Semiconductors, Setting the Stage for a Showdown with China

Paurush Gupta by Paurush Gupta
11 March 2023
in Economy
India and US Team Up on Semiconductors, Setting the Stage for a Showdown with China
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US Secretary Raimondo: The heyday of China has passed for the global good. Its loop-sided technological fortress is being breached at an unprecedented pace. To put it simply, China enjoyed hegemony in trade with major democratic nations of the world despite its blatant violations of the rules-based international order. China believed that no country would dare confront it due to its special leverage in the global market. This notion was not entirely unfounded, but things are now moving at a rapid pace.

Now, every nation, particularly the democratic ones, is accelerating its decoupling from China. They have been taking necessary actions and putting money where their mouth is. One significant area where China had enjoyed a special advantage for decades was semiconductor technology. But this hegemony will be a thing of the past as countries are rapidly reducing their reliance on China in this sector as well.

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US Secretary of State lauds PM Modi’s leadership

Recently, the US Secretary of Commerce, Gina Raimondo, visited New Delhi on the invitation of Commerce and Industry Minister Piyush Goyal. During her three-day India visit, US Secretary of State Raimondo participated in the India-US bilateral Commercial Dialogue 2023.

While in India, Secretary Raimondo appreciated several steps taken by the Modi government. She highlighted that many US companies are keen to invest heavily in India.

She said, “Many of the actions that India has taken under Prime Minister Modi’s leadership, even over the past couple of years, make India an even more attractive place to do business. More transparency, the rapid move to a digital economy, and absolutely zero tolerance for corruption—all of those things make India an even more attractive partner.”

India-US thinning out Chinese dominance in semiconductors

Later, US Secretary Raimondo and her Indian counterpart, Piyush Goyal, co-chaired the India-US commercial dialogue. This happened after a long gap of three years, during which the two sides discussed ways to drive trade and investment forward. Taking a major step, both the democratic nations signed a Memorandum of Understanding (MoU) to cooperate in the area of semiconductor technology.

On this momentous occasion, US commerce secretary Gina Raimondo claimed that the India-US MoU on cooperation in semiconductors would help the Indian side play a greater role in diversifying the supply chains. It would also help in identifying opportunities for joint ventures or technology partnerships.

In a telephonic briefing, US Secretary Raimondo told the media that this MoU will help India achieve a larger role in the electronic supply chain. She stated that the world would like to see India achieve its aspirations to play a larger role in the electronic supply chain, and to that end, the MoU that she signed on this trip around semiconductors was designed to help India achieve that goal.

The US Secretary Raimondo further stated that India and the US are in a “fortunate situation”. She lauded the fact that both countries are beginning to implement separate incentive programs for the semiconductor industry. The timing of this dialogue is crucial, as it comes very near the launch of the initiative on critical and emerging technology (iCET).

US Secretary Gina also elaborated on the discussions that the two sides undertook. The US Secretary added that discussions between the two sides looked at transparency in incentives, coordinating on their respective semiconductor initiatives, sharing information, and preventing over-subsidizing. It also deliberated on a range of certain kinds of chips, jointly mapping supply chains and making alignments based on the demand for semiconductors.

It is worth noting that India had earlier launched a production-linked incentive (PLI) scheme for semiconductor manufacturing. Additionally, the US administration, led by President Joe Biden, recently unveiled its CHIPS and Science Act. Through this act, the US wants to help rebuild its manufacturing and supply chains. Both these initiatives by the Indian and US governments are aimed at achieving a specific target. Both the nations are looking to reduce their dependence on China for this crucial asset, the semiconductor chip.

Raimondo told me that the agreed MoU talks about how India and the US will share information about the semiconductor commercial opportunities and how both nations will have a continued dialogue around policies that would encourage private sector investment in the semiconductor ecosystem. She categorically hinted that this collaboration will cater to both near-term benefits and long-term strategic opportunities for both nations.

She added, “So, we are looking for near-term commercial opportunities, but we’re also looking for longer-term strategic opportunities because, as you know, this isn’t a one-year collaboration. We think this is a five-, 10-, or 20-year collaboration between the US semiconductor industry, electronic supply chains, and India.”

Also Read: US reveals why Pakistan and its pet terrorists are scared of Modi-Shah

A new initiative for trade enhancement

Apart from the collaboration for semiconductors, US Secretary Raimondo also met with India’s External Affairs Minister, Dr S Jaishankar. She and Minister Jaishankar launched a new initiative called the India-US Strategic Trade Dialogue. As per official statements, the new dialogue would focus on drafting export control regimes for critical technologies.

As per the MEA statement, the dialogue will address export controls, explore ways of enhancing high-technology commerce, and facilitate technology transfers between the two sides.

The US Secretary of State, also stated that the US, India, and 12 other partners in the Indo-Pacific region are developing policies under the Indo-Pacific Economic Framework (IPEF) to create more resilient and secure supply chains. The framework will help to accelerate progress on the green transition and demonstrate nations’ commitment to creating a better business environment.

With enhanced cooperation, the US and India are accelerating the pace of decoupling from China. Currently, China enjoys unabated hegemony in wafer technology, which no other country has been able to achieve on its own. This is why, with the US’s cutting-edge technology and unparalleled skills in design, architecture, research, and development, India will get the push to replace China in this aspect. The United States wishes to capitalize on the vast potential of the economically prudent Indian market and capable skill power. Through these dialogues and initiatives, both nations are inching closer to pulling the lever that once only China controlled to get away with its geopolitical crimes, but not anymore.

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