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India and the US are likely to explore an alliance to manufacture semiconductor chips during US Commerce Secretary Gina Raimondo’s visit to New Delhi on March 8-10, a source tracking the matter has said.
Raimondo, accompanied by a senior business delegation, will co-chair the US-India CEO Forum and US-India Commercial Dialogue meetings with her Indian counterpart Piyush Goyal, focusing on issues such as supply chain resilience, inclusive digital economy, energy security, and post-pandemic economic recovery, a source told businessline.
“If all goes well, the two sides could sign a memorandum of cooperation on semiconductor partnership during Raimondo’s visit. The US wants to insulate its critical technology supply chain from China, secure against shortages, and also bring down the world’s dependence on Taiwanese chips. It views India as a reliable option,” the source added.
Private-sector task force
On January 31 this year, the US Semiconductor Industry Association (SIA) and the India Electronics and Semiconductor Association (IESA) announced plans to form a private-sector task force to strengthen collaboration between the two countries in the area of semiconductors.
The goals of the task force include developing a readiness assessment regarding the semiconductor ecosystem in India and making recommendations on opportunities and challenges to increase India’s role within the global semiconductor value chain, including chip manufacturing.
“India’s large labour force, sizeable English-speaking population and democratic rule of law make it an attractive destination for the manufacture of chips,” the source added.
Last year, the Union Cabinet approved the Semicon India programme with a total outlay of ₹76,000 crore to provide financial support to companies for the development of the semiconductor and display manufacturing ecosystem in the country.
Less Taiwan dependence
Promoting chip manufacturing in India fits in with Washington’s intention of relying less on supplies from Taiwan and cutting out China from critical technology supply chain because of existing geo-political tensions.
The global semiconductor foundry market size was valued at $101.6 billion in 2022 and is projected to reach $182.9 billion by 2030.
Taiwanese companies, led by TSMC, account for over 60 per cent of the market share of the global foundry market (factories contracted to make chips designed in other countries). China accounts for 8.5 per cent of the global foundry market.
Washington wants to check Beijing’s market expansion plans.
“While the US is eager to get into a semiconductor partnership with India, it may want to put in place some conditions related to labour regulations. The Democrats are very focussed on labour, but India needs to be comfortable with what is proposed,” the source said.
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