Semi-conductor chips are foundational to digital economy. To achieve this growth access to critical technologies, managing the changing geopolitical landscape and ensuring chips supply is crucial.

The Indo-US trade partnership is expected to gather momentum with the new President elect at the helm of affairs. It is an open secret that the impending increase in trade barriers is expected to affect China more than India. It is speculated that there may be a rebranding of US’ domestic semi-conductor programme, CHIPS and Science Act, given the huge capital expenditures involved and, with respect to India, the iCET (Initiative on Critical & Emerging Technologies) as remnants of the Biden era. Intrinsically they have both been spectacular policy measures to provide impetus to national resource architecture, creating sustainable jobs and hedging trade ties against China.

The CHIPS and Science Act has an allocation of $50 billion to revitalize the American IC (Integrated Chips) industry — with successful commitment by American as well as Taiwanese manufacturers that are building massive production facilities to be a leader in semi-conductor industry again. These investment commitments are unlikely to be reversed with the transfer of power in the US, as the resolve to reduce the role of China in this sector is certainly here to stay.

Indian angle

From an Indian perspective, the iCET is crucial and is seen as successful by policy wonks, over the last two years. It has been launched by the National Security Councils of both India and the US, and ably supported by MEA and the US State and Commerce departments. iCET is a progressive policy framework to enable transfer of dual use technologies.

This implies supporting innovation through strategic trade partnerships resulting in the creation of INDUS-X, a defense accelerator jointly steered by the Defense Innovation Unit (DIU) of the US and iDEX from the Ministry of Defence in India. It could result in a next generation of start-ups that can truly skyrocket across a spectrum of emerging technology areas like AI & Autonomous decision making, Quantum computing, Biosecurity, Space etc.

The India Semi-Conductor Mission (ISM) has demonstrated strong efficacy with a slew of announcements aimed at developing a robust ecosystem for electronics indigenization. Backed by more than $10 billion worth of sops, ISM is well positioned to continue bring in FDI into the country with the support of the state governments to facilitate the last mile clearances on land, electricity, water, and access to sorely needed quality talent pool.

Wanted: Tech talent

India has never been short of software engineering and IC design talent, however, when it comes to hi-tech and hardware manufacturing there is a shortage.

The country needs vast numbers to achieve self-reliance and, of course, effectively compete against other global giants. It is notable that Taiwan and China often brought people from agriculture to work on the chip assembly lines. How will India act to expedite talent shortage?

The access to critical minerals remains a stumbling block in the supply chain — the Quad and Critical Mineral Partnerships are expected to smoothen the flux in the coming years.

In the history of IC manufacturing, no country has been able to own the entire supply chain, some are strong in minerals and natural resources, some in manufacturing whilst others in tools and designing.

To indigenize a significant portion of India’s electronic supply chain is a worthwhile objective.

Can we make more than 50 per cent of mobile phone components in India and reduce imports drastically? Can we ensure all white goods and automotive brands source chips and other electronic hardware from India? Can we become a trusted partner of manufacturing dual use chips like the recent deal with US Space power and MQ-9B UAVs with MRO out of India?

In essence, as much as the new US administration will remain hawk eyed about national security and trade tariffs, the vast progress made by India and the US in shaping the iCET framework will stand in good stead.

Of course, export controls are heightened to ensure critical technologies are not misused owing to fear of India’s multi alignment foreign policy — this has been deftly handled by the US State Department and MEA through various workshops like the one recently in Bengaluru with contract manufacturers including start-ups, and in continuously developing a calibrated entity list to ward off any action in bad faith by counterparties.

The role of Indian States in pitching directly for investments beyond realpolitik is a welcome approach to cut the red tape and to ensure zero graft — States with existing economic clusters and talent pool will stand out.

The writer is India Technology Policy Fellow, The Pacific Forum