India-US chip partnership could boost global chip supply chain

India is making an attempt to emerge as a aggressive various to China within the semiconductor sector amid heightened chip battle between the US and China.

India and the US final week signed a memorandum of understanding on establishing a semiconductor provide chain, which consultants see as a chance for each nations to scale back international dependency on China.

“The MoU seeks to ascertain a collaborative mechanism for the semiconductor provide chain resiliency and diversification in view of the US CHIPS and Science Act and India Semiconductor Mission (ISM),” mentioned Charlie Dai, vice chairman, and analysis director at analysis agency Forrester.

ISM is a authorities initiative aimed to advertise the expansion and improvement of the semiconductor trade in India and to drive India’s methods for creating the semiconductors and show manufacturing ecosystem.

India goals to be a key semiconductor participant

Though India doesn’t have native semiconductor manufacturing corporations, the nation has been specializing in attracting international chip makers to arrange amenities within the nation. In December 2021, India accredited a $10 billion incentive plan to draw investments for semiconductor manufacturing and show manufacturing and to change into a key participant within the international semiconductor provide chain.

The semiconductor trade depends on a fancy international provide chain for uncooked supplies resembling silicon wafers, chemical compounds, and gases. Disruptions within the provide of supplies as a result of pandemic and geopolitical tensions have contributed to a semiconductor scarcity, impacting merchandise starting from servers and PCs to car manufacturing.

The pandemic has set companies throughout geographies interested by the right way to deal with the provision chain disruption, which is basically a results of overdependence on only a few nations for chips.

Taiwan, South Korea, Japan, the US, and China are at the moment the foremost gamers in chip manufacturing.

With the US being more and more frightened over China’s rising geopolitical energy, which rests partially on its manufacturing capabilities, US President Joe Biden’s administration has been issuing sweeping restrictions on exports of chip expertise to China.

All these have made India a possible candy spot for chip expertise improvement and presumably a key hyperlink to the worldwide semiconductor provide chain.

The newest US-India partnership indicators that the US considers India to be a future associate in constructing a resilient provide chain, mentioned Gaurav Gupta, an analyst at analysis agency Gartner.

Nevertheless, contemplating the “total semiconductor area, which incorporates uncooked silicon wafers; chip design; wafer fabrication; meeting together with take a look at and packaging; uncooked supplies together with chemical compounds, and EDA [electronic design automation] — the one space the place India has a good presence at this time is in chip design or what can be thought of to be a part of the fabless ecosystem,” Gupta mentioned.

Understanding the necessity for being aggressive in a sector that’s as important as semiconductors, India is working to create a resilient provide chain together with different nations.

In September 2021, the Quad Alliance — comprising India, the US, Japan, and Australia — collaborated to safe provide chains in semiconductors and 5G telecom applied sciences in a transfer to clip the rising affect of China.

“If profitable, India could possibly be part of the worldwide semiconductor provide chain, particularly in manufacturing, the place about 75% of the share is held by China, Taiwan, S. Korea, and Japan. The thought is to have a balanced regional distribution of chip manufacturing share for the long run — so you possibly can have a greater response to any logistics or geopolitical crises, like what occurred through the pandemic,” Gupta mentioned.

Crucial activity now for India is to reveal its first industrial fab, in line with Gupta.

Simply this week, Indian IT Minister Ashwini Vaishnav mentioned that the nation is about to announce its first semiconductor fabrication facility, deciding on a proposal from one among three worldwide bidders: a Vedanta-Foxconn three way partnership, the Worldwide Semiconductor Consortium (ISMC), and Singapore’s IGSS Ventures.

If one of many proposals strikes forward quickly it might take three or 4 years earlier than fabricated wafers might be shipped to prospects, Gupta mentioned. For an outsourced semiconductor meeting and take a look at (OSAT), the timeline could possibly be two and a half to a few years, he mentioned.

“At this level, I gained’t actually concentrate on when India turns into a viable various in opposition to the established nations. The present precedence is to take small steps and show that it may be a participant on this area. Now we have authorities schemes, proposals, curiosity, and agreements, however the important thing could be how and when tasks are literally executed,” Gupta mentioned.

India might change into a key chip maker in 3-4 years

Nevertheless, some consultants imagine that India has the potential to change into a producing nation in a span of three to 4 years, given the nation is resourceful and is placing a lot emphasis on talent improvement.

“There’s a very giant footprint of chip design prowess in India with a really superior and sturdy chemical trade. With the promulgation of NEP [national education policy], new syllabi design by AICTE [All India Council for Technical Education] just lately and a big coverage impetus on {hardware} together with PLI [product-linked incentive] and DLI [design-linked incentives] schemes by the federal government, India needs to be a semiconductor manufacturing nation in three to 4 years,” mentioned Anurag Awasthi, vice chairman of the trade physique for electronics system design and manufacturing sector, IESA.

As each India and the US are specializing in constructing resilient nationwide semiconductor provide chains, the India-US MoU will assist each nations to resolve regulatory obstacles to enterprise and expertise mobility in each nations and facilitate the longer-term strategic improvement of diversified semiconductor ecosystems, Forrester’s Dai mentioned.

Not solely is the MoU anticipated to result in larger cooperation in tech improvement between the US and India, however it’ll additionally possible gasoline enterprise funding within the semiconductor sector, mentioned Helen Chiang, Asia/Pacific Semiconductor Analysis Lead and Basic Supervisor of IDC Taiwan. “The cooperation additionally exhibits that the US hopes to have extra partnerships with non-China provide chains to construct a US-led semiconductor ecosystem. India is the highest seventh nation for China semiconductor exports; the extra in-depth relationship with the US might be a possible concern for China long run.”

Copyright © 2023 IDG Communications, Inc.