India-US chip partnership could boost global chip supply chain

India-US chip partnership could boost global chip supply chain

India and the US aim to collaboratively build a resilient semiconductor supply chain that is currently in a state of turmoil due to geopolitical disruptions.

Credit: Fancycrave

India is trying to emerge as a competitive alternative to China in the semiconductor sector amid heightened chip war between the US and China.

India and the US last week signed a memorandum of understanding on establishing a semiconductor supply chain, which experts see as an opportunity for both nations to reduce global dependency on China.

“The MoU seeks to establish a collaborative mechanism for the semiconductor supply chain resiliency and diversification in view of the US CHIPS and Science Act and India Semiconductor Mission (ISM),” said Charlie Dai, vice president, and research director at research firm Forrester.

ISM is a government initiative aimed to promote the growth and development of the semiconductor industry in India and to drive India’s strategies for developing the semiconductors and display manufacturing ecosystem.

India aims to be a key semiconductor player

Although India does not have native semiconductor manufacturing firms, the country has been focusing on attracting global chip makers to set up facilities in the country. In December 2021, India approved a $10 billion incentive plan to attract investments for semiconductor manufacturing and display production and to become a key player in the global semiconductor supply chain.

The semiconductor industry relies on a complex global supply chain for raw materials such as silicon wafers, chemicals, and gases. Disruptions in the supply of materials due to the pandemic and geopolitical tensions have contributed to a semiconductor shortage, impacting products ranging from servers and PCs to automobile manufacturing.

The pandemic has set businesses across geographies thinking about how to tackle the supply chain disruption, which is largely a result of overdependence on just a few countries for chips.

Taiwan, South Korea, Japan, the US, and China are currently the major players in chip manufacturing.

With the US being increasingly worried over China’s growing geopolitical power, which rests in part on its manufacturing capabilities, US President Joe Biden’s administration has been issuing sweeping restrictions on exports of chip technology to China.

All these have made India a potential sweet spot for chip technology development and possibly a key link to the global semiconductor supply chain.

The latest US-India partnership signals that the US considers India to be a future partner in building a resilient supply chain, said Gaurav Gupta, an analyst at research firm Gartner.

However, considering the “entire semiconductor space, which includes raw silicon wafers; chip design; wafer fabrication; assembly including test and packaging; raw materials including chemicals, and EDA [electronic design automation] — the only area where India has a decent presence today is in chip design or what is also considered to be part of the fabless ecosystem,” Gupta said.

Understanding the need for being competitive in a sector that is as significant as semiconductors, India is working to create a resilient supply chain along with other countries.

In September 2021, the Quad Alliance — comprising India, the US, Japan, and Australia — collaborated to secure supply chains in semiconductors and 5G telecom technologies in a move to clip the growing influence of China.

“If successful, India could be a part of the global semiconductor supply chain, especially in manufacturing, where about 75% of the share is held by China, Taiwan, S. Korea, and Japan. The idea is to have a balanced regional distribution of chip manufacturing share for the future — so you can have a better response to any logistics or geopolitical crises, like what happened during the pandemic,” Gupta said.

The most important task now for India is to demonstrate its first commercial fab, according to Gupta.

Just this week, Indian IT Minister Ashwini Vaishnav said that the country is set to announce its first semiconductor fabrication facility, selecting a proposal from one of three international bidders: a Vedanta-Foxconn joint venture, the International Semiconductor Consortium (ISMC), and Singapore’s IGSS Ventures.

If one of the proposals moves ahead soon it could take three or four years before fabricated wafers can be shipped to customers, Gupta said. For an outsourced semiconductor assembly and test (OSAT), the timeline could be two and a half to three years, he said.

“At this point, I won’t really focus on when India becomes a viable alternative against the established countries. The current priority is to take small steps and prove that it can be a player in this space. We have government schemes, proposals, interest, and agreements, but the key would be how and when projects are actually executed,” Gupta said.

India could become a key chip maker in 3-4 years

However, some experts believe that India has the potential to become a manufacturing nation in a span of three to four years, given the country is resourceful and is putting much emphasis on skill development.

“There is a very large footprint of chip design prowess in India with a very advanced and robust chemical industry. With the promulgation of NEP [national education policy], new syllabi design by AICTE [All India Council for Technical Education] recently and a large policy impetus on hardware including PLI [product-linked incentive] and DLI [design-linked incentives] schemes by the government, India should be a semiconductor manufacturing nation in three to four years,” said Anurag Awasthi, vice president of the industry body for electronics system design and manufacturing sector, IESA.

As both India and the US are focusing on building resilient national semiconductor supply chains, the India-US MoU will help both countries to resolve regulatory barriers to business and talent mobility in both countries and facilitate the longer-term strategic development of diversified semiconductor ecosystems, Forrester’s Dai said.

Not only is the MoU expected to lead to greater cooperation in tech development between the US and India, but it will also likely fuel enterprise investment in the semiconductor sector, said Helen Chiang, Asia/Pacific Semiconductor Research Lead and General Manager of IDC Taiwan. “The cooperation also shows that the US hopes to have more partnerships with non-China supply chains to build a US-led semiconductor ecosystem. India is the top seventh country for China semiconductor exports; the more in-depth relationship with the US will be a potential concern for China long term.”

Follow Us

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.



How MSPs can capitalise on integrating AI into existing services

How MSPs can capitalise on integrating AI into existing services

​Given the pace of change, scale of digitalisation and evolution of generative AI, partners must get ahead of the trends to capture the best use of innovative AI solutions to develop new service opportunities. For MSPs, integrating AI capabilities into existing service portfolios can unlock enhancements in key areas including managed hosting, cloud computing and data centre management. This exclusive Reseller News roundtable in association with rhipe, a Crayon company and VMware, focused on how partners can integrate generative AI solutions into existing service offerings and unlocking new revenue streams.

How MSPs can capitalise on integrating AI into existing services
Access4 holds inaugural A/NZ Annual Conference

Access4 holds inaugural A/NZ Annual Conference

​Access4 held its inaugural Annual Conference in Port Douglass, Queensland, for Australia and New Zealand from 9-11 October, hosting partners from across the region with presentations on Access4 product updates, its 2023 Partner of the Year awards and more.

Access4 holds inaugural A/NZ Annual Conference
Show Comments