India-USA sign MoU to establish semiconductor supply chain, Why it is crucial ?
New Delhi: India and the US on Friday signed a Memorandum of Understanding (MoU) to establish a semiconductor supply chain and innovation partnership. The MoU was signed during the Commercial Dialogue 2023 in New Delhi. This MoU was signed within the framework of the India-US Commercial Dialogue.
On the invitation of Piyush Goyal, the Indian Minister of Commerce and Industry, the US Secretary of Commerce, Gina Raimondo is on a visit to New Delhi. During this visit, the India-US Commercial Dialogue has been re-launched on Friday to discuss cooperation for unlocking new trade and investment opportunities between the two countries.
The MoU seeks to establish a collaborative mechanism between the two governments on Semiconductor Supply chain resiliency and diversification in view of US’s CHIPS and Science Act and India’s Semiconductor Mission. It aims to leverage complementary strengths of both countries and facilitate commercial opportunities and development of semiconductor innovation ecosystems through discussions on various aspects of semiconductor value chain. The MoU envisages mutually beneficial R&D, talent and skill development.
Why an alternative semi-conductor supply chain crucial?
The importance of having an alternative semiconductor supply chain to China lies in the need for diversification and risk mitigation. China currently dominates the global semiconductor industry, accounting for a significant portion of semiconductor production and consumption. However, recent geopolitical tensions, trade disputes, and the COVID-19 pandemic have highlighted the risks associated with relying too heavily on a single country for semiconductor supply. Having alternative semiconductor supply chains outside of China can help reduce the risk of supply chain disruptions, shortages, and price volatility. It can also increase competition, which could drive innovation and lead to lower costs for consumers. Moreover, some countries have concerns about China’s industrial policies and the potential risk of technology transfer or intellectual property theft. Establishing alternative semiconductor supply chains can help address these concerns and provide more secure and trustworthy sources of semiconductors.
How US, India working to establish an alternative semiconductor supply chain?
For the last several years the US and India are working together to establish an alternative semi-conductor supply chain.
Investment in semiconductor manufacturing: Both countries have announced plans to increase investment in semiconductor manufacturing to reduce dependence on China. For example, the US recently passed the CHIPS Act to fund semiconductor research and development and manufacturing. India has also announced a production-linked incentive scheme to encourage semiconductor manufacturing.
Collaboration between industry and academia: The US and India have established partnerships between industry and academia to promote research and development of semiconductor technology. For example, the US Department of Energy and India’s Ministry of Science and Technology have established a joint Clean Energy Research and Development Center that includes semiconductor research.
Bilateral agreements: The US and India have signed several agreements to enhance cooperation in technology and innovation, including in the semiconductor industry. For example, the two countries signed a Memorandum of Understanding on establishing a semiconductor supply chain and innovation partnership during the Commercial Dialogue 2023 in New Delhi.
Infrastructure development: The US and India are also investing in infrastructure development to support the semiconductor industry. For example, India has announced plans to establish a semiconductor fabrication plant and a dedicated semiconductor ecosystem in the country.