US to Boost India's Chip Industry in Global Tech Supply Chain Shift

The United States has announced plans to invest in India's semiconductor industry as part of a strategic initiative to reshape global technology supply chains. This move, revealed in New Delhi on September 9, 2024, marks India as the eighth country to join the International Technology Security and Innovation (ITSI) Fund partnership.

Robert Garverick, U.S. deputy assistant secretary of state for trade policy and negotiations, emphasized the potential of this collaboration to benefit both nations and the global semiconductor ecosystem. The partnership focuses on enhancing capabilities in assembly, testing, and packaging of semiconductors - crucial final steps in chip production.

While the exact investment details are pending review by the Organization for Economic Cooperation and Development, the primary focus is expected to be on workforce development and skills training. A senior State Department official highlighted the critical need for technicians and engineers in the semiconductor industry worldwide, noting India's potential as a natural partner in this endeavor.

The ITSI Fund, established as part of the 2022 CHIPS and Science Act, allocates $500 million over five years to bolster semiconductor ecosystems in friendly countries. This initiative complements the Act's broader $53 billion investment in domestic chip manufacturing.

Semiconductors, first developed in the 1940s and 1950s, have become increasingly crucial in geopolitics and global economics. These tiny chips power everything from smartphones to ballistic missiles and are indispensable in emerging technologies like artificial intelligence and quantum computing. The average modern car, for instance, contains over 1,000 semiconductor chips.

The global semiconductor market, valued at over $500 billion in 2021, is a key focus of technological competition with China. The Biden administration has implemented export controls on advanced semiconductors and chipmaking equipment to Chinese firms, underscoring the industry's strategic importance.

A significant concern driving these initiatives is the current concentration of advanced chip production in Taiwan, which manufactures over 90% of the world's most sophisticated semiconductors. Gina Raimondo, U.S. Commerce Secretary, has expressed concern about the world's dangerous dependence on Taiwan, especially given geopolitical tensions with China.

India has also recognized the importance of semiconductor independence, establishing the India Semiconductor Mission with a $9 billion government fund. This aligns with global efforts to create more resilient and self-sufficient manufacturing bases for this critical technology.

The semiconductor industry's significance extends beyond consumer electronics. It plays a vital role in renewable energy technologies, space exploration, and advanced computing. The industry is known for its intensive research and development, typically investing about one-fifth of its revenue in R&D.

While the ITSI Fund's resources are relatively modest compared to large-scale investments like Micron Technology's $3 billion commitment in India, they are designed to be catalytic. Ramin Toloui, former State Department assistant secretary, explained that these targeted public expenditures aim to create opportunities attractive to the private sector, ultimately enhancing the resilience of global semiconductor supply chains.

As the semiconductor industry continues to evolve, with emerging technologies like gallium nitride potentially complementing silicon in some applications, international collaborations like the U.S.-India partnership are poised to play a crucial role in shaping the future of this vital sector.