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, marking a significant step in reshaping global technology supply chains. This initiative, revealed approximately 1 year and 3 months ago in New Delhi, is part of the International Technology Security and Innovation (ITSI) Fund, established about two years ago under the CHIPS and Science Act.

Robert Garverick, U.S. deputy assistant secretary of state for trade policy and negotiations, emphasized the potential of this partnership to benefit both nations and the world. India joins seven other countries in this collaboration, including Costa Rica, Indonesia, Kenya, Mexico, Panama, the Philippines, and Vietnam.

The focus of this investment will be on developing capabilities for the assembly, testing, and packaging of semiconductors - the final stage in chip production. This process is crucial, as the average modern car contains over 1,000 semiconductor chips, highlighting the industry's importance in various sectors.

A senior State Department official, speaking anonymously, highlighted workforce development and skills training as primary areas of investment in India. This aligns with the growing demand for technicians and engineers in the semiconductor industry, which currently employs over 250,000 people in the United States alone.

The geopolitical significance of semiconductors cannot be overstated. These tiny chips are essential for smartphones, cars, ballistic missiles, and emerging technologies like artificial intelligence and quantum computing. The global semiconductor market was valued at $555.9 billion in 2021, underscoring its economic importance.

One of the key objectives of this initiative is to diversify the semiconductor supply chain away from Taiwan, which currently manufactures more than 90% of the world's most advanced semiconductors. This concentration poses risks due to geopolitical tensions with China.

"We as a world are so dangerously dependent on Taiwan that there's room for duplication."

India has also recognized the importance of developing its semiconductor industry. The country established the India Semiconductor Mission, allocating approximately $9 billion in government funds. India's semiconductor market is expected to reach $64 billion by 2026, indicating significant growth potential.

While the ITSI Fund's resources are limited compared to private sector investments, they are designed to be catalytic. As Ramin Toloui, former assistant secretary for economic and business affairs at the State Department, explained, these investments aim to create opportunities attractive to the private sector, ultimately enhancing the resilience of global semiconductor supply chains.

This partnership between the United States and India represents a strategic move in the ongoing technological competition with China. It aligns with broader efforts to strengthen semiconductor manufacturing capabilities in friendly nations, ensuring a more robust and diversified global supply chain for these critical components.