In order to protect crucial technological supply chains from China, the US seeks to extend its semiconductor-building alliances with like-minded nations such as India and Taiwan. Washington has promised to aid India in developing this industry. India expects a total investment of roughly $25 billion as a result of its incentive plan, which will attempt to increase domestic semiconductor production. The objective is for India to become a key role in the global supply chain. 

How can India capitalise on this opportunity?

The Modi administration aspires to make India a leader in cutting-edge technology, with semiconductors serving as a “foundational building component” towards that objective. The government approved a $10 billion initiative to expand the country’s semiconductor sector in December 2021. With the United States as the world leader in this field, and both nations concerned about China’s expanding influence in the semiconductor industry, the India-US alliance appears to be a natural next step.

The Indian industry is generally upbeat about the India-US agreement. According to Sunil G. Acharya, vice president of the India Electronics & Semiconductor Association (IESA), most US semiconductor companies, including Intel, Texas Instruments, Micron, and others, already have a strong presence in India. These multinationals’ Indian subsidiaries are active in semiconductor design and validation, as well as other support services. Furthermore, numerous prominent local fabless players provide design services to global firms across industrial areas.

The Indian industry is generally upbeat about the India-US agreement. According to Sunil G. Acharya, vice president of the India Electronics & Semiconductor Association (IESA), most US semiconductor companies, including Intel, Texas Instruments, Micron, and others, already have a strong presence in India. These multinationals’ Indian subsidiaries are active in semiconductor design and validation, as well as other support services. Furthermore, numerous prominent local fabless players provide design services to global firms across industrial areas.

The Indian semiconductor business, which was valued $27.2 billion in 2021, is expected to expand to $64 billion by 2026, reflecting a compound annual growth rate of 19 percent. Nevertheless, none of these chips are currently made in India from start to finish. And, while US corporations have expressed a lot of optimism for India, there appears to be a disconnect between what has been guaranteed in speech and what has been committed to on paper.

Opponents of the partnership in India claim that India has been lost in the global market for the previous seven to eight years. It is simply striving to imitate the West without recognising the distinctions. In the case of semiconductors, India has been unable to devote the necessary resources to such a complicated and capital-intensive sector. As a measure of the local sector’s persistent weakness, India’s semiconductor imports totaled $21 billion in 2019, an increase of 15% year on year.