INDIA AND THE US-CHINA CHIPS WAR
1. Context
The expansive new US-India technology partnership forged during Prime Minister Narendra Modi’s visit to Washington DC identifies technology as the new geopolitical frontier. A key element of the partnership is the resolve to diversify the global semiconductor supply chain, which is at the center of the rivalry between the world’s number 1 and 2 economic powers, the US and China.
2. Global Semiconductor Dependency
- Semiconductors or chips are crucial components in modern devices, including phones, defense systems, and AI-powered machines.
- Only a few countries possess chip manufacturing capabilities, with specialization in specific aspects of the technology.
- The Covid-19 pandemic highlighted the US dependence on Asian supply chains, particularly Taiwanese chip makers who are among the world's top manufacturers.
3. US Actions to Address Dependency
- Denying Semiconductor Technology to China
- Objective: Preventing China from gaining technological dominance and high-tech control.
- The Trump Administration listed Huawei and related companies as threats to US national security, limiting their access to chips from American companies.
- The Biden Administration maintained these restrictions, cutting off Chinese companies, including Huawei, from semiconductors made with American tools and software.
4. Boosting Domestic Semiconductor Manufacturing
- In August 2022, Congress passed CHIPS and Science Act, providing $280 billion in funding for the research and manufacturing of semiconductors within the US.
- Australia, Japan, India, and the US leaders are committed to building resilient, diverse, and secure supply chains for critical and emerging technologies, including semiconductors.
- The Quad held two summits in 2021 and 2022, focusing on strengthening semiconductor supply chains.
5. India-US iCET Initiative
- US-India Initiative on Critical and Emerging Technologies (iCET).
- President Biden and Prime Minister Modi announced iCET at the 2022 Tokyo Summit.
- Discussions between National Security Adviser Ajit Doval and his US counterpart Jake Sullivan outlined the areas for collaboration under iCET.
- Both countries agreed to enhance bilateral collaboration on resilient supply chains.
- Efforts to support the development of a semiconductor design, manufacturing, and fabrication ecosystem in India were initiated.
- Emphasis on promoting the development of a skilled workforce for the semiconductor industry.
- Joint Task Force was formed by the US Semiconductor Industry Association, India Electronics Semiconductor Association, and India's Semiconductor Mission.
- It Aimed to identify near-term opportunities and facilitate the long-term strategic development of complementary semiconductor ecosystems.
- The task force analyzed India's potential role in the global semiconductor value chain.
6. MoU and Investments
- Semiconductor Supply Chain and Innovation Partnership: An MoU was signed to promote commercial opportunities, research, talent, and skill development.
- Micron Technology proposed an investment of up to $825 million to build a facility in India, with additional investment from the Indian government to reach $2.75 billion. It is expected to create job opportunities.
- Lam Research announced plans to train 60,000 Indian engineers through its Semiverse Solution virtual fabrication platform.
- Applied Materials proposed a $400 million investment to establish a collaborative engineering center in India.
7. India's Semiconductor Industry Challenges
- India has allocated Rs 76,000 crore ($10 billion) to support the semiconductor industry.
- Three companies (Foxconn-Vedanta joint venture, Singapore's IGSS, and Next Orbit-ISMC joint venture) failed to establish fabrication plants due to separate reasons.
- The government modified specifications and reopened applications on June 1. Foxconn and Vedanta reapplied, but the response from major players is uncertain.
- Chip-making necessitates- uninterrupted power, water supply, and specialized fabrication plants (fabs). India currently lacks 24x7 power and water supply guarantees.
- Chip-making requires a highly skilled workforce, and industry experts emphasize its complexity compared to phone assembly.
- India lacks a comprehensive chip ecosystem, including ancillary industries and a domestic market for chips.
- Taiwan has urged India to establish a free trade agreement and bilateral investment agreement to attract TSMC, the world's largest chip maker.
- Micron's investment in semiconductor packaging is aimed at creating a global presence. India hopes for future wafer manufacturing.
- Micron may bring its existing mature supply chains to India initially and later incorporate domestic alternatives to meet quality standards.
8. China's Semiconductor Industry Challenges
- In 2020, China was the biggest market for semiconductor machines. China's "Made in China 2025" plan aimed to achieve self-sufficiency in semiconductors but faced challenges.
- US export controls on chip technology have made China's mission of self-sufficiency difficult.
- Japan announced restrictions on semiconductor exports to China, which will take effect in July.
- China's chip imports from Japan, South Korea, and Taiwan, part of the US-led "Chip 4 Alliance," fell by 20% in the first five months of 2023.
- The US is lobbying the Netherlands to impose similar restrictions due to ASML'S monopoly on deep ultraviolet lithography machines required for chip production.
- India is considered to be at least two decades behind in the semiconductor industry, and it may take 10-20 years to establish itself as a serious player.
- India has positioned itself in the global chip with a technology partnership, aiming to enhance bilateral ties with the US.
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For Prelims: Semiconductors, Artificial intelligence (AI), Critical and Emerging Technologies (iCET), and Chip 4 Alliance.
For Mains: 1. Examine the decline in China's chip imports from Japan, South Korea, and Taiwan, as part of the US-led "Chip 4 Alliance." Evaluate the significance of these trade numbers and their implications for China's semiconductor industry.
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Previous year question
1. A semiconductor differs from a conductor in that it has (UPSC IES 2016)
A. Only one path for the free electrons in the valence band
B. Only one path for holes in the conduction band
C. Two paths followed by free electrons and holes, one an ordinary path in the conduction band and the other one an extraordinary path in the valence band, respectively
D. Two paths followed by free electrons and holes, one an extraordinary path in the conduction band and the other one an ordinary path in the valence band, respectively
Answer: C
2. Which one of the following is a semiconductor device that is used to increase the power of the incoming signals by preserving the shape of the original signal? (UPSC CAPF 2022)
A. Register
B. Transistor
C.Flip-flop
D. Diode
Answer: B
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Source: The Indian Express
