India’s Priorities in the Semiconductor Diplomacy Age

The global chip shortage, which started during the Covid-19 pandemic, exacerbated and resulted in heavy losses for many economic sectors. The fragility of the supply chain and the innate dependencies have made international semiconductor collaboration essential to keep the industry’s efficiency at a respectable position.

India, as a fledgling semiconductor power, has an important role in the current setup of the industry. While the domestic industry does contribute to the functioning of the global ecosystem, there is still a long way to go before becoming an indispensable part of the supply chain. With semiconductors featuring centrally in international relations, it is imperative for India to devise its own strategy while navigating the contours of semiconductor alliances.

Kickstart a Quad Semiconductor Resilience Fund

Considering the multitude of diplomatic engagements that have taken place in the semiconductor domain, India’s best bet remains to collaborate with its Quad members on strengthening the supply chain. While the Quad Semiconductor Supply Chain Initiative was announced during the September 2021 Summit, there has been negligible movement on the front post the summit. The Indian semiconductor industry can also benefit from the help of established powers such as the US and Japan.  There are mainly three ways that the resilience fund can establish the Quad as a strong and formidable alliance in the semiconductor ecosystem:

• Joint setting up of fabrication facilities across the Quad countries. Depending on the investment and the domestic capabilities, these fabs can range from leading edge to trailing edge nodes. Each Quad country can set up a fab dedicated to manufacturing chips focusing on up-and-coming industries like artificial intelligence (AI), quantum, electric vehicles and 5G/6G communications
• Building Centres of Excellence (CoEs) in all Quad states based on each one’s comparative strengths in the value chain. For example, Japan can build a CoE dedicated to semiconductor manufacturing equipment, while Australia can host a CoE on critical materials for developing chips. Considering its strength in having a dedicated semiconductor design workforce, India can build a CoE related to fabless design architectures
• Facilitating trade and technology transfers across the Quad partners. The fund can be used to cover import duties on crucial semiconductor manufacturing equipment (such as photolithography tools) and licence fees (for software such as Electronic Design Automation (EDA) tools). This would ensure improved accessibility and cross-border cooperation in strengthening the existing supply chain

Increase Cooperation amongst Other Semiconductor Alliances

India also has the opportunity to become an integral part of other existing semiconductor diplomatic initiatives, directly or indirectly. The availability of a skilled workforce in semiconductor design, as well as the low-cost labour needed for ATMP facilities, can help India attract other potential diplomatic partners. For example,

• With respect to the Trade and Technology Council (TTC) Agreements, the European Union (EU) only has one other TTC agreement, and that is with India. Semiconductors can be one of the central focus areas in the recently signed EU-India TTC agreement. This can improve the volume of India’s electronics product exports and access to multiple markets in the EU. Along with this, a potential EU-US-India technology alliance focusing on semiconductors can effectively capture a large chunk of the global chip market
• Reports of high-level meetings with Taiwanese officials also showcase how the island nation views India as a potential destination for housing Taiwanese semiconductor technology. The India-Taiwan semiconductor collaboration can span across different areas in the supply chain. India can convince Taiwan to focus on building a low-investment trailing edge fab in the country to improve output volume and build redundancy into the ecosystem. India must also position itself as a credible alternative for Taiwan’s assembly, testing, marking, and packaging (ATMP) giants Foxconn and Wistron and its design behemoth MediaTek to outsource the assembly and design processes to the country

Champion Free and Open Semiconductor Technologies

A priority for India in the semiconductor diplomacy arena would be to become a leading voice for growing semiconductor powers. A way to achieve this can be through leading efforts to make different technologies in the domain more accessible and cost-effective for countries’ respective private sectors. This can be achieved through two main processes:

1. India, along with other like-minded nation-states, should pursue the development and adoption of open standards for the semiconductor domain. Open standards provide a royalty-free alternative on which technologies and platforms can be built. The current industry standards remain licensed and hard to adopt for startups. While open standards might not necessarily translate into open-source technologies, these technical standards will be much easier to adopt, especially for small-scale companies. If India can push for alternative open standards on which semiconductor technology to be developed, it can bring in a level playing field across the global ecosystem.
2. India can also participate in the funding of key open-source hardware projects related to the semiconductor industry. These projects have the possibility of reducing multiple entry barriers in key parts of the supply chain. For example, RISC-V is currently being developed (and supported by the Indian government) to reduce the dependency on the licensed ARM instruction set architecture. Similarly, OSH projects related to EDA tools (currently dominated by three American companies) can be funded to remove existing bottlenecks. India can pave the way for procurement and deployment of open-source alternatives for design firms while saving their resources on licences and royalty fees.

In this era of silicon diplomacy, India must tread a path favourable to international cooperation, which can help its domestic industry specialise in a specific area of the supply chain. India’s goal must utilise diplomacy and collaboration to become an indispensable part of the semiconductor ecosystem.

This piece is part of an Issue Brief originally published by the Observer Research Foundation (ORF).

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