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Semiconductor Rivalry Provides India with a Geopolitical Opportunity

Asia Manufacturing Review Team | Thursday, 09 November 2023

Asia Manufacturing Review Team

The year 2022 was a watershed event in the geopolitical conflict between the United States and China. Washington launched the CHIPS and Science Act in August, followed by chip export controls in October, laying the groundwork for a fierce contest in emerging and crucial technologies, with semiconductors at the vanguard.

The CHIPS and Science Act had only one goal: to bring chip manufacturing back to the United States from East Asia, where 85 percent of the world's fabrication capacity is located. The export limitations were designed to limit China's access to advanced semiconductors and maintain Chinese chip manufacturing capabilities at least a decade behind those of the United States. The regulations also imposed limits on international enterprises operating in China that rely on US-sourced technology and financing.

Last month, the US tightened the controls even more, focusing on perceived gaps in current laws and broadening their scope to include new types of chips and chipmaking equipment. In addition, 21 nations other than China and Macau were subjected to licencing restrictions.

Engaging in chip Assembly, Testing, Marking, and Packaging (ATMP) which is the chip value chain's bottom-most leg, China's participation in the semiconductor Global Value Chain (GVC) is based on its 38 percent market share in the Outsourced Semiconductor Assembly and Testing (OSAT) segment. China has a 15% market share in the foundry segment (which creates chips), with Taiwanese and South Korean multinational foundries accounting for the remaining 10%.

As a result, India has emerged as a key contender for companies/ manufacturers wishing to relocate or diversify their operations. India has collaborative partnerships with countries such as the United States and is working on an FTA with Taiwan. The Quad Initiative on Critical and Emerging Technologies (iCET), for example, can support semiconductor design, technology, and talent transfer efforts.

A redesigned trade policy might greatly boost India's desirability as a possible chipmaking location. Long-term strategic goals include integration into the semiconductor GVC. To make it a reality, India must use the chances presented by the US-China chip battle as soon as possible.