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News: The PM of India made a clarion call for Aatmanirbhar Bharat. Consequently, the government announced the Semicon India programme for India’s drive for self-sufficiency in semiconductors. It aims to provide $10 bn fiscal support and other non-fiscal measures for the sector.
How is semicon diplomacy relevant to India’s foreign policy?
Semiconductor chips are the lifeblood of the modern information age. These semiconductor chips are the drivers for ICT development.
The semiconductor is the cornerstone of all electronic products. They enable electronic products to compute and control actions.
It can be a great example of peacetime global cooperation. This is because the manufacturing cycle of a semiconductor chip changes hands approx. 70 times across international borders.
The global semiconductor market is projected to be $1.2 tn by 2030, India needs to be well-positioned to capture it.
Placing semicon diplomacy at the heart of India’s foreign policy is essential, both strategically and economically.
Attaining self-sufficiency in semiconductor manufacturing can mean collective growth of India’s neighbourhood in the South Asian region.
What are the issues in the global value chain of semiconductor products?
The semiconductor manufacturing capacities are concentrated in a few geographies like Taiwan, South Korea, East Asia and China. The concentration of capacities poses many challenges, leading several countries to be vulnerable to a few and prone to supply chain disruption.
The Covid-19 pandemic resulted in chip shortages. For example, automakers were hit hard. Now, the Russia-Ukraine Conflict has impacted the supply chain of the raw material resources for the semiconductor chipmakers.
What are the opportunities for India?
India has the opportunity to become an attractive alternative destination for semiconductor manufacturing.
Companies are looking to diversify their global supply chain. They are looking for alternatives to their bases in China.
The establishment of the value chain for semiconductors would ensure a multiplier effect on the entire Indian economy.
Second most imported items after oil and petroleum products are electronics products. Therefore, domestic production would be saving forex and reducing the balance of payments, especially vis a vis China.
India can go for self-reliance in the semiconductor sector. It will also encourage growth and prosperity of all, in the spirit of Vasudhaiva Kutumbakam.
The way ahead is conceptualising a semicon diplomacy action plan. It can be done by increasing multilateral and bilateral cooperation across the value chain of semiconductors which includes design, manufacturing, and packaging.
Quad can play a very important role in semicon diplomacy. Australia can be an important supplier of raw material resources. The US and Japan support in the advanced semiconductor technology & capacity building of India.
The semiconductor manufacturing and testing bases are heavily concentrated in East Asia, the Act East policy provides an opportunity to connect and strengthen ties with key players in the region.
India can promote frequent technological exchanges between a regional bloc like ASEAN via tracks in forums like the East Asia Summit and the ASEAN regional forum will be beneficial.
The recently announced Semicon India programme is a step in the right direction.
India needs to harness its strengths, such as the strong presence of global EMS players, diaspora, world-class design ecosystem, demographic dividend, and use it as a pedestal for global partnerships and outreach.
Source: The post is based on an article “Placing semicon diplomacy at the heart of India’s foreign policy” published in the Indian Express on 30th April 2022.