The United States will invest in expanding India’s semiconductor industry as part of a State Department-led initiative to reorient the global technology supply chain in Washington’s favor.
The United States will invest in expanding India’s semiconductor industry as part of a State Department-led initiative to reorient the global technology supply chain in Washington’s favor.
The new partnership, announced in New Delhi on Monday morning local time, “underscores the potential to expand India’s semiconductor industry to the benefit of both nations and the world,” Robert Garverick, the U.S. deputy assistant secretary of state for trade policy and negotiations, said in a statement to Foreign Policy. India is the eighth country with which the United States has signed a similar partnership—joining Costa Rica, Indonesia, Kenya, Mexico, Panama, the Philippines, and Vietnam—through the International Technology Security and Innovation (ITSI) Fund set up last year.
In all eight countries, the United States will focus on building out capabilities for the assembly, testing, and packaging of semiconductors—the final step in the manufacturing process that gets chips ready for use in various electronic devices.
While the exact nature and magnitude of the investments in India will be subject to a review of the country’s ecosystem by the Organization for Economic Cooperation and Development, they are likely to focus primarily on workforce development and skills training, a senior State Department official told Foreign Policy, speaking on condition of anonymity according to ground rules set by the department. “The number of technicians and engineers we need worldwide is astronomical,” the official said. “India is a natural partner in this area, and we’re very excited to explore this opportunity with them.”
Part of ITSI’s resources could also go toward “regulatory reform” in India to help streamline business for the semiconductor industry, the official added.
ITSI is part of the 2022 CHIPS and Science Act, one of the most high-profile pieces of legislation under President Joe Biden, which earmarks nearly $53 billion in government subsidies and investments to entice semiconductor manufacturers back to U.S. shores. But the ITSI Fund looks beyond U.S. borders, with the State Department receiving $500 million over five years to funnel into semiconductor ecosystems in friendly countries around the world that the Biden administration hopes will complement U.S. manufacturing efforts.
“For partner countries, there’s a positive signal that’s being sent by this partnership with the United States, and that’s a signal of the potential that the U.S. government sees,” Ramin Toloui, the State Department’s former assistant secretary for economic and business affairs who played a lead role in ITSI before leaving government in June, told Foreign Policy in an interview before his departure.
Semiconductor chips have acquired unprecedented geopolitical importance, with their use in smartphones, cars, ballistic missiles, and much more, making them the lifeblood of the global economy and indispensable to rapidly growing new technologies such as artificial intelligence and quantum computing. Chips are also at the heart of a growing technological competition with China that the Biden administration has made a priority, dovetailing its legislative efforts with a series of export controls that ban the sale of advanced semiconductors and chipmaking equipment to Chinese firms. There is also a long-standing effort to diversify the supply chain from Taiwan. Beijing sees the independent island off China’s coast as its own territory and has committed to eventually annexing it, making Taiwan an increasingly dangerous geopolitical hot spot. The island also happens to manufacture more than 90 percent of the world’s most advanced semiconductors.
“We as a world are so dangerously dependent on Taiwan that there’s room for duplication,” U.S. Commerce Secretary Gina Raimondo told Foreign Policy in an interview this year.
Governments around the world have had a similar awakening, subsidizing their own chip industries in an effort to build a more self-sufficient and resilient manufacturing base. India is no exception, establishing the India Semiconductor Mission, which provides some $9 billion in government funds to semiconductor manufacturing. The United States has been a key partner in those efforts as well, with Idaho-based chip firm Micron Technology announcing a nearly $3 billion commitment to build a new factory in India during Prime Minister Narendra Modi’s state visit to Washington last year.
The funds available to ITSI are a mere fraction of that—the State Department gets $100 million each year under the initiative, of which $20 million goes to its Bureau of Economic and Business Affairs to disburse across partner countries. But those investments are “designed to be catalytic,” Toloui said, laying the groundwork for the private sector to follow suit. “The proposition of the fund is with some targeted expenditure of public money, it can create more opportunities that are attractive to the private sector—and that’s something which is good for the United States, good for our partner countries, and ultimately good for the resilience of global semiconductor supply chains.”
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