Geo-Economics, Geopolitics and the Origins of India–US Semiconductor Alliance

Introduction

The world is witnessing the emergence of a new technological order in the post-COVID era. Major powers are recalculating their strategies to dominate the supply chains of semiconductors, which have surpassed oil as the most critical element in the world in this new digital era. (Fitch, 2023; Miller, 2022; Stankiewicz, 2022). In this process, one of the most remarkable developments is the deepening partnership in the semiconductor sector between India, which has recently introduced its semiconductor strategy to become a key player in the field, and the US, one of the world’s leading superpowers in the semiconductor industry. Significant advancements have taken place between the two countries in recent years, forming the foundation of what can be termed the India–US semiconductor alliance. This raises several intriguing questions: What are the driving forces behind this semiconductor alliance? What are the major characteristics and trends in the India–US semiconductor partnership? And what are the future prospects of this partnership amidst the emerging chip war? This study seeks to provide an in-depth and systematic examination of these questions.

In this paper, I have developed a new analytical framework to examine the origins of the India–US semiconductor alliance, inspired by the scholarly works of Linda Weiss and Elizabeth Thurbon on techno-industrial development. This model posits that the formation of the India–US semiconductor alliance in the post-COVID era is influenced by a blend of geo-economic and geopolitical imperatives. Geo-economic factors include pandemic-induced disruptions in India’s semiconductor supply chain, a recognition of the critical role that semiconductors play in India’s economic future, and India’s ambitions to become a chip exporter. These elements have shaped India’s new semiconductor strategy, positioning the US as a key ally due to its dominance in the semiconductor industry. Geopolitical factors also play a crucial role in shaping India’s new semiconductor strategy and the New Delhi–Washington chip alignment. As political and security tensions with China have intensified in recent years, India has come to view its substantial chip import dependence on China as a security threat. Similarly, like the US, India perceives China’s technological advancements as a challenge rather than an economic opportunity. These geopolitical imperatives have contributed to an unprecedented rise in technological convergence between India and the US. The origins of the India–US semiconductor alliance can be explained within this context, where both geo-economic and geopolitical imperatives have driven the partnership forward.

There are at least three major characteristics and trends in the India–US semiconductor partnership that have emerged in the post-COVID era. First, there is a deepening of high-level political commitments for the chip alliance. Indeed, there has been a significant shift in the cooperation areas between India and the US at the highest political levels. Specifically, the primary agenda of the India–US high-level summits has evolved from nuclear cooperation in the 2000s, to climate and clean energy in the 2010s, to critical technology cooperation in the post-COVID era, with a particular focus on semiconductors. Second, there has been a significant enhancement of chip-related agreements and institutional collaborations between the two countries. These agreements and collaborations have been deepened with several specific commitments to support each other in the field of semiconductors. Third, and most importantly, there is a notable fostering of US semiconductor companies’ presence in India. In an unprecedented move, the Indian government has directly collaborated with the US companies to realize its policy goals. Additionally, private sector cooperation has emerged, supported substantially by strategic state initiatives.

This paper underscores that the future prospects of the India–US semiconductor partnership are bright if both countries can address a few critical challenges highlighted herein. The India–US semiconductor partnership indeed holds great potential, given the substantial convergence between the two countries on key issues. The US can assist India in realizing its aspirations of establishing a robust semiconductor manufacturing sector at a time when the US companies are looking for alternative investment destinations to China. Moreover, the US can support India’s efforts to attract and train its youth, helping to fulfill India’s dream of becoming a global supplier of skilled manpower in this industry. On the other hand, India’s skilled workforce can help the US mitigate the talent shortage in the semiconductor sector, thereby enhancing its competitive edge in the emerging global chip wars. Additionally, India can support the US’s objective of fostering democratic chip alliances by offering a substantial chip export market, overcoming the obstacles that have previously hindered meaningful chip alliances.

However, despite these promising prospects, this partnership faces significant challenges. The growing sentiment in the US to prioritize its own economic security while pursuing an “America First” strategy could undermine this relationship. It is unclear how US policymakers will tolerate US companies finding substantial success in India compared to the US. India’s unique developmental strategy, particularly the absence of a long-term strategy for high-tech, capital-intensive industries, may also hamper this relationship. The success of this partnership will depend on continued financial support and other key assistance to the US companies to thrive in the Indian market. Finally, the competition from other regional players like Vietnam and Malaysia to attract US companies and key support systems in their own semiconductor industries also poses a challenge. These countries might be seen as more suitable investment destinations by the US companies. Addressing these challenges will be crucial for the long-term success of the India–US semiconductor partnership.

This paper is organized as follows. After this introduction, the paper presents the analytical framework, emphasizing the significance of geopolitical and geo-economic factors in understanding the semiconductor strategies. It then explores the rise of India’s semiconductor strategy and how these imperatives shape the India–US semiconductor ties in the post-COVID era. This is followed by an examination of the major characteristics and trends in this partnership. Finally, the paper discusses the future prospects of the India–US semiconductor relationship.

Analytical Framework: Conceptualizing Drivers of International Semiconductor Cooperation

This section provides an analytical framework to explore the origins of the India–US semiconductor alliance. By examining the geopolitical and geo-economic implications, I aim to demonstrate how these two drivers are crucial to the expansion of the state’s semiconductor strategies in both domestic and international affairs.

My analytical framework is inspired by the research works of Linda Weiss and Elizabeth Thurbon. Their research over the last two decades has challenged market-centered neoliberal approaches to understanding economic development, particularly the techno-industrial development. They argued that the state’s role and policymakers’ mindset are key to understanding the state’s techno-industrial policy (Thurbon, 2016; Weiss, 1999). Their studies particularly focused on showing the state’s techno-industrial development in the domestic context and argued that geopolitical and geo-economic imperatives are two major drivers that shape the states’ techno-industrial policies (Weiss & Thurbon, 2021). They primarily applied their case studies to the US and South Korea’s techno-industrial policies. Their key argument was that while the US techno-industrial policy is driven by geopolitical motivations, South Korea’s techno-industrial policy is driven by geo-economic imperatives (Thurbon & Weiss, 2021; Weiss & Thurbon, 2018, 2021).

This understanding is crucial for comprehending the state’s semiconductor strategy and its approach to international cooperation, especially in relation to the chip industry. To strengthen my arguments, I will first explain which geopolitical imperatives are key to understanding semiconductor strategy by examining the case of the US. Then, I will show why geo-economic imperatives are essential for understanding the development of the semiconductor industry and international semiconductor strategy by examining the case of South Korea. Finally, I will apply this analytical framework to understand the absence of a semiconductor strategy in India before COVID.

Navigating Geopolitical Imperatives in Semiconductor Strategies

Geopolitical imperatives are key shapers of states’ semiconductor strategies. To support this argument, it is worth briefly mentioning the evolution of the US semiconductor strategy. A notable trend in tech competition recently is the US’s attempt to enhance international semiconductor cooperation. Specifically, the US has sought to forge its semiconductor alliance with its Asian allies—Japan, South Korea, and Taiwan. This effort is known as the “Chip-4 alliance” (Yoon, 2023). What is the motivation behind the US’s move? The US’s move is driven by the geopolitical imperative. To understand this move, we must understand what kind of state the US is. Scholars have defined the US as a National Security State (NSS), which gives priority to security issues over economic issues in international affairs (Weiss, 2014). Technological supremacy is a key goal of NSS, which is driven by the security logic of competing with its main security rival state. This conceptualization is important to understand the US’s semiconductor-related action in international affairs. During the Cold War, the US built the world’s first robust semiconductor industry to become a technologically superior power compared to its main security rival, the Soviet Union, whose technological advancement is seen in Washington as a security threat. The US also helped Japan to flourish in its semiconductor industry, seeing it as a key security partner in East Asia to contain the Soviet Union. However, when the US began to perceive Japan as its main security rival after the demise of the Soviet Union, it killed a flourishing Japanese semiconductor industry as it saw Japan’s technological advancement as a geopolitical threat (Ota, 2021). Instead, it went on to have a tactical alliance with new semiconductor players, such as South Korea in semiconductor manufacturing and the Netherlands in semiconductor equipment, and helped them to flourish their respective semiconductor businesses so that it could minimize Japan’s growing semiconductor dominance (Miller, 2022).

The recent move of the US’s quest for semiconductor cooperation in international affairs should be seen in this regard because the US is acting in this manner due to geopolitical imperative. In recent years, the US came to see China as its main security rival. China’s technological advancement is perceived as a major national security threat in the US (Diamond, Ellis, & Schell, 2023). To contain China, it has dramatically enhanced the semiconductor bilateral and multilateral cooperation with its key allies in Asia and beyond. It has shouted to forge its semiconductor alliance with its Asian allies, Japan, South Korea, and Taiwan, under the “Chip-4 alliance” framework, despite the fact that its key security allies, such as South Korea, were not willing to join it due to their huge economic dependence on the Chinese market (Kumar, 2023b). It has also bilaterally sought to foster its closer collaboration with South Korea and Japan. When President Biden visited South Korea for the first time, the semiconductor cooperation was a focal point of his visit. Similarly, the US has sought to foster close cooperation with Japan (Ministry of Foreign Affairs of Japan, 2024). In fact, semiconductor is the topmost important topic in the two countries’ recent high-level meets (Japan External Trade Organization, 2024).

Decoding Geo-economic Imperatives for Semiconductor Strategies

Now, I turn to why geo-economic, rather than geopolitical, imperatives drive a country’s semiconductor strategy, including external chip alignments. South Korea is a classic example of this. Contrary to the US, which is defined as an NSS, South Korea is conceptualized as a developmental and trading state where state activism primarily focuses on securing geo-economic objectives rather than geopolitical options in major power struggles (Kumar, 2021a; Weiss, & Thurbon, 2021). This approach is evident in its strategy for building a semiconductor industry and its international cooperation in this sector. The origins of South Korea’s semiconductor industry in the 1980s were driven by geo-economic logic, with the state recognizing the industry as critical for enhancing its international economic competitiveness (Amsden, 1989). Since then, South Korea has fostered closer ties with its main security partner, the US, which wanted to contain Japan’s dominance in this strategic sector. Later, in the 1990s and 2000s, South Korea built its strong semiconductor partnership with China, and the latter emerged as its most significant semiconductor trade and investment partner (Kumar, 2023b). South Korea built strong semiconductor ties with China despite the fact that its key security partner saw China’s technological advancement as a concern for the existing liberal international order (Mearsheimer, 2019). This is because geo-economic logic, such as gaining the semiconductor market share in China, drives South Korea to strengthen its ties with China.

South Korea’s contemporary semiconductor cooperation can also be explained by geo-economic imperatives. In the post-COVID era, South Korea has brought a new dynamism to its semiconductor alliance with the US and Japan and fostered new ties with European semiconductor powers, like the Netherlands. The “geo-economic imperative” not the “geopolitical objective” is shaping South Korea’s new move. South Korea, which is vital in manufacturing, wants to bring new dynamism to its semiconductor ties with the US as the Korean companies can gain semiconductor market share in the US, where the majority of design companies exist, which are the customers of Korean manufacturers (Gyong & Lee, 2022). South Korea also wants to repair its ties with Japan so that it can secure the semiconductor materials supply that is key for manufacturing. Similarly, South Korea forged “semiconductor alliance” with the Netherlands so that it can secure critical equipment necessary for the production of cutting-edge chips (Office of the President, 2023). Nevertheless, it is also important to note that South Korea still wants to maintain its robust semiconductor ties with China. This is because Seoul does not fully agree with the US’s perspective that China’s technological superiority is a direct security threat to the Indo-Pacific democratic countries (Bae, 2022). Instead, it views that South Korea–China semiconductor cooperation is critical for the survival of its semiconductor industry as China is South Korea’s most important semiconductor exporting destination. Hence, geo-economic logic is a major driver of South Korea’s alignment with major powers. This is different from the US’s strategy, which is seeking to strengthen ties with its Asian allies, but downsizing its semiconductor ties with China due to geopolitical motivation.

Missing Geopolitical and Geo-economic Dimensions of India’s Semiconductor Approach before COVID

After elucidating why geopolitical and geo-economic motivations are pivotal for a long-term semiconductor strategy, it is pertinent to apply this understanding to the absence of a semiconductor strategy in India before the COVID era. It is significant to mention that major economic powers, such as the US, South Korea, Japan, and China, have dominated the semiconductor industry for the last four decades, actively fostering key semiconductor partnerships to achieve their geopolitical and geo-economic aims. However, India’s presence and its international cooperation in this industry remained notably absent during this period. Why? This absence is largely due to the lack of a clear, goal-oriented plan in India’s strategy for this industry. Indeed, unlike the US or South Korea—as previously mentioned—India has shown a clear absence of geopolitical or geo-economic motivations to develop a semiconductor strategy. Historically, India cannot be conceptualized as an NSS like the US, nor as a developmental state like South Korea, especially in terms of incorporating technology into its international cooperation. During the Cold War, India chose not to engage in the bipolar geopolitical contest, thus lacking a strong security imperative to build its techno-industry or to foster technological alignment. Economically, unlike South Korea, which emphasized a “growth-first strategy,” India was a “fragmented multiclass state” focused on various domestic objectives, from economic redistribution to socialist-leaning policies (Kohli, 2004). This contributed to the absence of a clear geo-economic agenda for technological advancement from a relative perspective. In the post-Cold War liberal era, India experienced a lack of intense security competition in international affairs and felt no urgent need to build robust technological partnerships to secure its security interests. Moreover, this era emphasized economic liberalization and a reduction in state activism, driven by the rise of the US-led Washington consciences model (Kumar, 2023c). As a result, technological development, including the semiconductor industry, was left to market forces. Consequently, the absence of a geo-economic imperative led to the lack of India’s involvement in semiconductor cooperation on the international stage.

The Mixed Imperatives for the Rise of India’s Semiconductor Strategy in the Post-COVID Era

In the previous section, we laid the analytical foundation of this study, explaining why geopolitical and geo-economic objectives are key to understanding states’ actions in fostering the semiconductor industry and building semiconductor alliances. In this section, we will discuss the rise of India’s semiconductor strategy in the post-COVID era and reveal how geo-economic and geopolitical factors are shaping this evolving strategy.

Rise of India’s Semiconductor Strategy in the Post-COVID Era

As discussed in the previous section, there has long been an absence of a goal-oriented semiconductor strategy in India. However, this situation changed dramatically in the post-COVID era with a sudden rise in semiconductor initiatives in the country. Recently, the semiconductor strategy has become a key focal point in India’s domestic and international affairs. Indian policymakers have started to promote this industry, recognizing it not just as a commercial sector but as a strategic one. In 2021, the state launched a goal-oriented India Semiconductor Mission (ISM) plan to boost this industry and position India as a key player in global semiconductor value chains. Several initiatives were introduced to realize India’s semiconductor ambitions, including financial incentives and subsidies for domestic and international private players—an unprecedented move in India’s political economy history (Kumar, 2023b).

On the external front, too, for the first time, semiconductors emerged as a key part of Indian foreign policy in the post-COVID era. India’s Ministry of External Affairs included several semiconductor-related contents in its key diplomatic negotiations with key global partners. This development was crucial because the semiconductor was not part of diplomatic negotiations conducted by the India’s Ministry of External Affairs until recently. It became only apparent in 2021. India’s strategic move in this technology is also reflected in several statements from top policymakers and their actions. To illustrate, the Indian External Affairs Minister S. Jaishankar highlighted the strategic significance of semiconductors when he said that (the semiconductor) technology trade is not just trading; it is as much about political science (Ministry of External Affairs of India, 2023). Since 2021, Prime Minister Modi has also highlighted India’s semiconductor move several times in his international negotiations. What is more, even India’s National Security Adviser is also directly involved in international semiconductor negotiations (Bhandari, 2023). It was never in the past that all top leaderships in foreign affairs and national security were directly involved in semiconductor strategy in international affairs.

What contributed to the rise of India’s semiconductor strategy? The new geo-economic and geopolitical imperatives are the ones that are pushing India’s semiconductor strategy.

Decoding Geo-economic Imperatives for the Rise of India’s Semiconductor Strategy

Let me first decode the geo-economic imperatives driving the rise of India’s semiconductor strategy. By closely examining India’s new developmental mindset regarding this industry, we identify three key geo-economic imperatives propelling India’s semiconductor ambitions.

Recognizing the Risk to Existing Economic Security without a Stable Supply of Chips

The COVID pandemic demonstrated the first semiconductor-related economic security dilemma for India. There was a massive shortage of supply of chips in the global economy, which hugely disrupted the Indian economy. For example, the auto industry, one of the major backbones of the Indian economy, felt a huge hit as chip shortages caused the shutdown of many production facilities (Bhandari, 2023; Kotasthane & Manchi, 2023). Production at other key industries such as the mobile industry and consumer electronics was also significantly disrupted. It was the first time that Indian policymakers came to realize the importance of semiconductors for the Indian economy. The chip shortages also increased awareness of the global supply chains of semiconductors and India’s import dependence on this critical device (Kotasthane & Manchi, 2023; Kumar, 2023b). In sum, India realized that its economic security is at risk as its industry is too dependent on importing chips, emphasizing the gravity of the situation.

Realizing that Future Economic Growth is at Risk without Self-reliant Semiconductor Production

It was not just about the current economic security dilemma discussed above, but India came to realize that its future economic growth is at stake. Suddenly, the Indian policymakers evaluated that the semiconductor is a foundation industry that connects almost all major industries in India (Interviews in New Delhi, December 2023). Like South Korea in the 1980s, India also came to realize that its industrial competitiveness in the global perspective depended on whether it would achieve “technological independence” in semiconductors and secure supply chains. Another geo-economic imperative is India’s calculation of the future chip demand as it strives to become a global leader in the digital economy and a main global player in manufacturing key items such as the EVs, telecom devices, and power electronics. Hence, India came to realize that building the semiconductor industry through domestic efforts and international cooperation is vital for its emergence as a top global economy (Jaishankar, 2024). As Prime Minister Modi highlighted in Semicon 2023, India’s fate in the Fourth Industrial Revolution will depend on how successfully it implements its semiconductor strategy, underlining the need for immediate attention (Press Information Bureau, 2023).

Pursuing a New Geo-economic Ambition to become a Key Supplier of Semiconductors in the Global Market

India’s emerging semiconductor strategy is also driven by its new geo-economic ambitions to emerge as a manufacturing hub and a key supplier of chips, integrating itself as an exporter in the Global Value Chain (GVC). Policymakers in New Delhi now fully realized the global growth prospect of the chip industry, which is expected to increase multifold in the next few years. Hence, just like South Korea four decades back, India aims to gain significant market share in semiconductors. India is particularly focusing on manufacturing older-generation semiconductors, also known as legacy chips, where China is a dominant player, as frequently mentioned by its policymakers (Interviews in New Delhi, January 2024). In this context, India promotes the idea of a Trusted Value Chain (TVC) over a GVC and invites foreign companies from the US, Korea, and Japan to invest in it as they are seeking an alternative destination to China in the post-COVID era (Kumar, 2023b). India’s abundant skilled manpower also reinforces its new geo-economic ambitions amid the global shortages of chip talent, painting a promising picture of its future in the semiconductor industry.

Navigating Geopolitical Imperatives in the Rise of India’s Semiconductor Strategy

Along with geo-economic imperatives, geopolitical imperatives are also pushing India’s semiconductor strategy to rise. There are at least two reasons to support this argument.

Like the US, India also began to see Its Semiconductor Import Dependence on China as a Security Threat, and that New Geopolitical Imperative is Shaping India’s Emerging Semiconductor Strategy

It is significant to note that China emerged as India’s largest source of semiconductor imports as the latter’s economic development proliferated over the last three decades. By 2020, India imported the majority of its required semiconductors and critical chip-related equipment from China to meet its domestic demands. It was predicted that India would become even more dependent on China for chip imports in the future as the country continued to digitalize its economy (Kumar, 2023b). India’s chip dependence on China until recently was not seen as a significant threat, as this development was calculated based on a “commercial perspective.” However, India’s commercial viewpoint has significantly changed in recent years when it began to view its semiconductor dependence on China from a geopolitical perspective. Just like the US, Indian policymakers are not reluctant to openly say that India’s chip imports from China are a direct security threat, and the country urgently needs to reduce its dependence on China. In this context, one of the most important India’s domestic and foreign policy priorities is fostering its semiconductor “supply chain resilience” that is not dependent on China (Kumar, 2021b).

This transformation came due to a recent shift in India–China political and security relations. In the post-Cold War era, India significantly improved its ties with China, which deteriorated after the 1962 India–China war. In the post-Cold War era, India came to see China’s economy rise in a positive sense and sought to foster closer economic and technological ties based on “commercial logic.” However, in recent years, India’s strategic perception of China has significantly changed from an economic partner to a direct security threat (Kumar, 2023a). Various geopolitical security factors contributed to this change, including China’s growing aggressive posture toward the territorial issues with India and Xi Jinping’s aggressive foreign policy in South Asia that undermines India’s strategic interest. In the process, the Galwan clash between China and India in 2020, in which 20 Indian soldiers were killed, was a major turning point when New Delhi came to realize that India seriously needed to recalculate its economic and tech ties with China. Against that backdrop, India’s China tech decoupling began, during which it banned several Chinese technology companies working in India (Kumar, 2021b). These geopolitical imperatives also drive India’s quest for “chip decoupling” from China. 

Like the US, India also sees China’s Technological Advancement as a Challenge rather than an Economic Opportunity

Indeed, unlike many other emerging economies in the Global South, which see China’s economic and technological rise as economic opportunities and seek a deeper technological collaboration with China (Heeks et al., 2024), India has now begun to perceive China’s technological advancement as a challenge. There is more focus of the Indian establishment on how to compete with China rather than how to gain opportunities. As the Indian External Affairs Minister S. Jaishankar recently mentioned, to compete with a rising China, India must focus on its own technological advancement by focusing on manufacturing, which it neglected for a long time (Jaishankar, 2020). Observers also noted that India’s recent quest for its own technological advancement is driven by its growth in technological competition with China (Behera, 2022; Kotasthane, Ray, & Madan, 2023). This is also true for the semiconductor sector, as New Delhi sees China’s semiconductor advancement as a challenge to its national security (Upadhyay, 2023). India now sees China’s quest for semiconductor dominance from a geopolitical-driven “zero-sum” perspective. That means that the more China advances in semiconductors, the more challenges there will be for India. 

Revealing the Origins of the India–US Semiconductor Partnership

In the previous sections, this paper examined how geo-economic and geopolitical imperatives have led to the rise of India’s semiconductor strategy in recent years. In this section, the paper will first analyze how these same factors—geo-economics and geopolitics—have contributed to the formation of the India–US chip alliance in recent years. Then, it will discuss the major characteristics and trends in the India–US semiconductor alliance.

Geo-economic and Geopolitical Drivers behind the Formation of the Alliance

A closer examination suggests that geo-economic and geopolitical imperatives have paved the way for the formation of the India–US semiconductor alliance. From a geo-economic perspective, India views the US as an essential economic partner capable of helping India realize its semiconductor ambitions. The US, a dominant player in the semiconductor industry that controls its GVC through structural power (Malkin & He, 2024; Weiss & Thurbon, 2018), can facilitate India’s integration into this sector. Equally significant, the recent shift of American companies away from China in search of alternative destinations has motivated Indian policymakers to position India as a viable location for building a domestic semiconductor manufacturing base. Additionally, India’s strong, well-established human resource connections with the US make it a natural partner. India believes that the US companies can train Indian talent to meet the domestic demand and supply the US and global markets, which are experiencing a skilled workforce shortage in the chip industry (Business Standard, 2023; Deloitte, 2022; Ezell, 2024).

Just as the geo-economic imperatives provided opportunities for the emergence of the India–US semiconductor alliance, geopolitical imperatives have also played a significant role. There has been an unprecedented rise of strategic convergence between India and the US in managing China’s rise, leading to a transformation of the India–US strategic partnership in recent years, particularly under the Modi government (Pant & Joshi, 2017). Moreover, as the US–China tech rivalry intensified, India found itself in alignment with the US, sharing a common goal to deal with China’s technological advancement (Kumar, 2023a). Above all, India’s growing strategic partnerships with the US and its key security allies in the multilateral frameworks, such as the Quadrilateral Security Dialogue (Quad), have provided a solid geopolitical foundation for India to join the US-led multilateral technological partnerships in an emerging tech bipolar order (Kwon, 2022).

Major Characteristics and Trends in India–US Semiconductor Alliance

There are at least three major characteristics and trends in the India–US semiconductor alliance that have emerged in the post-COVID era. These include: (1) the deepening of high-level political commitments for chip alliances, (2) the enhancement of chip-related agreements and institutional collaborations between the two countries, and (3) the significant fostering of US semiconductor companies’ presence in India.

Deepening of High-Level Political Commitments for Chip Alliances

One of the most remarkable changes in India–US relations in the post-COVID era is the growing high-level political commitment to technological alliances, with a focus on semiconductor partnerships. Indeed, there has been a significant shift in the focus of the India–US partnership: from nuclear cooperation in the 2000s, to climate and clean energy in the 2010s, and finally to semiconductor and technological partnerships in the recent post-pandemic period. It is significant to note that when Prime Minister Modi resumed office in 2014, technology and semiconductors were not the focal points of the bilateral relationship. For instance, the much-hyped Modi-Obama 2016 Summit primarily focused on advancing the India–US global leadership on “Climate and Clean Energy.” A joint statement released by India and the US in June 2016 began with detailed collaboration on this issue (The White House, 2016). This was due to the fact that both countries wanted to make significant progress on their commitments related to global climate change, which was one of the hottest issues in global affairs following the 2015 Paris Agreement on climate change.

However, as major powers’ priorities shifted amid the chip competition, so did the priorities of India and the US. At the Modi-Biden 2023 Summit, the technological partnership became the focal point, replacing the climate change partnership. Several commitments were made in the India–US joint statement to foster a high-level partnership in technology, especially semiconductors (The White House, 2023). The political commitment to strengthening semiconductor partnerships is also manifested in growing numbers of high-level political meetings and discussions focusing on promoting them (see Table 1). Above all, the India–US semiconductor alliance strengthened when India and the US joined hands with like-minded partners such as Japan and Australia within the Quad framework to boost semiconductor cooperation. This development marked a crucial step in the India–US tech partnership amid the emerging US–China tech war, which is pressuring countries to take sides.

Enhancement of Chip-related Agreements and Institutional Collaborations

In recent years, substantial developments in India–US semiconductor partnerships have been marked by multiple agreements and enhanced bilateral cooperation. In May 2022, Prime Minister Modi and President Biden announced the elevation of the India–US strategic partnership with the India-United States Initiative on Critical and Emerging Technology (iCET). This technological partnership in semiconductors and other key tech sectors is considered a significant milestone in India–US relations, akin to the nuclear power cooperation agreement of 2016 (Swanson, 2023).

Following the initiation of iCET, in 2023, India signed an MoU with the US to establish the semiconductor supply chain and innovation partnership. What is more, in January 2023, both countries set up a joint task force, organized by the India Electronics & Semiconductor Association (IESA) and the US Semiconductor Industry Association, with the participation from the Indian government’s ISM, to strengthen semiconductor ecosystems (Semiconductor Industry Association, 2023a). In June 2023, the joint task force submitted its initial assessment, highlighting various key areas for strengthening the India–US chip partnerships, with a major focus on building chip talent (Semiconductor Industry Association, 2023b). Consequently, India’s SIA and Purdue University signed an MoU to advance workforce development, joint research, innovation, and global industry collaborations (Purdue University, 2023). Both sides have expanded their scope of institutional collaborations by including third countries. The recent inauguration of India–US–South Korea trilateral technology cooperation in 2024 is a case in point.

Fostering of US Semiconductor Companies’ Presence in India

One of the most important characteristics and trends in the India–US semiconductor partnership is the growing presence of US semiconductor companies in India. This development is significant, as many top semiconductor companies were initially hesitant to accept India’s offer to invest in its semiconductor mission. However, US companies are now leading the way in engaging with India’s market. The increasing presence of US companies in India represents a strategic cooperation between the two countries.

As Table 2 shows, several US companies are collaborating with the Indian government on various strategic projects. Furthermore, the Indian government has extended subsidies to US companies like Micron as a strategic move. Above all, these private sector investments in India are the direct results of high-level political summits between the two countries, reflecting both geo-economic and geopolitical strategies. The growing presence of US companies in India underscores the strengthening of the India–US semiconductor alliance.

Discussion and Conclusion

So far, this paper has discussed the geo-economic and geopolitical logic behind the formation of the India–US semiconductor alliance. It has also revisited key characteristics and major trends in this alliance. Now, the question is: What are the prospects of the India–US chip alliance? The future prospects of this alliance are promising. India is planning to emerge as a key player in the semiconductor value chain, and the US can support it in various ways to strengthen this industry. US companies can assist India in establishing its manufacturing plans, especially as they seek alternative investment destinations to China. This is well indicated by the US semiconductor giant Micron’s recent announcements for manufacturing in India. The US can also help realize India’s dream of becoming a global power in the supply of a skilled workforce in the semiconductor industry by providing educational and training opportunities for Indian youths.

India can also significantly contribute to achieving the US’s semiconductor goals. For instance, in the emerging chip talent wars, Indian talent could be a key asset in addressing the US semiconductor industry’s challenges regarding workforce shortages. It is worth noting that the US’s upcoming ambitious chip manufacturing plans, such as those by Taiwan Semiconductor Manufacturing Company (TSMC), are slowing down due to a shortage of talent (Swanson & Clark, 2024). India’s skilled workforce can help alleviate these problems. The future of the US semiconductor industry heavily depends on securing sufficient workforce talent, with an expected shortage of around 90,000 skilled workers in the US (Deloitte, 2022). India can indeed assist the US in this regard. Moreover, India can help the US realize its dream of fostering democratic chip alliances in Asia by providing a huge semiconductor market. Currently, the US allies, especially South Korea, are reluctant to be part of US-led chip alliances due to their export dependency on the Chinese market (Kumar, 2023b). India’s future demand for chips and electronic devices can help resolve this dilemma.

However, the India–US semiconductor partnership also faces several challenges, and resolving these issues will be key for long-term cooperation in this field. These challenges stem from both sides’ political economies and international relations issues. From the US side, there are three major challenges that can undermine this relationship. First is the US’s abandonment of its decades-long promotion of international trade and economic policies and the embrace of the America First stance, raising concerns about its economic interests. Second is the US’s initiative to bring production back home, focusing on relocating the semiconductor manufacturing plants domestically. In this context, it is uncertain how US policymakers will tolerate if US manufacturing companies succeed in the Indian market. Finally, the regime shifts pose a significant challenge for the future prospects of the India–US partnership. Although the Biden administration is also concerned about the outsourcing of US manufacturing to Asia, the Donald Trump-led administration was more vocal about ensuring US companies adhere to the America First strategy and often criticized key allies for taking advantage.

India’s domestic political economy issues and the challenge posed by other regional competitors such as Vietnam and Malaysia to lure US companies to Southeast Asia also pose significant challenges for the long-term partnership in the India–US semiconductor ties. India is characterized as a fragmented multiclass state with various goals, including left-leaning policies of redistribution, which demand substantial investment of state resources in non-productive areas (Kohli, 2004). This situation has historically hampered the development of high-tech, capital-intensive industries since the Cold War. Although there are signs of change with the rise of pro-growth and development-oriented governance under the right-wing BJP, which has enjoyed substantial support since 2014, it is uncertain how long India can continue investing heavily in capital-intensive industries. India’s commitment to long-term goals and continued investment in this industry are crucial for the success of US companies in the Indian manufacturing sector. Ensuring sustained investment and policy support will be key to realizing the full potential of the India–US semiconductor partnership. Furthermore, the future of the India–US semiconductor partnership will also depend on how India competes with other regional competitors in Southeast Asia, such as Vietnam and Malaysia, to attract the American companies. As US–China tech tensions intensify, the US companies are considering Vietnam and Malaysia as alternative options to China. These countries are often seen as more suitable than India due to various domestic challenges, especially concerning infrastructure. Addressing these challenges will be essential for the successful long-term collaboration between India and the US in the semiconductor sector.

Acknowledgments

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2017S1A6A3A02079749). This paper was originally presented at the International Conference on the Great Transition in India, held at Hankuk University of Foreign Studies in Seoul, South Korea, on May 17, 2024.

ORCID

Rajiv Kumar  https://orcid.org/0000-0002-6385-9889