US think tank urges India to bolster semiconductor investment appeal

Jerry Chen, DIGITIMES Asia, Taipei 0

Credit: AFP

A recent report from a US-based think tank suggested ways the Indian government can enhance regulatory stability and business conditions to attract more semiconductor investments.

Commissioned by the joint initiative of the US-India government, the published paper evaluated India's position in the international semiconductor value chain. It also calls for increased collaboration between India and the US to bolster supply chain resilience amid global diversification efforts.

In May 2022, India and the United States announced the Initiative on Critical and Emerging Technology (iCET) to enhance strategic technology partnerships and defense industrial cooperation. As part of this initiative, the Semiconductor Industry Association (SIA) in the US and the India Electronics and Semiconductor Association (IESA) agreed to conduct a "readiness assessment". The Washington-based think tank, the Information Technology and Innovation Foundation (ITIF), was tasked with evaluating India's semiconductor ecosystem and policy frameworks to provide recommendations to the US Department of Commerce and India's Semiconductor Mission (ISM).

John Neuffer, president and CEO of SIA, expressed optimism about India's role in the global semiconductor supply chain and the potential for expansion in the sector through collaborative efforts between the two nations. Ashok Chandak, president of IESA, acknowledged the current timing and factors influencing the ongoing establishment of semiconductor manufacturing in India and emphasized the report's recognition of India's progress in becoming a prime destination for electronics and semiconductor manufacturing.

The commissioned report titled "Assessing India's Readiness to Assume a Greater Role in Global Semiconductor Value Chains" examines India's semiconductor policy environment, India's current industry state, and the regulatory and business landscape, including talent, infrastructure, taxes, and tariffs. It also explores strategies implemented by various Indian states to attract semiconductor investments and draws lessons from US states' experiences.

India's semiconductor prospects

Regarding its growth potential, the report found India has the potential to significantly expand its presence in global semiconductor value chains, leveraging its large and growing consumer and business marketplace, strengths in electronics production, and global supply chain rebalancing. The country's strengths in semiconductor design, accounting for 20% of the world's chip design talent, and recent successes in attracting semiconductor manufacturing investments, such as Micron's announcement of an ATP facility in Gujarat, indicate a strong potential for India to play a more significant role in the semiconductor industry. The report also highlights India's strengths in market opportunity and a large, skilled workforce, although ITIF noted the infrastructure quality of the nation remains an ongoing challenge.

To create a conducive regulatory and business environment, the report states stability, certainty, predictability, and transparency would be required to provide a favorable climate for domestic and foreign investors.

Lessons from US states

Furthermore, the report draws lessons from leading US semiconductor states, such as Arizona, New York, and Texas, in attracting semiconductor investments. It recommends that Indian states consider strategies such as investing in low-cost energy and water accessibility, establishing cross-sector partnerships with higher-education institutions to grow the skilled workforce, and developing local value chains to support semiconductor manufacturing. It also provides insights into the strategies and policies adopted by leading Indian states, such as Gujarat and Tamil Nadu, to attract semiconductor and electronics production investments.

Other key actions to enhance US-India cooperation in the semiconductor sector were also suggested in the report. These include establishing a partnership with the CHIPS for the International Technology Security and Innovation (ITSI) Fund and implementing a pilot visa program to facilitate the movement of skilled workers between the two nations under the iCET initiative. Additionally, policy reforms are advised to reduce the cost of doing business for semiconductor companies in India, such as providing tax incentives, streamlining customs administration processes, and expediting goods clearance times.