[Chiptalk] US Partners with 'Semiconductor Desert' India... Advises "Lower Investment Barriers"

US Think Tank ITIF 'Assessment of India's Semiconductor Readiness' Draft Report
"Indian Government Making Efforts to Resolve Infrastructure and Tax Issues"

"India has strengths in terms of the semiconductor manufacturing ecosystem. Adding measures to lower 'investment barriers' such as tariffs, taxes, and infrastructure issues could make it a stronger player."

This assessment was made in a draft report recently prepared by the U.S. public policy think tank Information Technology and Innovation Foundation (ITIF), which reviewed India's readiness for semiconductor industry development. In a situation where India, practically a 'semiconductor frontier,' is aiming to leapfrog China to become a semiconductor powerhouse, the U.S., actively supporting this, has presented the necessary elements for industry cultivation. This serves as a positive message to U.S. companies considering investment in India, while conveying from the U.S. perspective the necessary factors to the Indian side, with the U.S. think tank playing a kind of bridging role.

Indian Prime Minister Narendra Modi (left) and U.S. President Joe Biden
[Image source=Reuters Yonhap News]

According to the report released by ITIF on the 22nd of last month (local time), both the Indian federal and state governments are showing great interest in resolving issues that semiconductor companies worry about, such as various regulations, taxes, infrastructure, and incentives, to attract investment in capital-intensive industries. The report stated, "(India is) tremendously ready to grow," emphasizing that "the important thing is for India to have a long-term goal of transitioning to a business environment with sustained competitiveness."

India has long been considered a difficult country for the semiconductor industry. While there has been some growth in the fabless (semiconductor design) sector due to a large IT workforce, the manufacturing sector has lagged behind as a priority investment destination due to insufficient infrastructure. India is one of the countries where power outages frequently occur and water supply is unstable. On the other hand, semiconductor manufacturing plants require stable infrastructure such as water and electricity. Since factories operate 24/7, any infrastructure instability causing even a one-second halt results in enormous damage.

However, ITIF evaluated in the report that India is making efforts to secure stable power supply. According to the report, India's total power capacity is 410GW, the third largest in the world. Of this, 172GW is renewable energy. ITIF also introduced that since 1983, India's semiconductor research institutes have never experienced a power outage. Additionally, ITIF added that the Dholera region in Gujarat city, western India, which is mainly considered by global semiconductor companies as an investment candidate, has recently seen rapid improvements in various infrastructures such as water supply, logistics, and railways.

India has actively provided semiconductor investment incentives and addressed tax and tariff issues. So far, India has committed to providing $10 billion (approximately 13.2 trillion KRW) for the semiconductor and display sectors, with a total of $30 billion in support for semiconductor-related fields. India is also known for its complex tax system, and measures to resolve this are underway. ITIF emphasized, "(To attract cutting-edge investments) more changes are needed," adding, "When deciding on investments, companies value stability, certainty, and efficiency regarding taxes."

This report was released amid the Biden administration's full efforts to curb China's semiconductor rise. The U.S. is restraining China through various export controls while identifying India as an alternative semiconductor production base. Indian Prime Minister Narendra Modi has introduced the 'Made in India' policy to attract investments from capital-intensive global companies. The interests of the two countries align well, leading to the publication of this report.

India's cooperation in having a U.S. think tank evaluate its semiconductor industry also appears to be in this context. The report began discussions after the U.S. and India announced the advanced sector cooperation initiative 'iCET' in January. The semiconductor associations of both countries commissioned ITIF to assess how prepared India is as a semiconductor industry development site. The ITIF delegation visited India in May, met government officials, and is currently drafting the report aiming for a final release this fall. The draft was released when Prime Minister Modi visited the U.S.

U.S. semiconductor industry investment in India has already taken its first steps. U.S. memory semiconductor company Micron recently agreed to build a semiconductor factory in Gujarat state, western India. The factory construction will involve a total investment of $2.75 billion, with 50% supported by the Indian federal government and 20% by the Gujarat state government. The factory is scheduled to begin operations by the end of next year. Applied Materials, the world's leading semiconductor manufacturing equipment company, also announced plans to invest $400 million over four years to establish an engineering center in Bengaluru, India. U.S. company Lam Research is also launching a semiconductor technology training program to train 60,000 engineers in India.

Ashwini Vaishnaw, India's Minister of Electronics and Information Technology, announced last month that the first semiconductor manufactured in India is expected to come out by December next year. Minister Vaishnaw anticipated that 4 to 5 semiconductor factories would be established in India in the future.

This content was produced with the assistance of AI translation services.