India-Singapore Agreement on Semiconductor Chips

Prime Minister Narendra Modi visited Singapore during his trip to South-East Asia. The visit was marked by agreements on semiconductors, digital technologies, health and skill development.

Key-highlights

• Given the breadth and depth of bilateral ties and immense potential, they decided to elevate the relationship to a Comprehensive Strategic Partnership. This would also give a major boost to India’s Act East Policy.
• India and Singapore announced four agreements on:
  • Semiconductor: The MoU envisages cooperation to support India’s growing semiconductor industry while facilitating Singapore’s companies and supply chains to enter the Indian market.
    • Singapore contributes around 10% of the global semiconductor output, along with 5% of the global wafer fabrication capacity (silicon wafer is a circular piece of ultra pure silicon, out of which chips are carved) and 20% of semiconductor equipment production.
    • Nine of the world’s top 15 semiconductor firms have set up shop in Singapore.
    • Singapore has players in all segments of the semiconductor value chain: integrated circuit (IC) design, assembly, packaging and testing; wafer fabrication, and equipment/ raw material production.
    • Challenge: Singapore’s semiconductor industry is limited to “mature-node chips”, which are used in appliances, cars, and industrial equipment. It is not equipped to make high-end logic chips like the ones used in the AI sector.
  • Digital Cooperation: The MoU on cooperation in digital technology will encourage greater interoperability between the digital economies of the two countries and build on earlier work such as the linking of the digital payment systems of India and Singapore.
    • The main areas of cooperation under this MoU are data flows and data protection, digital utilities and digital public infrastructure, cyber-security and business-to-business linkages.
  • Education and skill development: The two sides will cooperate on technical and vocational education and training
  • Healthcare and medical research: There will be cooperation in disease surveillance, pandemic preparedness and prevention of communicable diseases.

Why is India intensifying its efforts for chip?

• Semiconductor chips are critical in virtually everything from missiles to mobile phones and from cars to computers.
• However, the global chip industry is dominated only by companies from a very small number of countries, and India is a late entrant into this high-tech and expensive race.
• Supply disruptions during the Covid-19pandemic and the geopolitical tensions arising out of China’s aggressive moves in the Taiwan Strait and the South China Sea have brought great urgency to India’s efforts to develop its own semiconductor
  • India launched the India Semiconductor Mission in 2021 with a Rs 76,000 crore chip incentive scheme, under which the central government offered half the plant’s capital expenditure costs as subsidy.
  • The Cabinet approved semiconductor-related projects adding up to investments of about Rs 1.26 lakh crore.
  • The government announced a partnership between the Tata Group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) to set up a semiconductor fabrication plant.