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India-Japan chip supply chain partnership

  • Category
    International Relations
  • Published
    31st Oct, 2023

Context:

The Union Cabinet has approved a Memorandum of Cooperation (MoC) between India and Japan on developing a semiconductor supply chain partnership, which will focus on research and development (R&D), manufacturing, design, and talent development for the industry.

About the partnership:

  • Background: The MoC was initially signed in July 2023, between the IT Ministry and Japan’s Ministry of Economy, Trade and Industry.
  • Objective: The MoC intends to strengthen cooperation between India and Japan towards enhancement of the semiconductor supply chain, recognizing the importance of semiconductors for the advancement of industries and digital technologies.

Semiconductor supply chain in India

  • India currently imports all chips and the market is estimated to touch USD 100 billion by 2025 from USD 24 billion now. However, for the domestic manufacturing of semiconductor chips, India has recently launched several initiatives:
  • The Union Cabinet has allocated an amount of Rs. 76,000 crore in 2021 for supporting the development of a ‘semiconductors and display manufacturing ecosystem’.
  • Consequently, a significant number of incentives would be provided to design companies to design chips.

India’s initiatives to become ‘Atmanirbhar’ in semiconductor manufacturing

  • India has also launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) for manufacturing of electronics components and semiconductors.
  • In 2021, India announced its roughly USD 10 billion-dollar Production-Linked Incentive (PLI) scheme to encourage semiconductor and display manufacturing in the country.
  • In 2021, the MeitY also launched the Design Linked Incentive (DLI) Scheme to nurture at least 20 domestic companies involved in semiconductor design and facilitate them to achieve a turnover of more than Rs.1500 Crore in the next 5 years.

Top 5 Countries Producing Semiconductors

  • Top 5 Countries that produce the most semiconductors are Taiwan, South Korea, Japan, United States, and China.
  • Taiwan and South Korea make up about 80% of the global foundry base for chips. TSMC, the world’s most advanced chipmaker, is headquartered in Taiwan.
  • Currently, foundries in Taiwan account for over 70% of the chips that mobile devices made in India utilize, according to industry estimates by the Indian Cellular and Electronics Association.
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