India needs a Holistic and Effective ‘Techplomacy’ Strategy

Technological advancements in the 21st Century have heightened the role of technology in the diplomacy arena. Technically adept nation-states are developing their own strategies to integrate technology with their foreign policy and diplomatic initiatives. But how can technology be used as a credible diplomatic plank by the Indian State to further its national and geopolitical interests? The Indian state needs to address the ability to utilise technology as a credible foreign policy and diplomacy tool.

India’s Semiconductor Push should Focus on Revamping the DLI Scheme

Announcing that India needed a long-term vision for building its semiconductor ecosystem, the minister for electronics and information technology, Ashwini Vaishnaw, unveiled four different schemes covering all areas of the semiconductor supply chain. One of these was the Design Linked Incentive (DLI) scheme that aimed at cultivating and building on India’s expertise in semiconductor design. Given India’s comparative advantage in human capital, DLI is a welcome change from focusing solely on chip manufacturing. However, six months after the updated semiconductor policy created ripples in the industry, the traction for DLI scheme has been underwhelming.

Are Government’s New Schemes For Semiconductors Enough To Make India Atmanirbhar?

the Union Cabinet recently approved a ‘comprehensive programme for the development of a sustainable semiconductor and display ecosystem’. This programme emphasised that India intends to play a more prominent role in the hyper-globalised semiconductor supply chain. Following up on that announcement, the Ministry of Electronics & Information Technology (MeitY) on December 21 notified four specific schemes to reduce India’s dependency on imports and build an ecosystem for the production of semiconductors. On December 30, MeitY released the guidelines for these schemes.

India Needs a 20-Year Semiconductor Strategy

To succeed in semiconductor manfacturing, it is essential to reflect on the difference between being able to manufacture one line of chips and achieving semiconductor self-sufficiency or even becoming a key manufacturer. The current discourse masks this difference. The dominant narrative suggests that India is in a do or die situation, one in which building a fab now implies the elimination of critical strategic vulnerabilities. In contrast, another failure means India is resigned to a position of weakness in the information age. This understanding is misplaced. Getting one fab going will not make India a key manufacturer. We will still be dependent on manufacturing equipment, designs, and chips manufactured outside India. India needs to drop the dream of swadeshi semiconductors. Instead, it should aim to become a key player in a trusted, plurilateral semiconductor ecosystem that keeps key adversaries out. In our view, at least five specific parts of the puzzle need to fall in place.

The Race for the Domination of AI Chips

With AI and advanced semiconductor technology an integral part of Industry 4.0, the impact of AI chips on the global technology landscape will gradually evolve in the coming decade.  The concept of new applications of semiconductors is gradually emerging and the concept of using artificial intelligence (AI) algorithms on high-end chipsets has opened an entirely new market for these devices, also known as AI chips. 

The Quad Makes the First Siliconpolitik Move

Summary

An earlier paper on ‘Siliconpolitik: The Case for a Quad Semiconductor Partnership’ made a detailed case for a Quad partnership on semiconductors. It argued that the Quad’s technology cooperation agenda should focus on semiconductors due to their ‘metacriticality’. Further, it reasoned that “since each Quad member enjoys a comparative advantage in a specific sub-domain of the semiconductor supply chain, this grouping is well-placed to collaborate.” With these arguments as a reference point, this paper analyses the semiconductor supply chain collaboration announcement at the first in-person Quad Leaders’ Summit.Read the full paper on the Institute of South Asian Studies website here [HTML & PDF]. 

On Semiconductors, India Needs to Reboot Trade Policies, Ecosystem to Build a TSMC

Talks have accelerated between India and Taiwan to build a state-of-the-art semiconductor manufacturing unit in the country. Reports have indicated that officials from both sides have met regularly to discuss the possible outcomes of Taiwan investing in a fabrication facility in India. The Taiwanese government and its major foundries, which hold the lion’s share of the world’s semiconductor manufacturing supply, have reportedly agreed to invest $7.5 billion in India to set up a long-pending fab in the country.

Go Easy on Amazon and Flipkart

The FDI in e-commerce policy clarifications made by the DIPP was done in order to help the small retailers from getting exploited at the hands of the big e-commerce players. While it may help them in the short run, an atmosphere that is not conducive to investment in this sector is bound to hurt them in the long run.Both Amazon and Flipkart have planned to approach the government together to reconsider these provisions. If they fail to convince the government, they will shrink the size of their future investments. This can have a significant negative effect on the entire e-commerce sector and can lead to job losses due to the closing of their private labels. Not to mention the loss of the number of jobs they would have created by their extension plans. Cities in the US are fighting with each other to provide incentives and attract Amazon’s second headquarters, while the Indian government is driving away from the investment.Finally, the decision is bound to hurt the Indian consumers. By limiting the number of discounts given by the private labels, the consumers will have to pay a higher price for their purchases. It will also reduce the variety of goods that are available to the consumers for online purchases.Vertical integration can have anti-competitive practices but can be dealt with in a far more efficient manner than outright bans on such operations. Antitrust authorities across the world have tools to recognise and prevent practices that can hurt consumers and small retailers. The competition commission can be given the mandate to develop these tools and implement them instead of killing the goose that lays the golden eggs.Finally, this would also be the right time to revisit the policy of not allowing FDI in multi-brand retail. The parochial fears of potential harm to small retailers are overplayed in the public discourse. All of the small retailers in question have benefited massively from the presence of these platforms. They are now able to reach an unimaginable number of customers because of the platform. Similarly, multi-brand retail can have a massive positive effect on economic growth and job creation.Read More