Semiconductor deal with the US a big strategic boost

The chip and the ability to miniaturise computing power determined victory in the Cold War. Now, it will again establish the strategic haves and have-nots of the 21st century. Just as industrial-age arsenals made sure that you never ran out of ammunition, in the digital age you will need chip fabrication (fab) strength to make sure that you do not run out of chips. Ascendancy in every critical domain of modern, electronic warfighting rides on the sufficiency of quantity and quality of chips.
The salience of the meeting between Prime Minister Narendra Modi and United States (US) President Joe Biden in Delaware last week, where the two leaders hailed a watershed arrangement to establish a new semiconductor fabrication plant in India that will be focused on advanced sensing, communications, and power electronics for national security, next-generation telecommunications and green energy applications, is to be read against this backdrop. The fab, which will be established with the objective of manufacturing infrared, gallium nitride and silicon carbide semiconductors, will be enabled by support from the Indian Semiconductor Mission as well as a strategic technology partnership between Bharat Semi, 3rdiTech, and the US Space Force.
The agreement will help to take India’s nascent capacities in chips and micro-electronics not only towards self-sufficiency but also to a new, game-changing high.
As of 2024, global semiconductor sales stand at a staggering $526.8 billion, while concurrently stimulating another $7 trillion in global economic activity annually. These also underpin a range of downstream applications in Artificial Intelligence (AI) and big data. Also, since semiconductors power virtually every modern device, it means industries/enterprises with access to the most sophisticated semiconductors enjoy a significant advantage when it comes to the ability to manufacture the most innovative products.
In 2023, India’s import of chips was pegged at $110 billion. Rather unflatteringly, while 20% of the global semiconductor manpower is located in India, India has always been a back-end design and services hub; almost 100% of Indian talent works in the back offices of foreign companies. Currently, the entire Indian defence ecosystem relies on imports. Bharat Electronics alone spends close to ₹1,800 crore every year on the import of semiconductors. The aggregate military-industrial complex in India spends over ₹8,000 crore on semiconductor imports. The new US-India fab arrangement, therefore, could be a turning point in converting our abject strategic dependencies into a historic opportunity for strategic autonomy.
A peep into the nuances of the arrangement points to the monumentality of the achievement. India’s Bharat Semi and 3rdiTech (the latter is a product essentially of the ministry-of-defence-driven iDEX enterprise, and therefore a feather in its cap) have inked a collaboration with the US Space Force to build the first, Indo-US semiconductor fab with a focus on national security. This historic agreement will see the US military — the developers of niche capacities in semiconductors — provide the technological enablement for a commercial fab to be set up in India. This fab, in turn, will focus on critical facets of prowess in modern warfighting, such as advanced sensing, communications, and power electronics.
The calculus in fact goes beyond national security; it encompasses next-generation telecom infrastructure and the humongous challenge of the green energy transition. The ambitions run even deeper — to develop a framework of state-of-the-art semiconductor technologies that help lubricate partnerships like Quad, in the wider Indo-Pacific, possibly, even in the Global South, as a source of a secure, trusted, and resilient supply chain for friends and partners.
The very name of the company — Bharat Semi — is more than symbolic. Drawing from Article 1 of the Constitution of India, the aspiration is to build an Indian deep technology behemoth, albeit one with an international visage, a strategic asset that India could wield in the pursuit of its interests. It could also be the first step towards making India a defence powerhouse — if seven out of 20 most promising defence primes in the globe today, are Chinese, how about some Indian competition too?
What is of even greater significance perhaps is the fact that the infusion of start-ups, the private sector, and an entrepreneurial drive in Indian defence have begun to bear fruit. The iCET Initiative, signed by Modi and Biden in 2022, laid out a very clear vision of unleashing the private sector and start-ups in the two democracies, to uncover possibilities and forge partnerships in critical technologies. The agreement could be the beginning of a perfect storm in such collaborative endeavours. It may also be legacy building for both leaders — Modi for his audacious moves that have led to rare access to hitherto denied technologies and Biden for making good on his promises.
The signing of the agreement will go down in history as a symbol of the coming of age of Indian statecraft, in the deft accomplishment of an extraordinarily ambitious and game-changing deal. We might consider celebrating this day as Aatmanirbharta Diwas if only to take our aspirations in strategic military self-reliance to ever-higher vistas of achievement and delivery.
Lt. General (Retd) Raj Shukla is member, Union Public Service Commission.The views expressed are personal