Understanding the India-US MoU on Semiconductor Supply Chain

The primary objective of this MoU is to establish a mechanism that enables the two governments to collaborate on enhancing the resilience of the semiconductor supply chain. The US has introduced the CHIPS and Science Act to reorganize its supply chains and manufacturing processes. On the other hand, India has initiated a production-linked incentive program and launched the India Semiconductor Mission for semiconductors.

Why is this Significant for India?

• India is the ninth-largest trading partner of the US, and reciprocally, the US is India’s largest trading partner and the biggest market for its exports.
• The US ranks among the top five investment destinations for India and is the third-largest source of foreign direct investment ( FDI) in the country.
• This agreement aims to leverage the synergistic attributes of both nations, unlock business opportunities, and foster the growth of ecosystems for semiconductor innovation.
• The pact comes as India seeks to decrease its dependence on China for semiconductors.
• The agreement strives to encourage talent and skill development as well as research and development in a mutually beneficial manner.

Further Reading: Understanding the Semiconductor Shortage – Causes, Impact, and Possible Solutions

In Conclusion: As the US and India begin to establish distinct incentive programs for the semiconductor industry, they find themselves in a favorable position. By jointly mapping the supply chain, the two nations can identify potential areas for joint ventures, technology partnerships, workforce training, and research and development collaborations.