US and India Plan to Boost Chips Collaboration, Biden’s Commerce Chief Says

(Bloomberg) -- The US and India will sign an agreement to boost coordination of their chip-industry incentive plans and are discussing the best ways to avoid over-subsidization as the South Asian nation looks to boost its role in the global technology supply chain.

The memorandum of understanding focuses on information-sharing and policy dialogue, Commerce Secretary Gina Raimondo told reporters Thursday. While she said there were no specific investment commitments by US firms to announce, American companies are optimistic about the future of ties with India, said Raimondo, who touted the benefits from greater collaboration on chips between the two governments.

“We would like to see India achieve its aspirations to play a larger role” in the electronics supply chain, Raimondo told reporters on a week-long trip that includes meetings with Indian public- and private-sector leaders in New Delhi, as well as conversations between American and Indian corporate executives.

Raimondo’s department is leading the way in pouring about $52 billion into the US semiconductor industry, which she frames as a key to American competitiveness and national security to reduce the nation’s dependence on chips from Taiwan and Asia more broadly. Commerce also applied broad export controls on chipmaking technology for China last year to address concerns about the threat to US strategic interests from its top global rival.

India’s geopolitical importance to the US and its allies has grown as American policy makers seek to contain China’s growing assertiveness, with an increased focus on the so-called Quad grouping that includes Japan and Australia. 

Prime Minister Narendra Modi’s government sees an opportunity to close India’s tech gap with China as Western investors and corporations sour on Beijing’s crackdowns on the private sector.

India’s $3.2 trillion economy is projected to be among the fastest-growing in the next years and it’s offering $10 billion in incentives to win manufacturing projects from foreign chip firms. While it has attracted some minor players, the program hasn’t managed to secure investments from industry leaders including Taiwan Semiconductor Manufacturing Co. and Intel Corp. 

Nevertheless, Raimondo, who’s traveling with executives from 10 leading US companies, sees “unbridled enthusiasm and optimism for how we can generate jobs in both of our countries and both share the benefits of a more resilient supply chain,” she said.

The US and India are working to align export controls and are launching a new trade dialogue focused on the issues, with Commerce’s Bureau of Industry and Security taking the lead for the US, Raimondo said.

India has remained neutral in the Russia-Ukraine war and has tried to mediate in the conflict. While the government’s relations with Washington have been warming, the US remains frustrated by India’s unwillingness to sanction Russia, with New Delhi eager to maintain close ties in a bid to secure cheaper energy. 

IPEF Talks

The Indian capital last month hosted a special negotiating round of the Indo-Pacific Economic Framework, or IPEF. 

It’s an effort by President Joe Biden’s administration to deepen ties with Asian nations through a range of issues. It’s also among US levers to counter China’s rising influence, although US officials have stressed that they aren’t asking partners to choose between Washington and Beijing despite an ever-intensifying competition.

Talks for the framework among 14 countries started in Los Angeles in September and are focused on four “pillars,” being trade, supply chains, clean economy — which focuses on the transition to renewable energy and fighting climate change — and fair economy, which includes taxation and corruption issues.

Last month’s negotiating round left off trade — since India isn’t participating in that pillar — and focused on the other three aspects. The Commerce Department is leading IPEF talks in those three areas for the US.  

Raimondo said she’s hopeful that India will eventually join the trade pillar of the framework, and for the countries in general to see economic benefits from the initiative this year. 

The next negotiating round is scheduled for next week in Bali, Indonesia.