India EU Semiconductor Pact

GS Paper II International Relations

Context:

Recently, India and the European Union signed a Memorandum of Understanding (MoU) on semiconductors to help build a “robust supply chain” and support innovation.

Memoranda of Understanding: The MoU was signed at the second India-EU Trade and Technology Council (TTC) meeting held virtually for deepening cooperation on the semiconductors ecosystem.
This agreement requires India and the EU to share semiconductor ecosystem experiences, best practices, and information and establish research, development, and innovation collaborations between universities, research organisations, and enterprises.
Review of Progress: The TTC also examined the council’s working groups’ progress in high-performance computing, digital public infrastructure, EV batteries and recycling, waste to energy, resilient supply chains, and FDI screening.

EU-India Trade and Technology Council (TTC)

The EU and India have set up the TTC as a coordination platform to address key trade, trusted technology, and security challenges.
The role of TTC is to deepen strategic engagement in trade and technology between both partners.
The first meeting of the TTC was held in May 2023 in Brussels.
India is the second country after the US with which the EU has a TTC mechanism.

Semiconductors:

They are also called integrated circuits (ICs) or microchips, which are made from pure elements, typically silicon or germanium, or compounds such as gallium arsenide.
In doping, small amounts of impurities are added to these pure elements, causing large changes in the material’s conductivity.
Applications: Semiconductors are an essential component of electronic devices, enabling advances in military systems, communications, computing, transportation, healthcare, clean energy, etc.

Strategic Commodity: Semiconductors are at the center of the digital economy. Its contribution to innovation, productivity, and economic growth in the past four decades has been extensive.
Supply Chain Diversification: In the post-COVID period, diversifying away from China-dominant supply chains has gained momentum due to geo-strategic and geo-political concerns.
Strategic and Commercial Alignment: The agreement will help India align more with the EU and the U.S. on the semiconductor industry’s future. Both sides will also identify areas for mutually beneficial collaboration in research, development, and innovation in semiconductor technologies, including advanced packaging technologies, design, and raw materials.

PLI Scheme for Semiconductor:

A PLI scheme for semiconductor manufacturing in India with an outlay of Rs 76,000 crore.
It allowed uniform fiscal support of 50 percent of project cost for semiconductor fabs across technology nodes and display manufacturing.

Exchange of information: It will involve information on trade barriers, disruptions, and their potential impact on the semiconductor value chain and explore measures to mitigate their impact.
Development of a High-skilled workforce: It will foster skills, “talent, and workforce development for the semiconductor industry.
Level Playing Field: The agreement will “ensure a level playing field in the sector by sharing information on granted public subsidies.
Encourage industry and stakeholder engagement: It will facilitate collaboration between Indian and EU stakeholders towards direct investments, joint ventures, and technology partnerships including manufacturing facilities.

Further Reading: Semiconductor Manufacturing, India’s First Semiconductor Memory Chip

Source: Financial Express