India’s evolving defence cooperation with the West is increasingly centred on technological collaboration. Non-traditional sources of technological innovation are becoming crucial for transforming defence partnerships. This article examines the recent India-US semiconductor fabrication agreement, highlighting its significance in India’s changing defence ecosystem. It also analyses the relevance of the deal amid geopolitical shifts with particular reference to the power differentials in the Indo-Pacific.
India and the US Amid Shifting Global Order
One of the most notable outcomes of Prime Minister Modi’s recent visit to the United States was signing an agreement on semiconductors. While it became a talking point, the discussions that followed the deal fell short of grasping its geostrategic and geo-economic implications. In recent years, especially in the last decade, strategic relations between India and the US have strengthened. Crucial developments after the Ukraine war began in 2022 substantiated this futuristic relationship, summarised below.
Key initiatives such as ICET, INDUS-X, and the defence industry roadmap have accelerated this partnership to newer heights. Before Modi’s visit, Defence Minister Rajnath Singh had finalised two significant agreements: the Security of Supplies Agreement (SOSA) and an agreement on the exchange of liaison officers. This laid the groundwork for deeper defence cooperation, especially in response to rising tensions with China in the Indo-Pacific region.
Although India has remained neutral regarding China in the Quad, maintaining a free and open Indo-Pacific and managing China along the disputed Line of Actual Control (LAC) requires India to enhance its capabilities, in line with the goals of ‘Self-Reliance’ and ‘Make in India’ initiatives. Additionally, India is gradually diversifying from its long-standing dependence on Russian defence equipment.
India’s new defence partnerships focus on co-developing defence equipment and securing supply chains through ‘friendshoring’ with trusted partners. The September 2024 semiconductor agreement between India and the US is a landmark deal. It aims to establish a new semiconductor fabrication plant, focusing on advanced sensing, communication, and power electronics, vital for national security, telecommunications, and green energy.
At the recent sixth ministerial-level meeting, India’s Piyush Goyal and US Secretary of Commerce Gina Raimondo reviewed the importance of the semiconductor agreement. The US Semiconductor Industry Association and India’s Electronics Semiconductor Association completed a private sector ‘readiness assessment’ to identify opportunities for the industry
Background of India-US Defence Cooperation
Three main factors are driving the growth of India-US defence collaboration after the war in Ukraine began in February 2022.
- Initiative on Critical and Emerging Technology (iCET): This key agreement signed in January 2023 is steered at the National Security Advisor level. The iCET initiative focuses on several critical areas to enhance collaboration and strengthen the India-US partnership. Among several focus areas is defence industrial cooperation by creating a new defence industrial cooperation roadmap to boost technological partnership for joint development and production. It also mentions developing shared AI standards to ensure compatibility and interoperability between both countries’ systems.
The vision for creating a semiconductor ecosystem was laid out in ICET as well. It mentioned supporting the development of a semiconductor ecosystem to enhance supply chains and boost production capabilities. In a short time, India and the US have achieved notable progress under the iCET. Key achievements include the Quantum Coordination Mechanism; and launching a Public-Private Dialogue (PDD) on Telecommunications focusing on collaboration in OpenRAN, 5G, and 6G technology development. Additionally, exchanges have happened in the realm of AI and Space Exchanges. Finally, a Memorandum of Understanding (MoU) to establish a semiconductor supply chain, paving the way for collaboration in this vital sector has also been signed.
- Roadmap for US-India Defence Industrial Cooperation: Signed in June 2023, this roadmap builds on several foundational documents and recognises robust investments by US businesses in India’s defence ecosystem for decades. Under the roadmap, both countries commit to accelerating the integration between their respective defence industrial sectors in line with ICET and innovation. The roadmap mentions the value of supply chain resilience in the defence industry sector and the conclusion of SOSA and its successor, which was carried out in September 2024 when Rajnath Singh visited the US.
- India-US Defence Acceleration Ecosystem (INDUS-X): Signed in June 2023, INDUS-X is designed as an innovation bridge to enhance cooperation between the two nations’ industrial base under the iCET. India and the US are close to finalising a crucial jet engine deal with other deals on state-of-the-art drones and armoured infantry vehicles. Most of these deals have a component of ‘Make in India’ and transfer of technology that needs to be supervised consistently for the final shape to emerge.
So far, two significant developments have occurred under the INDUS-X framework:
- Launch of the DIU-iDEX Joint Challenges: This involves cooperation on maritime intelligence, surveillance, and reconnaissance, along with technologies for underwater communication and oil spill detection.
- Agreement on semiconductors which is seen as a significant step toward strengthening defence innovation.
Recently, the sixth ministerial-level meeting of the US-India Commercial Dialogue, held between India’s Piyush Goyal and US Secretary of Commerce Gina Raimondo, reviewed the importance of the semiconductor agreement. The US Semiconductor Industry Association and India’s Electronics Semiconductor Association completed a private sector ‘readiness assessment’ to identify industry opportunities.
India imports around $1 billion worth of advanced semiconductors – critical for advanced communication systems, radar technology, and secure data encryption – for defence forces annually. The partnership with the US is expected to significantly reduce this dependency, as India will develop its capability to manufacture these crucial components
The Importance of the Semiconductor Agreement
Semiconductors are critical for advanced communication systems, radar technology, and secure data encryption. India’s defence ecosystem is transitioning from a buyer to a builder, necessitating technological sharing and reliable access to essential components. Semiconductors, or chips, are crucial for all modern technologies and play a central role in the emerging digital order.
India’s rapidly growing semiconductor market is expected to be among the top five globally by 2029, valued at $55 billion. However, India is reliant on imports, with a 92 per cent increase in semiconductor imports over the past three years. The new agreement with the US could transform India from a ‘chip taker’ to a ‘chip maker’, a vital step in India’s goal of becoming a builder’s defence ecosystem.
From the US perspective, this collaboration is part of a broader strategy to relocate critical technology supply chains away from China to trusted partners. India, a key player in the Indo-Pacific, is essential to this strategy. Thus, the comprehensive India-US partnership has naturally extended to the semiconductor sector, a crucial element for building India’s defence capabilities with the help of its closest strategic allies
What Makes This Fabrication Agreement So Special?
The semiconductor agreement is a significant step in technological collaboration between the United States and India. It focuses on the fabrication of semiconductors, a complex process that involves three main stages: design, fabrication, and ATP (Assembly, Testing, and Packaging).
The current agreement revolves around the second stage — fabrication, which refers to the specialised procedure of transforming raw materials into functional electronic components, particularly semiconductor devices like integrated circuits.
Most semiconductors use silicon, which dominates about 80 per cent of the global semiconductor market. Silicon’s widespread use is attributed to its abundance, low cost, and the mature infrastructure that exists for its fabrication. However, silicon semiconductors are gradually becoming outdated as more advanced and complex semiconductors emerge, particularly those suited for high-speed, high-power applications.
The joint efforts of India and the US aim to move beyond silicon and focus on developing these advanced semiconductors, which are critical for modern strategic and technological needs. This partnership is especially relevant to national security, as advanced semiconductors are essential for various defence-related applications. Two key advanced semiconductor materials highlighted in the joint statement are Gallium Nitride (GaN) and Silicon Carbide (SiC). These materials offer superior performance in high-power and high-frequency devices, making them suitable for military and strategic applications
The India-US Fab agreement is supported by India’s Semiconductor Mission and a strategic technology partnership involving Bharat Semi, 3rdiTech, and the US Space Force. The fabrication plant, dubbed ‘Shakti’, is designed to produce advanced semiconductors for modern warfare, with a focus on three key pillars: advanced sensing, advanced communications, and high-voltage power electronics. These areas are deeply connected to India’s broader goals of enhancing national security.
The second area of cooperation under the agreement focuses on building resilient, secure, and sustainable semiconductor supply chains. This effort is exemplified by GlobalFoundries’ (GF) establishment of the GF Kolkata Power Centre in India, which aims to strengthen research and development linkages in semiconductor manufacturing, artificial intelligence (AI), and other emerging fields.
India’s dependence on imports of advanced semiconductors is a matter of concern. New Delhi currently imports around $1 billion worth of advanced semiconductors for defence purposes annually. The partnership with the US is expected to significantly reduce this dependency, as India will develop its capacity to manufacture these crucial components. A key element of the agreement is the commitment to fostering collaboration. Over the next five years, the US and India plan to mobilise up to $90 million through the US-India Global Challenges Institute to support partnerships between universities and research institutions in both nations. This collaboration builds on various frameworks established by iCET, with a particular focus on advanced materials research and development.
One groundbreaking aspect of this agreement is that it marks the first time the US military has entered into such a partnership with India for cutting-edge technologies, underscoring the importance of collaboration in today’s security landscape.
The India-US semiconductor fabrication agreement is poised to be a game-changer, provided it is successfully implemented. This partnership aligns with the broader strategic goal of the United States to empower India to play a more significant role in the Indo-Pacific region, particularly in balancing China’s influence
Importance of Advanced Semiconductors: A Cross-sectional Analysis
The semiconductor fabrication plant in India will focus on manufacturing Gallium Nitride (GaN) and Silicon Carbide (SiC) semiconductors. Both these materials fall into the Wide-Band Gap (WBG) semiconductors category. The band gap of a semiconductor determines its electrical performance, particularly its ability to operate at high frequencies and withstand high voltages. WBG semiconductors like GaN and SiC are superior to conventional silicon, making them ideal for modern, high-performance electronic systems.
GaN is a strategic semiconductor compound known for its wider bandgap, making it highly suitable for next-generation high-power and high-frequency applications. It is particularly effective in radar systems, autonomous vehicles, and missile defence systems, which are critical for national security. The US has been at the forefront of research and development in GaN technology, and it will be a win-win situation to operate the fabrication units from India catering to the defence needs of both countries.
Similarly, SiC is another WBG semiconductor with advantages such as better thermal conductivity and stability, making it well-suited for high-power, high-temperature environments. SiC is commonly used in electric vehicles (EVs), solar power designs, wind turbines, and other applications that require high-voltage operations and improved heat dissipation.
By comparison, GaN and SiC have distinct characteristics that make them suitable for specific applications. GaN is better for high-performance, high-frequency systems due to its higher electron mobility, while SiC’s superior thermal conductivity makes it ideal for high-power applications. These advanced semiconductors are becoming increasingly important in many fields, including advanced warfare technologies such as night vision devices, missile seekers, space sensors, drones, fighter jets, radars, and jammers.
The fabrication plant in India aims to attract investments to manufacture these two advanced semiconductors. India’s startup 3rdiTech is collaborating with the US defence company General Atomics on various projects to boost semiconductor production. In the first phase of the collaboration, they aim to produce around 50,000 semiconductor units per year. The partnership involves Bharat Semi, 3rdiTech, General Atomics, and the US Space Force.
Strategic and Geopolitical Implications
The India-US semiconductor deal is poised to be a game-changer, provided it is successfully implemented. This partnership aligns with the broader strategic goal of the US, which is to empower India to play a more significant role in the Indo-Pacific region, particularly in balancing China’s influence. With the capacity to manufacture advanced semiconductors, India will join a select group of nations capable of producing these crucial components.
As most semiconductors worldwide use conventional silicon, only about 20 per cent consist of more advanced materials like GaN and SiC. However, demand for complex semiconductors will grow as critical and emerging technologies become more pervasive and the global digital order expands. These advanced semiconductors will be essential in shaping the direction of the digital landscape and futuristic defence technologies.
Technological innovation will shift global production and supply chains, with nations that control key technologies likely to dominate the security and economic order. This is evident from the role played by the Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan’s national security calculus. Scholars have elaborated that the US reliance on TSMC’s semiconductor production acts as an implicit security guarantee for Taiwan. The shift towards engaging India as a hub for advanced semiconductor manufacturing is part of the US’s broader strategy to reduce its reliance on TSMC and diversify its supply chains.
For India, this partnership is crucial for transitioning from a chip consumer to a chip producer, a shift central to building a robust defence ecosystem. As India strengthens its semiconductor manufacturing capabilities, it will shape the global technological and security landscape.
What’s Next?
Relevant analyses in this field have suggested that India needs to be integrated into the recently announced US National Defence Industrial Strategy. This strategy, the first ever for the US, was announced in January 2024. It underscores the shifting defence industry pathways after the protracted war in Ukraine building resilience in US supply chains for the United States and its allies and partners. India is included in that list. It is too early to assess how India’s place in the United States’ national defence industrial strategy will play out. However, it can be argued that the India-US defence partnership will draw its fuel from technological innovation.
In conclusion, the India-US semiconductor fabrication agreement represents a major milestone in the two countries’ technological and strategic partnership. It reflects the ongoing geopolitical shifts in the global order, where technological capabilities will play a critical role in shaping power dynamics. The success of this agreement will depend on the ability of both sides to deliver on their promises and ensure that progress is monitored through regular reviews.
–The writer is ex-Associate Fellow, Europe and Eurasia Centre, Manohar Parrikar Institute of Defence Studies and Analyses (MP-IDSA). The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda
