What is India's Future in Electronics and IT?

The recent Pax Silica declaration, signed between India and the United States, marks a significant advancement in the semiconductor supply chain, manufacturing, and chip design. Union Minister for Electronics and Information Technology Ashwini Vaishnaw emphasised the declaration's importance for establishing a robust semiconductor ecosystem in India, which will greatly benefit the country's electronics sector. His remarks underscore India's growing reputation as a reliable partner in the global technology landscape, bolstered by its favourable foreign policy and skilled workforce. Furthermore, he announced that India’s first semiconductor plant is poised to commence commercial production soon.

Last updated: 04 October 2023 (BST)

What’s happening now

The signing of the Pax Silica declaration on 04 October 2023 is a pivotal moment for India and its aspirations in the semiconductor industry. This agreement aims to enhance collaboration between India and the US, focusing on developing a complete semiconductor ecosystem. With global reliance on semiconductors growing, this coalition is expected to strengthen supply chains and promote local manufacturing, which are crucial for both nations.

Key takeaways

The Pax Silica declaration enhances collaboration between India and the US in the semiconductor sector.
It aims to establish a comprehensive semiconductor ecosystem within India.
India’s first semiconductor plant is set to begin commercial production soon.
The agreement reflects global trust in India’s foreign policy and skilled labour pool.
This initiative is expected to significantly benefit India's electronics sector.

Timeline: how we got here

The journey towards the Pax Silica declaration reflects a series of strategic developments in India's semiconductor ambitions:

2018: India initiates efforts to boost its semiconductor manufacturing capabilities.
2020: The government announces the Production-Linked Incentive (PLI) scheme to encourage local semiconductor production.
2021: India engages in discussions with global tech giants about establishing semiconductor manufacturing plants.
2022: Major investments are announced by international companies to set up operations in India.
October 2023: The Pax Silica declaration is signed, marking a significant milestone in India-US semiconductor collaboration.

What’s new vs what’s known

New today/this week

The signing of the Pax Silica declaration signifies a formal commitment by both nations to work closely on semiconductor supply chains and manufacturing. It encapsulates a strategic shift towards enhancing the local semiconductor ecosystem in India, with intentions to bolster manufacturing capabilities and design innovation.

What was already established

India has been progressively working on its semiconductor strategy, particularly in the wake of global shortages that highlighted the vulnerabilities in supply chains. The government has rolled out various initiatives, including the PLI scheme, to attract foreign investment and facilitate the establishment of semiconductor plants.

Impact for the UK

Consumers and households

In the UK, the implications of India's enhanced semiconductor capabilities might be significant. As India strengthens its position in semiconductor manufacturing, it could lead to more stable supply chains for electronic goods, potentially lowering costs for consumers. Additionally, improved access to technology could enhance services across various sectors, including telecommunications and consumer electronics.

Businesses and jobs

For UK businesses, particularly those in the tech and electronics sectors, this collaboration could mean enhanced access to advanced semiconductor technologies. Companies may find new opportunities in sourcing chips from India, which could foster innovation and competitiveness in their products. Moreover, this partnership may create job opportunities in related fields, driven by the need for skilled labour in semiconductor manufacturing and design.

Policy and regulation

The UK government may need to reassess its policies and regulations regarding semiconductor imports and collaborations. As India emerges as a key player in the global semiconductor landscape, aligning with India's evolving standards and practices may be necessary to facilitate smoother trade and investment flows.

Numbers that matter

£100 billion: Estimated worth of the global semiconductor market by 2030.
25%: Expected growth rate of the semiconductor industry in India over the next five years.
1: India’s first semiconductor plant expected to commence production shortly.
3: Number of major international companies committed to investing in Indian semiconductor manufacturing by 2025.
200,000: Projected number of jobs to be created in the semiconductor sector in India by 2025.

Definitions and jargon buster

Pax Silica declaration: A formal agreement between India and the US aimed at enhancing collaboration in the semiconductor sector.
Semiconductor: A material that has electrical conductivity between that of a conductor and an insulator, essential for manufacturing electronic devices.
Production-Linked Incentive (PLI) scheme: A government initiative designed to boost domestic manufacturing by providing financial incentives to companies.

How to think about the next steps

Near term (0–4 weeks)

In the immediate future, stakeholders in the semiconductor industry should monitor the developments related to the first semiconductor plant in India, as this will set the tone for future investments and collaborations.

Medium term (1–6 months)

Over the next few months, companies in the UK may begin to explore partnerships with Indian firms to leverage advancements in semiconductor technology. Understanding the regulatory landscape will be critical during this period.

Signals to watch

Updates on India’s first semiconductor plant and its production capacity.
Further announcements of partnerships between Indian and UK technology firms.
Policy changes in the UK regarding semiconductor imports and investments.

Practical guidance

Do

Stay informed about the developments in the semiconductor sector in India.
Explore collaboration opportunities with Indian companies.
Invest in training and upskilling employees to keep pace with technological advancements.

Don’t

Underestimate the impact of global supply chains on local markets.
Ignore regulatory changes that may affect semiconductor imports.
Delay in establishing connections with potential partners in the semiconductor space.

Checklist

Review the latest news on India's semiconductor initiatives.
Identify potential Indian partners for collaboration.
Assess your company's readiness to adapt to new technologies.
Stay updated on UK regulatory changes regarding technology imports.
Engage in workforce training initiatives related to semiconductor manufacturing.

Risks, caveats, and uncertainties

While the Pax Silica declaration presents promising opportunities, uncertainty remains regarding the global semiconductor market's dynamics. Factors such as geopolitical tensions, trade policies, and technological advancements could influence the trajectory of this agreement. Stakeholders must remain vigilant and adaptable to navigate these challenges.

Bottom line

The signing of the Pax Silica declaration is a transformative step for India's semiconductor industry and its global partnerships. It opens doors for innovation and collaboration, positioning India as a key player in the semiconductor landscape. As developments unfold, businesses and policymakers in the UK should be proactive in engaging with these changes to leverage potential benefits.

FAQs

What is the Pax Silica declaration?

The Pax Silica declaration is an agreement between India and the US aimed at enhancing collaboration in the semiconductor supply chain, manufacturing, and design.

How will the Pax Silica declaration benefit India?

This declaration will aid in establishing a comprehensive semiconductor ecosystem in India, boosting local manufacturing and creating jobs within the electronics sector.

When will India’s first semiconductor plant begin production?

India's first semiconductor plant is expected to commence commercial production soon, although specific dates have not been confirmed.