US-China Tech War Is Opening A Big Door For India, And We Must Take Advantage

The tech noose around China is slowly being tightened, and Chinese companies have begun to feel the heat of this action by the US and its allies in Europe and Asia. Chinese leaders have started to complain about this and warn the US and European companies of severe consequences. From 5G equipment to semiconductor chips, Chinese companies are in the US and European net on the allegations that they are stealing local data and transferring them to Chinese security agencies. It is strange that the US and its European partners took notice of the suspected Chinese spying through their high-tech equipment only when the Chinese began displaying their aggressive and offending behaviour in the international arena, especially in the maritime domain.

The tech companies based in China, both domestic and international, suddenly find themselves in dire straits after the latest round of US and European sanctions. In fact, on the strength of these originally West-developed high-tech components and equipment technology, China could become a manufacturing giant and destroy the domestic industries of many developed and developing countries like the US and India. 

So rattled by the current round of tech bans the Chinese leadership is that President Xi Jinping in his last speech at the Chinese Communist Party meeting blamed the US for everything. Said Xi: “Western countries led by the US implemented all round containment, encirclement and suppression against us.” 

In order to prevent China from manufacturing advanced chips, the US has announced export restrictions. Presently, the advanced chips industry is dominated by Taiwanese firms. To encourage advanced chip manufacture in the US, the administration has legislated the US$53 billion Chips and Science Act. In addition to this move, the US hit hard on 31 more Chinese firms, research institutions and related groups by including them in the list of Bureau of Industry and Security, with the possibility of greater sanctions later. Among the affected is the Yangtze Memory Technologies Corporation (YMTC), China’s top memory chipmaker, which found mention in the Entity list, which restricts any business with American companies without clearance from the authorities.

As a result of the strong action, US tech giant Dell said last month that the company would not use Chinese chips by 2024, while Hewlett Packard declared its decision to drop from the joint venture with Beijing-based semiconductor company Tsinghua Unigroup. 

Most notable is the decision by Apple to leave China. The iPhone manufacturer has decided to shift to India, where Taiwanese chipmaker Foxconn has also decided to invest over US$ 500 million. It is expected that these high-tech giants will inspire others to relocate their factories to India. It is now assessed that the technology ban on China will lead to the exit of many other US and European high-tech, IT and electronics companies from China. 

So, where will they shift their ventures? Is India ready to take advantage of this tech war between the US and China? 

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Here Is What India Is Doing To Cash In On The Situation

As the tech war intensifies, India is getting proactive in encouraging the tech giants to look to India as an investment destination, which offers not only a huge market but also cheaper skilled manpower. For this, India is already engaged in a serious dialogue both at bilateral and multilateral levels. At the multilateral level, India is engaging with QUAD partners, through the QUAD Critical and Emerging Technology working group, which is focussing on countering Chinese influence in technology spheres — ranging from rare earth minerals to semiconductor chips and undersea cables. QUAD intends to shape the technology flows and regimes in the Indo-Pacific, which is of great relevance for India and other regional partner countries. During the March 8-10 visit to New Delhi, US Commerce Secretary Gina Raimondo said India and the US are sharing information about semiconductors manufacturing and its commercial opportunities between the two nations, and engage in a continuous dialogue around policies that would encourage private investment in the semiconductor ecosystem. The US and India are also looking for joint ventures or technology partnerships. Since both India and the US are implementing a semiconductor incentive programme, the two sides are also coordinating their investment programmes.

Besides the US, India is also seriously engaged with the European Union with which a Trade and Technology Council was set up in April 2022. The TTC has further formed three working groups, one of which relates to strategic technologies, digital governance and digital technologies. The TTC is a high-level coordination platform to take this forward. It will allow India and EU to tackle strategic challenges at the nexus of trade, trusted technology and security and help implement political commitments in these areas. 

The QUAD has concurred on the need for trusted vendors, as well as global standards underpinned by democratic values. The quadrilateral group has also identified the areas for collaboration among the four partner countries, which include creation of a trusted and resilient supply chains for critical minerals, semiconductors, telecommunication equipment and undersea cables, and inclusive digital transformation encompassing future skills, cyber security capacity, APIs (active pharmaceutical ingredients), and global governance of technologies that include data governance, cyber crimes and 5G standards. 

QUAD is also slated to announce measures for collaboration on semiconductor supply chains. These multilateral efforts will enable India to attract semiconductor chipmakers, rare earth miners, and telecommunication equipment producers etc to invest in India. 

As far as rare earth mining and production is concerned, Indian investors are looking for investment in Australia, which also presents an opportunity for India to be self-reliant in products made of rare earth minerals. Big Indian miners can also bring in foreign partners to invest in rare earth mining and production factories in India. Currently, China has a monopoly over production of rare earth minerals. India is also dependent on China for meeting its requirements of rare earth minerals for its electronic, auto, space and defence equipment sectors. During the Covid-19 pandemic, when the supply of semiconductor chips was hampered, Indian carmakers had to shut their workshops. 

As the US and its partner countries are facing same issues and problems of timely supply of semiconductor chips, rare earth materials, telecommunication equipment etc, India has entered into a cooperative arrangement with these advanced economies like the US, EU, Japan etc for becoming not only self-dependent in these high-tech components but also an important player in the supply chain system. India simply needs to provide a congenial ecosystem for the tech giants to thrive, to achieve its goal of becoming self-reliant in high-tech products.

The author is a senior journalist and strategic affairs analyst.

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