India and the US to partner for future technologies

On January 31st India and the US announced partnerships in the fields of space, defence, semiconductors and next-generation technologies. The bilateral agreement is another example of the US strengthening relations with allies in strategic areas while isolating China. India will benefit from initiatives on combined research, development and potential lowering of barriers on US tech exports for supercomputers. 

The Critical and Emerging Technology initiative (iCET) with India allows the US another opportunity to partner with a country looking to compete with China’s technological advances. The US is also keen to be a global frontrunner for future technologies such as artificial intelligence, quantum computing and 6G. The partnership with India comes a few months after a proposal to form a ‘Chip 4’ alliance with Japan, South Korea and Taiwan to create a semiconductor supply chain that excludes China. 

Meanwhile, India, alongside Vietnam, is turning out to be one of the preferred alternatives for technology companies looking to diversify from China. The US-India taskforce on semiconductors will further accelerate India’s efforts to grow its semiconductor manufacturing ecosystem. The Indian government announced a US$10bn incentive scheme in late 2021 that led to some non-chip Indian firms entering the market. Vedanta, a mining company, is looking to set up a semiconductor facility in collaboration with Taiwan’s Foxconn, and invest US$20bn. Tata Group, a salt-to-software conglomerate, has outlined a US$90bn investment over five years starting 2023 for a chip plant.

High-performance computing (HPC) technology and processing units are another area where India can leverage US expertise and technology. The iCET mentioned plans to lower US HPC technology export barriers for India. India’s HPC imports have increased by 45% between 2018 and 2022, but at the same time it has also been reducing import dependency on China. Up until 2018, China accounted for the bulk of HPC imports (35%), but India has since attempted to source hi-tech processing units from other countries. As of 2022, India sourced only 20% of its HPC imports from China, with the rest coming in from Singapore, the US, Hong Kong, Malaysia, Taiwan and the Netherlands. The US accounted for just 14% of India’s HPC imports in 2022, but that could change with the iCET.

The India-US partnership offers more strength to an otherwise unilateral effort by both countries to respond to China’s rapid technological progress. We can expect similar alliances on biotechnology, advanced materials and rare earth processing technology, which are areas identified by both countries for future collaboration. It is also possible that India seeks to build more such tech alliances with like-minded countries at the G20 summit it will host in September 2023.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, helping organisations identify prospective opportunities and potential risks.