Opinion
An India-US pact on electronics would benefit both countries. Now's the time.
Summary
- Collaboration on electronics system design and manufacturing could help diversify global supply chains, foster innovation and technology transfers, boost trade and investment, and create jobs in India and the US.
A pioneer of India’s software industry asked me some time ago if this was the ‘Y2K moment’ for Indian electronics hardware. My answer was an emphatic ‘yes.’ It is all the more evident today. India is poised to be a full-stack player.
We can design, make and provide a supply chain for electronics system design and manufacturing (ESDM). We can develop, test and market products at home and overseas.
The Union government recognizes this and has been aggressively pushing a policy for India to emerge as an ESDM hub. Generous business incentives for electronics, semiconductors and allied sectors have sparked interest among investors, multinational corporations and business houses.
India has the requisite talent and infrastructure, yet its ESDM activity is still nascent and a strong case can be made in favour of acquiring a trusted partner.
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When the software surge took place in the country, Indian industry had the US as its natural partner. It is time to extend that goodwill and relationship to electronics hardware. This would expand trade and provide an excellent business opportunity.
The US is a leader in global value chains across ESDM sectors. American firms lead in smartphones, personal computers and servers, networks, electric vehicles, semiconductors and operating systems, among other fields.
India, on the other hand, is the world’s fastest-growing major ESDM market and is keen to develop a manufacturing ecosystem and supply chain. There is a natural synergy that India and the US can leverage to mutual benefit.
The time has come for both countries to forge a formal pact or memorandum of understanding on ESDM collaboration. Bilateral trade in the sector has already risen to $4.9 billion in 2023 from negligible levels, with American firms investing in the Indian supply chain and Indian companies setting up operations in the US. The market in India alone is projected to rise from $155 billion today to $350 billion by 2027.
Deeper collaboration between India and the US makes eminent sense. It will diversify global supply chains and reduce overreliance on any single geography.
It will also foster innovation and technology transfer, thus resulting in cutting-edge products and services. Most importantly, it will boost trade and investment, and create jobs in both India and the US.
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We can initially aim for $200 billion in bilateral ESDM trade by 2030. Overall bilateral trade, which is touching $200 billion now, would then rise significantly to $500 billion by the end of this decade. For this, the ESDM pact must focus on five key areas of India-US collaboration.
It should first facilitate trade in end products, sub-systems as well as modules and components. This would align with New Delhi’s Make in India and Viksit Bharat vision as well as America’s re-shoring agenda.
These plans can be synchronized so that India de-risks, diversifies and provides a secure supply chain for the US as a friend-shoring alternative.
For instance, semiconductors can be sourced from the US while modules, sub-assemblies and end products are built in India for the US and global markets. This way, both nations would create a more robust and secure supply chain for critical electronic products and technologies.
Both India and the US have taken steps to strengthen their respective ESDM capacities. India’s production-linked incentives scheme and the US’s Chips Act and Inflation Reduction Act offer significant incentives for local manufacturing and R&D.
A coordinated approach will amplify their impact. By aligning these policies, both countries can attract investments, foster innovation and create jobs.
Given the talent available in both countries, India and the US can align their resources to invest in R&D and develop cutting-edge technologies like artificial intelligence, quantum computing, advanced manufacturing and advanced materials. Joint research projects and exchange programmes could place them at the forefront of technological advancement.
Realizing the full potential of an India-US partnership in ESDM would also require harmonizing standards and regulatory frameworks. This would facilitate an exchange of ideas, trade, investment and collaboration for technology transfers.
Also read: India’s electronics industry is surging
Rapid changes in the ESDM industry also require constant skilling, and since India and the US have developed onshore and offshore skills to service the software industry, a calibrated workforce development programme could address evolving needs.
To give such an agreement concrete shape, a high-level joint working group comprising representatives of both countries should be constituted to develop an action plan, monitor progress and address challenges.
In an era of shifting global ESDM supply chains, India and the US can emerge as the best combination for success and unlock massive potential for economic development, innovation, technological leadership and sustainable employment.
Formalizing a collaboration will create a resilient and diversified supply chain that will boost the global competitiveness of both and be of mutual benefit for decades to come.
These are the author’s personal views.
