India may see trickle-down benefits of US CHIPS Act

Source: The post is based on the article “India may see trickle-down benefits of US CHIPS Act” published in Livemint on 9th September 2022

What is the News?

According to experts, the ban on American chipmakers building advanced technology facilities in China if they have received funding from the US under the CHIPS Act could benefit countries such as India over the years.

What is the US CHIPS Act?

The US Government has passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act, 2022.

The Bill provides subsidies and additional tax credits to companies that manufacture chips in the US.

However, the semiconductor companies that receive financial assistance through this bill are barred from building high-tech facilities in China for the next 10 years.

How will this bill benefit India?

In the short term, the US will benefit from this bill but in the medium term, i.e., three years or more, it could benefit markets like India.

This is because incentives from this bill may be utilized by firms to expand globally and India would be a good choice for them.

Does India have an ecosystem for semiconductor manufacturing?

India currently does not have an ecosystem in place for advanced semiconductor manufacturing. 

But there is a semiconductor laboratory(SCL) in Mohali, Punjab that manufactures semiconductor chips in partnership with local and Israeli suppliers.

Moreover, conglomerates such as the Tata group and Vedanta have expressed interest in setting up chip operations here, and the government has also received interest from some global firms.

India has also introduced a Production-linked incentive(PLI) scheme for chipmakers.