US Proposal Restricting Chips Impacting India
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Source: The post US Proposal Restricting Chips Impacting India has been created, based on the article “Processing power: GPU restriction will affect India’s ambitions” published in “Business Standard” on 16th January 2025

UPSC Syllabus Topic: GS Paper3- Science and Technology- Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

Context: The article discusses a US proposal to restrict advanced chip exports, including GPUs, to countries like India, aiming to maintain US AI leadership and prevent China’s progress. This could hinder India’s AI plans, but India might leverage diplomatic ties and local chip design capabilities to mitigate the impact.

For detailed information on Semiconductor Industry in India read this article here

What is the US Proposal About Advanced Chip Exports?

  1. The US is proposing to restrict the export of advanced computer chips, particularly GPUs, which are essential for AI development.
  2. This proposal aims to maintain US leadership in AI technology and prevent China from gaining a technological edge.
  3. About 20 key allies of the US would not face these restrictions, but other countries, including India, would have limits on how many chips they can import.

For detailed information on Learning from the CHIPS Act of the U.S read this article here

How will this impact global supply chains?

  1. The US proposal could disrupt global chip supply chains as key chips designed by Nvidia and AMD are fabricated abroad.
  2. Many raw materials come from nations not on the “favoured” list, complicating production.
  3. Countries like India, with R&D centers for Nvidia and AMD, may retaliate against restrictions, affecting production.
  4. Countries like Israel and EU members, also facing restrictions, could experience similar impacts.
  5. India’s lack of high-end fabrication units hinders self-reliance; building such facilities requires years and large investments.
  6. Supply chains for AI and data-center industries globally may face delays and higher costs due to restricted GPU availability.

What Can India Do?

  1. Leverage Existing Strengths: India has strong chip-design expertise and a growing data-center industry. Companies like Nvidia and AMD have R&D centers in India. India can use its large domestic market as a testbed for AI innovations.
  2. Diplomatic and Strategic Efforts: India needs smart diplomacy to negotiate “favored” status with the US. It can leverage its IT services giants and Silicon Valley connections. India’s role as a US military ally against China is also a bargaining point.
  3. Explore Long-Term Alternatives: If negotiations fail, India will need alternative GPU sources. This requires domestic fabs or overseas facilities owned by Indian businesses. Building such capacity will take years and require enormous investments.

Question for practice:

Discuss how the US proposal to restrict advanced chip exports could impact India’s AI ambitions and global supply chains, and what steps India can take to mitigate these challenges.


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