PM Modi’s Southeast Asia Visit Strengthens Semiconductor Ties with Singapore, Expands Act East Engagement

(Source: Indian Express; Section: Explained; Page: 10)

Topic: GS2 – International Relations; GS3 – Indian Economy

Context:

● Prime Minister Narendra Modi’s visit to Brunei and Singapore focused on strengthening partnerships in trade, defense, and semiconductors, advancing India’s Act East Policy and Indo-Pacific vision.

 Analysis of News:     

Prime Minister Narendra Modi’s Visit to Southeast Asia

• Prime Minister Narendra Modi visited Brunei and Singapore as part of a two-nation trip.
• His visit to Brunei was the first by an Indian PM, highlighting Brunei’s role in India’s Act East Policy and Indo-Pacific vision, with discussions focused on trade, defense, space, and cultural ties.
• In Singapore, the focus was on signing agreements related to semiconductors, digital technologies, and skill development.

India’s Push for Semiconductors

• The partnership with Singapore on semiconductors is crucial for India’s geo-strategic and economic goals.

• The global chip shortage, exacerbated by the COVID-19 pandemic and tensions with China, has spurred India to develop its own semiconductor ecosystem.
• India’s Semiconductor Mission, launched in 2021, includes significant investment incentives, and collaborations with Taiwan and global semiconductor players to establish manufacturing units.

Singapore’s Semiconductor Industry

• Singapore has a well-established semiconductor industry, contributing around 10% of global output.
• The country’s success is rooted in early investments and government support in the 1970s. With a complete value chain, including design, fabrication, and testing,
• Singapore’s semiconductor industry plays a key role in its economy. Leading global semiconductor firms have set up operations there, enhancing its strategic importance in the global supply chain.

Opportunities for India-Singapore Collaboration

• While Singapore focuses on mature-node chips used in various industries, it faces challenges with increasing production costs and limited land and labor.
• This presents opportunities for India to collaborate with Singapore in talent development, knowledge sharing on semiconductor park management, and attracting semiconductor companies looking for expansion, leveraging India’s abundant land and competitive labor costs.

What is the Overall Scenario of the Semiconductor Market?

● Global Scenario: ● The chip-making industry is a highly-concentrated one, with the big players being Taiwan, South Korea and the U.S. among others. ● Infact, 90% of 5 nm chips are mass-produced in Taiwan, by the Taiwan Semiconductor Manufacturing Company (TSMC). ● Therefore, the global chip shortage, U.S.-China tensions over Taiwan, and the supply chain blockages owing to the Russia-Ukraine conflict have led major economies to enter the chip-making sector with a renewed push. ● The global semiconductor industry is currently valued at USD 500-600 billion and caters to the global electronics industry currently valued at about USD 3 trillion. ● Indian Scenario: ●  The Indian semiconductor market is valued at approximately USD 23.2 Bn and is projected to reach USD 150 Bn by 2029, growing at a CAGR of 27.10% during the forecast period. ● However, for the domestic manufacturing of semiconductor chips, India has recently launched several initiatives: ● To support semiconductor research and development (R&D) in India, MeitY has announced a USD 10 Bn investment in the ISM. ● India has also launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) for manufacturing of electronics components and semiconductors.

Practice Question:  Examine the significance of Prime Minister Narendra Modi’s recent visit to Brunei and Singapore in the context of India’s Act East Policy and Indo-Pacific strategy, with a focus on strengthening trade, defense, and semiconductor partnerships. How can these engagements contribute to India’s economic and strategic goals? (250 words/15 m)