India, Japan join hands to boost semiconductor supply chains

India and Japan last week agreed to boost their semiconductor supply chains in what analysts said would help both countries move away from China and secure access to critical products and materials, including chips, batteries, and minerals.

Indian minister of electronics and information technology Ashwini Vaishnaw and Japanese minister of economy, trade, and industry Yasutoshi Nishimura signed the agreement on Thursday.

Japan, which has about 100 semiconductor manufacturing plants, is now the second Quad partner after the US to sign a deal with India for the joint development of a semiconductor ecosystem. Australia is the fourth member in the grouping.

The Quad has been involved in talks to strengthen cooperation within the grouping and also bilaterally among the members to establish peace and stability in the Indo-Pacific region amid growing Chinese clout.

“India has excellent human resources” in fields such as semiconductor design, Nishimura said at a press conference after his meeting with Vaishnaw in the Indian capital.

“By capitalizing on each other’s strengths, we want to push forward with concrete projects as early as possible,” Nishimura said.

Japanese news agency Kyodo reported that Tokyo is expanding its partnership with like-minded nations to develop more resilient supply chains in the face of heightened geopolitical and economic security challenges.

“India has over 50,000 highly-skilled design engineers. India and Japan will create an implementation organization in which there will be opportunities for government-to-government as well as industry-to-industry collaboration,” Vaishnaw said.

Tokyo-headquartered Japanese state-backed semiconductor maker The Rapidus Corp. in which eight companies Denso, Kioxia, MUFG Bank, NEC, NTT, SoftBank, Sony, and Toyota, also have a stake will play a significant role in the partnership with India.

Japan currently lags behind global rivals in the ability to make finished semiconductor products, though it has an edge in producing certain materials and chip-making equipment such as silicon wafer, ingot, and glass displays.

Reuters had reported earlier this year that Tokyo is looking at ways to boost domestic microchip production following global supply chain snarls. 

Japan’s industry ministry is aiming for an up to threefold jump in the sales of made-in-Japan semiconductors to 15 trillion yen ($112.55 billion) by 2030. 

Taiwan Semiconductor Manufacturing Co (TSMC) last November announced plans to build a $7 billion chip factory on Kyushu Island, Japan, with the production of 12- and 16-nanometre chips set to begin from next year.

This May, US memory chipmaker Micron Technology announced up to 500 billion yen ($3.5 billion) funding over the next few years to make next-generation memory chips in Japan, with support from Tokyo

Last month, Micron announced a plan to set up a $2.75-billion chip packaging – assembly, testing, marking, packaging – unit in India. 

China this month tightened export controls on gallium and germanium – metals crucial for chip production – in retaliation after the US imposed curbs on semiconductor exports from China.

Speaking on China’s export curbs on Gallium and Germanium, Vaishnaw said the move will have a minimal impact on India as it could import these critical elements from other sources.