Malaysia and Singapore can partner India in semiconductor strategy

This article is authored by Rahul Mishra.

On March 16, 2024, Prime Minister Narendra Modi spoke at a media conclave reaffirming India's commitment to becoming a semiconductor power within the next five years. The government launched the Indian Semiconductor Mission (ISM) in 2021, allocating ₹76,000 crore for semiconductor manufacturing, packaging, and design units. The ISM is a strategic initiative aimed at bolstering India's semiconductor ecosystem and establishing the country as a global electronics manufacturing and design hub. While the ISM enjoys a specialised and independent business status, it is under the overall purview of the Digital India Corporation.

Semiconductor

Semiconductors are critical components in cutting-edge technologies such as electric vehicles, factory automation, Artificial Intelligence, and the IT sector. They power a vast array of electronic devices, from smartphones and laptops to household appliances. Due to the ongoing United States (US)-China semiconductor competition and the Covid-19 pandemic-induced disruptions, leading economies worldwide are developing their capabilities in this sector. The pandemic highlighted the importance of semiconductor components in numerous businesses as also the fact that most of the chip manufacturing is concentrated in countries such as Taiwan, Japan, Malaysia, Singapore, the US and China. Therefore, it is natural for India, now the third biggest economy in the world, to establish itself as a semiconductor power.

International collaboration emerges as a crucial factor for India's advancement in this sector. Malaysia and Singapore, with their well-established electronics manufacturing sectors, stand out as India's potential key partners. In his address to the Indian community in Kuala Lumpur on March 27 during his visit to the country, external affairs minister S Jaishankar underscored the importance of stronger India-Malaysia semiconductor cooperation -- a point reiterated during his visit a few days ago in Singapore as well.

Collaboration in the semiconductor sector can not only elevate ties to the next level but also consolidate their positions in the highly competitive and vital semiconductor business. A systematic and long-term partnership between India and its Southeast Asian partners, Malaysia and Singapore, and East Asian partners, such as Taiwan, has the potential to make a qualitative addition to India's Act East policy.

India and Singapore have established joint ventures and investment initiatives to develop semiconductor manufacturing prowess. Singapore's competence in precise engineering and supply chain management, coupled with India's skilled workforce and market size, can constitute a mutually beneficial partnership to accelerate the development of semiconductor manufacturing facilities.

Large global corporations such as Intel, Infineon, and Micron have invested and developed assembly and testing facilities in Penang, Malaysia's key semiconductor manufacturing hub, to streamline the entire production process. This reinforces Malaysia's position as a vital player in the development and supply of semiconductor products to the global market, as well as its place in the semiconductor supply chain.

Malaysia can play a critical role in strengthening the supply networks required for India's semiconductor manufacturing goals. Malaysia's extensive electronics manufacturing ecosystem can help secure the supply of critical materials and components needed for semiconductor fabrication. This includes raw ingredients, specialised chemicals, and numerous components that are essential to the chip manufacturing process. Strengthening these supply chains can help to minimise risks and costs, and improve the efficiency and reliability of semiconductor manufacturing.

Research and Development (R&D) is another area where these countries could greatly benefit from Singapore's high-tech ecosystem, Malaysia's experience in electronics manufacturing, research institutes and innovation centres from both countries can work with Indian institutions and technology businesses to conduct contemporary semiconductor research.

Building capacities via talent exchange initiatives play an essential role in the semiconductor sector, which demands highly specialised skills. Joint training programmes, internships, and workshops on semiconductor design, production, and testing can be implemented, using Malaysia-Singapore's strong technical education system and India's large pool of engineering talent.

Bilaterally, India can work with both Malaysia and Singapore in outlining an optimal policy that promotes the growth and sustainability of the semiconductor industry. This could entail working together on trade rules, tariffs, and regulatory standards to ensure smooth cross-border flows of semiconductor products and technologies. These collaborations can also open up new markets and expand their global reach. By combining forces, all three countries can better position themselves to meet the growing global demand for semiconductors, which is spurred by advancements in technology and the increasing digitalisation of economies worldwide.

In essence, India-Malaysia-Singapore cooperation in the semiconductor sector presents a transformative opportunity to redefine global technological leadership. India can work both as a huge market and a source of human resource supply in building capacities in the semiconductor sector. By pooling resources, skills, and geographical advantages, these countries can enhance economic resilience and contribute significantly to a more robust global semiconductor ecosystem. This partnership underscores the importance of international cooperation in addressing complex global challenges and fostering innovation on a global scale.

This article is authored by Rahul Mishra, senior research fellow, German-Southeast Asian Center of Excellence for Public Policy and Good Governance, Thammasat University, Thailand, and associate professor, Centre for Indo-Pacific Studies, Jawaharlal Nehru University, New Delhi.