News Brief
US-China Chip Trade War Escalates: India Gains Amid Retaliatory Export Bans On Gallium And Germanium
USA China Chip's Trade war
The US and China have entered a new phase of tit-for-tat trade restrictions. Following the US’s recent export controls on chip-making equipment, software, and high-bandwidth memory chips, China retaliated on Tuesday (3 December) by banning exports of gallium, germanium, antimony, and other high-tech materials essential to industries such as semiconductors and telecommunications.
This escalation underscores the ongoing geopolitical rivalry between the two largest economies. However, it also highlights opportunities for "neutral economies" like India, which have gained from the US-China trade tensions since Donald Trump’s presidency.
As China’s export share to the US has declined since 2019, countries like India, Vietnam, and Mexico have increased their market share, benefiting from shifts in global supply chains.
China’s latest export ban comes after it partially restricted key material exports earlier this year by introducing licensing requirements for exporters. The Chinese Commerce Ministry announced these measures in response to the US expanding its export control list targeting Chinese tech firms.
International Monetary Fund (IMF) First Deputy Managing Director Gita Gopinath, in a recent speech, emphasised the role of non-aligned countries like India in mitigating global trade fragmentation. She noted that during the Cold War, such economies played a limited role due to their smaller footprint and less integrated supply chains.
Gopinath highlighted that current trade disruptions are not yet as severe as those during the Cold War when trade between rival blocs was significantly lower.
However, she warned that fragmentation is more costly now due to the higher ratio of global goods trade to GDP—45 per cent today compared to just 16 per cent at the start of the Cold War. India, aiming to capitalize on these dynamics, is boosting its semiconductor manufacturing capabilities. The government plans to increase funding for its chip manufacturing incentive policy to $15 billion, up from the initial $10 billion.
Tata, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation, is constructing India’s first commercial fabrication plant, worth over Rs 91,000 crore. Additionally, three assembly and testing plants, known as ATMP and OSAT facilities, have been approved to strengthen India’s position in the global semiconductor supply chain.
