As AI software and hardware giants turn their attention to India for profitable opportunities, the US's recent AI chip export controls limiting India's access to advanced processors have stirred concerns about the impact on strengthening US-India relations amid enduring ties between India and Russia.
The US Commerce Department announced an AI chip export control on January 13, 2025, which categorized countries and economies into three tiers, with tier-1 (UVEU) nations granted unlimited access to advanced chips and tier-2 (NVEU) countries, which includes India, permitted to purchase computational power equivalent to up to 320,000 advanced GPUs over the next two years.
Impact on India's AI ambitions
India has unveiled the IndiaAI Mission, with plans to acquire approximately 10,000 GPUs to bolster the development of its AI ecosystem.
According to The Economic Times, while there could be some short-term challenges concerning compliance, the use of AI continues to stay within established boundaries. Industry sources indicate that the total computing power in India is currently equivalent to 25,000 advanced GPUs. However, due to India's significant market size, there will be a need for much greater capacity in the future.
Industry leaders voice concerns
According to Business Standard and The Economic Times, Ashok Chandak, the president of the India Electronics and Semiconductor Association (IESA), stated that extensive AI data centers—requiring several hundred thousand GPUs—might encounter delays or need to scale down. This situation could position global companies at a competitive advantage compared to Indian enterprises.
Reliance, under Mukesh Ambani's leadership, plans to establish India's largest AI data center using Nvidia's powerful GB200 GPUs, which are six times more robust than the previous H100 model, within 24 months. However, Sajai Singh from JSA Advocates & Solicitors warns that limited availability could impede scaling even if Reliance's Jio obtains the necessary GPUs. Additionally, mandatory licensing could introduce bureaucratic challenges and costs, potentially delaying the development of their GPU clusters.
Geopolitical considerations at play
The US decision to impose restrictions on India's acquisition of advanced chips is somewhat surprising, given that in recent years, the US has been actively supporting India's efforts to develop its semiconductor capabilities in the context of the US-China geopolitical competition.
Experts find it reasonable for the US to impose this measure on India due to its historical ties with Russia. According to Tekedia, Bhaskar Chakravorti from The Fletcher School noted that India's relationship with Russia influences its strategic decisions, which makes the US cautious about granting unrestricted access to critical technology despite improving US-India relations.
Security and regulatory concerns
Furthermore, security analyst Scott Jones from Washington's Stimson Center pointed out reports of Indian companies allegedly supporting Russia during the Ukraine conflict and expressed concerns about India's technology regulatory environment. He remarked that India's ability to handle sensitive technology isn't yet comparable to some top-tier nations. However, Jones suggested that this situation is not a setback but a temporary status open to improvement.
Path forward for US-India tech cooperation
Still, Richard Rossow of the Center for Strategic and International Studies (CSIS) noted that the policy framework allows for individual exemptions. He highlighted India's increasing technological collaboration with the US and its strategic importance in the Indo-Pacific as factors that make India a strong candidate for future inclusion. Rossow also mentioned bilateral initiatives such as the US-India Critical and Emerging Technology partnership to promote technological innovation and investment.
Future implications for India's chip sector
The recent export controls might speed up India's push to develop its home-grown advanced chips, a challenging endeavor for the country. However, India boasts a vast pool of talent in the integrated circuit design sector.
Despite the development of advanced chips by India-based integrated circuit (IC) designers, the actual manufacturing still requires collaboration with leading chipmakers. On January 16, 2025, the US Commerce Department unveiled stricter regulations concerning advanced chip manufacturing, accompanied by a whitelist of approved IC designers and OSAT companies. Those not included on this whitelist may face challenges when trying to outsource chip production to prominent foundries like TSMC and Samsung Electronics.