The next step for Quad: A dialogue on high technology
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12, Tech-10, Democracy-10 are some proposed multilateral mechanisms to enable international cooperation in technology governance. Cooperation, however, won’t be easy because there is significant dissonance even among democracies on issues such as competition in the digital economy, privacy, and data governance. The European Union (EU) prefers a regulation-heavy approach centred on protecting users’ data; the United States (US) prefers a less-restrictive approach; and India is considering data localisation measures. Such divergent outlooks run the risk of derailing collaboration.
A more useful way of structuring these collaborations is to extend the Quad to the technology sphere, starting with securing the semiconductor supply chain first. Negotiations are more likely to bear fruit since Quad countries have a clear political end goal — to resist China’s not-so-peaceful rise.
Building a semiconductor supply chain matters for three reasons. One, the semiconductor industry underlies all critical technologies. Two, it is perhaps the most globalised high-value supply chain and no country can become entirely self-resilient. And three, all four countries have complementary strengths.
The US is a dominant force in chip design — a stage responsible for specifying how transistors are placed inside a semiconductor chip. Four of the world’s top 10 fabless chip makers are American. Further, chips designing requires electronic design automation (EDA) tools, the market for which is quite concentrated because of high research and development requirements. And all three major EDA players are located in the US. The next stage in the process, semiconductor manufacturing, requires a high degree of precision and capital investment. A few Japanese companies dominate the global market in crucial semiconductor manufacturing equipment and chemicals. These companies are renowned for their high-quality products.
Australia is set to play a vital role in the high-tech electronics industry. It is the world’s largest producer of lithium, an element used for making rechargeable batteries present in electric vehicles, phones, and laptops. It is also one of the leading suppliers of Neodymium, used in powerful electromagnets critical for electric vehicles.
India is one of the major global hubs for chip design. Annually, 3000 chips are designed in India. Most top foreign semiconductor companies have established their design and R&D centres due to the availability of a large talent pool. India also has proven excellence with electronics end-product assembly.
As a collective, the Quad is a force to reckon with. The missing ingredient is a foundry that can manufacture advanced chips below the 5-nanometer process node. Building such a foundry requires significant risk capital, between $12bn-$20bn. Here too, Quad countries can form a consortium to fund a semiconductor foundry in one of the four countries, de-risking the considerable upfront investment.
Realising the potential of the Quad also needs agreement on some trade issues. Encouraging the movement of skilled professionals, building confidence in each other’s judicial settlement mechanisms, developing common standards, and allowing knowledge transfer on sophisticated technology issues are crucial for success. Our colleague, Nitin Pai, likens these initiatives to creating “bubbles of trust”.
Democratic states have come to the right conclusion that going it alone in the realm of high-tech geopolitics is unrewarding. India should use this to expand its role in the global high-tech value chain. A Quad Silicon Dialogue can be one such start.