A few months ago, Indian Prime Minister Narendra Modi offered a unique perspective on AI while speaking about the Indian diaspora at a community event in New York. The world associates AI with artificial intelligence, but Prime Minister Modi believes that AI also represents “America and India.”
He emphasized the flourishing partnership between the two countries, but on January 13, the then-Joe Biden and Kamala Harris administrations announced a regulatory framework for the responsible deployment of advanced AI technologies, making the United States one of the world’s leading shocked the technology industry.
This framework has created different tiers of access. Fifteen allies, including Germany, South Korea and Japan, have been granted unrestricted access to America’s cutting-edge AI chips, while others, including China, Russia and North Korea, face complete blocks.
Notably, India was removed from the privileged list of 18 allied countries that were granted unrestricted access and was instead placed in a third-tier destination that requires an explicit license.
The new rules for chip manufacturing and development provide flexibility through two important tolerances. Companies can import up to 1,700 GPUs worth about $40-50 million without requiring a license.
However, large imports worth up to $1 billion will require a license review. This approach provides easier access to small-scale imports while maintaining tighter oversight of large purchases.
What is going on in India now?
While this raises questions about India-US relations, it may also impact the Indian Semiconductor Mission (ISM). This could create complex new realities for India’s technological ambitions and increase its global presence, as countries like China do not have access to this technology.
The rule change sparked widespread international debate by updating regulations for “advanced computing chips” and requiring permits for exports, reexports, and internal transfers involving a broader range of countries.
“In the short term, the impact is expected to be minimal,” said Ashok Chandak, chairman of the Indian Electronics and Semiconductor Association (IESA). However, the long-term effects must be carefully considered.
Meanwhile, Ajay Chowdhury, who as co-founder of HCL helped build India’s earliest technology success story, sees this as a pivotal moment.
“This will take us back to the old licensing system,” Chaudhary said, drawing parallels with India’s past. “We faced similar export controls for space and nuclear power…and then we successfully navigated through that and had some great engineers develop our own technology.”
Chandak said large AI data centers requiring hundreds of thousands of GPUs could face delays and downsizing, which could give global companies a competitive edge over Indian companies. He pointed out that there is a gender.
But he also found a silver lining. “Even small-scale setups can allow for experimentation, innovation, and limited model development.”
India can set up its own NVIDIA
According to Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology, NVIDIA is “by far the most important” company in the semiconductor industry.
“I am sure that most of the designs of NVIDIA and AMD GPUs must have been done in India by Indian engineers,” Chaudhry said. This makes the current state of US sanctions particularly interesting.
In a recent interview with AIM, Miller praised India’s deep talent pool in chip design.
India is already on a promising path forward through the indigenous RISC-V technology developed at IIT Madras. Unlike other chip technologies that require high licensing fees, RISC-V is open source, meaning India is free to use and modify it to build advanced chips.
“This is a new unipolar world where all countries are independent,” Chaudhry said.
To turn this challenge into an opportunity, he advocated a pragmatic approach that would increase government funding for chip design through ISM and make chip design accessible to companies of all sizes.
“Maybe we can create our own NVIDIA and AMD within the next 10 years!” he suggested. In particular, the increase in funding from Rs 5,000 crore to Rs 150,000,000 crore could help Indian companies, from established companies to innovative start-ups, drive this transformation.
Additionally, NVIDIA strongly criticized the rule in a recent post, arguing that it threatens to undermine U.S. leadership in AI and stifle innovation around the world.
Current status of semiconductors in India
India’s semiconductor landscape is undergoing a major transformation, marked by significant investments, strategic initiatives and new challenges.
Global industry leaders recognize India’s potential. The government’s commitment to fostering a robust semiconductor ecosystem is evident through the ISM.
However, the industry continues to face challenges. Despite producing approximately 1.5 million engineering graduates each year, there are concerns about the specialized skills needed to design and manufacture semiconductors.
Experts emphasize the need for continued investment in both technical and business talent to close this gap. Furthermore, India’s semiconductor industry has traditionally been ‘fabless’, with designs conceived domestically and manufacturing carried out overseas.
This reliance on external manufacturing introduces security risks within the supply chain. Efforts are underway to set up domestic manufacturing facilities, with companies such as PSMC and Tata Electronics planning to set up factories in India by 2026.
Therefore, India is making progress in the semiconductor sector through strategic investments and initiatives.
Future developments
In the future, India may have flexible access to advanced chips through a program called National Verified End User (NVEU).
This is because India faces a unique situation. Although it does not re-export high-end chips (such as computing ICs) or manufacture advanced chips in-house, it does have major design centers for large companies such as NVIDIA and AMD.
This could make it easier for India to get approval for chip licenses under the program.
The program also sets limits on the number of high-performance chips (such as the H-100 GPU) that India can receive each year. These limits will grow over time, from less than 100,000 GPUs in 2025 to 2.7 million in 2026 and 3.2 million in 2027.
This gradual increase will allow us to control access to advanced chips in the coming years.
