Jake Sullivan Goes to India
New Zealand's Reset, South Korean Shipbuilding
Hub Story: Jake Sullivan’s Trip to India
Spoke Story: New Zealand’s Foreign Policy Reset?
Spoke Story: South Korean Defense Company Buys U.S. Shipyard
Hub Story: Jake Sullivan’s Trip to India
During a visit to New Delhi, U.S. National Security Adviser Jake Sullivan and Indian officials agreed to strengthen cooperation in high-tech areas such as defense, semiconductors, and AI, as part of a 2023 landmark agreement. They launched a new strategic semiconductor partnership and plan to co-invest in lithium and rare earth projects. Despite recent controversies involving Sikh separatist incidents, both nations remain committed to deepening their strategic partnership, emphasizing mutual concerns over China's assertive actions.
Back in 2023, the United States and India launched the Initiative on Critical and Emerging Technology (iCET) to enhance cooperation in defense, semiconductors, AI, and 5G, based on shared democratic values. The inaugural iCET meeting led to agreements on joint research, industrial cooperation, and regulatory alignment, aiming to advance technological innovation and address global challenges.
iCET is an interesting initiative. It strives to boost both civil and defense innovation ecosystems, but it all focuses on strategic technologies. The Carnegie Endowment’s India Director, Rudra Chaudhuri, analyzes iCET nicely.
The iCET is not designed to deliver a single deal. There are, at least, eight to ten different streams for cooperation under the iCET, which serve as a framework for collaboration between the United States and India on critical and emerging technologies. Accordingly, there are a range of deals to be done across these technologies. For instance, in the area of commercial space, it is about finding practical ways by which timely licenses can be provided to Indian space startups. In the event that licenses are not forthcoming, it is about discovering ways by which specific exemptions can be made from the U.S. International Traffic in Arms Regulation (ITAR).
Sullivan’s trip made new announcements in innovation base collaboration, civilian and defense space technology, defense industrial cooperation, telecommunications, biotechnology, critical minerals, emerging technologies, and semiconductor development.
India has been eager to gain from the U.S.-China semiconductor decoupling. Countries and companies are diversifying their semiconductor supply chain, and India and Southeast Asia are primed to benefit from this. High-end semiconductor fabrication will still be centered in Taiwan for some time. However, India is striving to be a long-term manufacturing leader.
In 2021, India announced its India Semiconductor Mission, which aims to tap into India’s robust technology sector and provide vital subsidies and incentives for companies to diversify to India. Historically, India’s technology strategy has focused on software, resulting in major chip design companies like Intel, Qualcomm, Texas Instruments, and Broadcom having R&D centers in India. Now, India is trying to shift to investing in technology hardware.
The Diplomat: The Dawn of India’s Semiconductor Era:
The ISM policy framework has been instrumental in attracting companies and investments for chip assembly and fabrication. The central government’s offer of 50 percent capital support to new entrants in the fields of compound semiconductors, fabrication, assembly, outsourced semiconductor assembly and test, and photonics, coupled with additional incentives for setting up peripheral infrastructure within industrial clusters, has spurred significant global interest. Gujarat has become the first state to complement this initiative by providing an extra 25 percent capital expenditure support, further enhancing the attractiveness of India’s semiconductor policy landscape.
In 2020, India’s semiconductor market sat at around $15 billion. That market is projected to grow to $55 billion by 2026, mostly due to smartphones and wearables, automotive components, and computing and data storage. Sullivan’s trip to India announced some new initiatives, but they are fairly light.
Securing Semiconductor Supply Chains
Launching a new strategic semiconductor partnership between General Atomics and 3rdiTech to co-develop semiconductor design and manufacturing for precision-guided ammunition and other national security-focused electronics platforms;
Celebrating the conclusion of a joint Semiconductor Readiness Assessment through a partnership between the U.S. Semiconductor Industry Association and the India Electronics Semiconductor Association, which identifies near-term industry opportunities and facilitates longer-term strategic development of complementary semiconductor ecosystems;
Expanding engagement with U.S. and Indian investors in the semiconductor industry in India, to continue building India’s robust semiconductor and information communication technology ecosystem.
India's potential as a robust semiconductor manufacturing hub is underscored by its decades of chip design experience. This, coupled with a large and growing domestic market for semiconductors, and a thriving chemicals industry (expected to reach $350 billion by 2025), which produces many of the chemicals required for the complex semiconductor fabrication process, positions India favorably in the global semiconductor landscape.
However, India still lacks any prominent foundries. A major joint venture between Vedanta and Foxconn to set up a semiconductor and display manufacturing unit in India, with an investment of $20 billion, fell through last year. And while India hosts around 800,000 engineers, few are well-versed in semiconductor fabrication's elusive art. If India can provide a stable political and economic environment, a stronger ease-of-business record, a trained workforce, and a better regulatory structure, then Washington's effort to bolster iCET initiatives will start flowing easier, but it depends on India.
Spoke Story: New Zealand’s Foreign Policy Reset?
According to an interview with Nikkei Asia, New Zealand is shifting its foreign policy to enhance its engagement in Indo-Pacific security and defense, focusing on regional stability to support its export ambitions. Prime Minister Christopher Luxon emphasized the need for active participation in security issues, stronger ties with Japan, and potential involvement in AUKUS amidst rising tensions with China and other regional challenges.
Wellington has steadily been shifting closer to confronting China. However, as Washington knows, strategy and statements don’t always translate into resourcing your strategy.
Last year, New Zealand released its first national security strategy. It cited protecting the rules-based international system as one of its core national interests and directly pointed to China as challenging that system.
New Zealand’s National Security Strategy 2023-2028:
China’s rise is a major driver of geopolitical change. China can play a significant role in addressing global challenges and is an important relationship for New Zealand. Our national interests require continued engagement with China, and cooperation where our interests converge. At the same time, China has become more assertive and more willing to challenge existing international rules and norms. We have seen the building of military bases in disputed areas of the South China Sea, and the use of economic coercion. Chinese state-sponsored actors have exploited cyber vulnerabilities in New Zealand in ways that undermine our security.
Part of New Zealand’s modest shift probably has to do with China’s growing security presence in the South Pacific as well as its aggressive tactics in the South China Sea. Nearly 80 percent of New Zealand’s exports are trafficked through the South China Sea.
New Zealand risks being caught without a partner. If Wellington would prefer to stay out of the growing great-power competition, I think Washington and Beijing are largely willing to let them be. However, New Zealand will miss out on some of the benefits of great-power competition that naturally develops for second and third countries. There are undoubtedly compelling security reasons for New Zealand to develop deeper ties with the United States and like-minded countries. However, as noted during his interview, there are probably even more compelling economic interests.
Nikkei Asia: New Zealand 'Resets' Foreign Policy on Indo-Pacific Security:
At home, Luxon is seeking investments to further economic growth. One key area is infrastructure such as roads. Luxon said he hoped to attract investment from Japan and "every investor will need to be compliant with regulations," including China. "We don't rule any particular country out," he said.
Luxon said his government was considering introducing private-public partnerships for infrastructure projects.
"That is a new development for New Zealand but it's a very important one," he said. "It's the way in which we can get our infrastructure built in a much quicker, much faster way, by partnering with others in the financing and funding of infrastructure."
Government strategies are always buttressed by domestic support. If elites in Wellington want a closer security relationship with Indo-Pacific democracies, it will probably have to be modest. New Zealanders just aren’t convinced of the threat that China poses.
According to an annual poll conducted by the Asia New Zealand Foundation, only 37 percent of the New Zealanders surveyed consider China to be a threat, down from 58 percent in a mini-poll done in 2022.
Luxon’s announcement of a security policy reset is a welcomed development. Washington and her partners should warmly embrace New Zealand into its coalition. However, the depth and breadth of that security cooperation is still to be tested.
Spoke Story: South Korean Defense Company Buys U.S. Shipyard
South Korea's Hanwha Systems and Hanwha Ocean announced the acquisition of Philly Shipyard, a leading U.S. shipbuilder, with a $100 million investment to expand their global defense and shipbuilding activities. This strategic move allows Hanwha to deploy its advanced marine technology and shipbuilding expertise in the U.S. market, complementing Philly Shipyard's capabilities in producing large commercial vessels and training ships for the U.S. Maritime Administration.
Hanwha, HD Hyundai Heavy Industries, and South Korea, more broadly, have some of the world's biggest and most efficient shipyards. In October 2023, South Korean shipbuilders bagged 62 percent of the total global orders, outpacing its biggest competitor China. Also, shipbuilding contributed $9.22 bn to the country's exports in the first half of 2023, resulting in an 11.9 percent year-on-year increase.
Secretary of the Navy Carlos Del Toro has been courting South Korean shipbuilders for some time, with a recent visit to Korea earlier this year.
Secretary Del Toro reflected, “In each of these engagements, I brought to the table a simple, yet profound opportunity: invest in America. I was enormously gratified by the strong interest expressed by the leaders of each of these world-class shipbuilders in establishing U.S. subsidiaries and investing in shipyards in the United States.”
It now seems that those efforts are starting to come to fruition. Leveraging allied industrial bases to support American industrial demands is a no-brainer. Needles to say, more of this.
Worth Your Time:
Australia:
Australia Defence Magazine: Singapore to deploy F-16s and F-15s to Australia
The Strategist: We Need More Defence Capability Long Before the First SSN Arrives
India:
Carnegie Endowment: One Year of the INDUS-X: Defense Innovation Between India and the U.S.
USSC: India and Collective Defence in the Indo-Pacific: Possibilities, Prospects and Challenges
Japan:
The Japan Times: Japan and Italy Agree to Beef up Defense and Diplomatic Cooperation
The Japan Times: Japan and Philippines to Hold ‘Two-Plus-Two’ Security Talks in July
Philippines:
South Korea:
Yonhap News Agency: S. Korea Slams N.K.-Russia Treaty; Hints at Potential Arms Supply to Ukraine
Maritime Executive: South Korea's Rise as a Global Shipbuilder
Taiwan: