Geopolitics of High-tech

ANANTA INSIGHTS

Geopolitics of High-tech

UK Foreign Secretary Lammy meeting Indian PM Modi 

As nations vie for supremacy in critical and emerging technologies, understanding the geopolitical implications becomes paramount. From artificial intelligence to space exploration, these advancements not only revolutionise industries but also redefine international power dynamics and strategic alliances. In an era where technological advancements shape global dynamics, this newsletter delves into the intricate intersections of geopolitics and high-tech innovations.

In this edition we analyse the India-US and India-Singapore partnerships on semiconductors, the UK-India technology and security initiative, Japanese investment in high-tech production, the emerging Potassium-ion battery technology, Mega constellations and India’s path to deep sea mining. 

1. India’s partnerships with US and Singapore aim to secure New Delhi’s place in the semiconductor ecosystem

After signing a similar agreement with Singapore on 26 August, India has entered into a strategic partnership with the United States, focused on enhancing semiconductor supply chains, according to a September 9 press release by the US Department of State. The agreements signal India’s commitment to securing its place in the global semiconductor ecosystem, addressing growing application of semiconductor chips and their demand driven by industries like household and industrial electronics, electric vehicles(EV), and renewable energy.

The partnership with the US focuses on improving semiconductor manufacturing capabilities, developing resilient supply chains, and fostering research and innovation. 

India and Singapore have in turn agreed to cooperate on ecosystem development, supply chain resilience, and workforce training.  Both partnerships aim to create robust frameworks for mutual collaboration between government bodies and private enterprises, which is crucial given the rising geopolitical tensions impacting global chip supplies.

India’s initiatives reflect its broader strategy to reduce its dependence on imported semiconductors and position itself as a global manufacturing hub for chips. The Indian government’s collaboration with global leaders in the sector such as the U.S. and Singapore will likely accelerate its efforts to establish domestic manufacturing capacity, which is crucial for meeting both national and international demand. Moreover, the agreements provide Indian companies with access to advanced technology, expertise, and investment, while creating opportunities for international players to tap into India’s rapidly growing market.

2. The UK-India Technology Security Initiative is a step in advancing high-tech cooperation in the Indo-Pacific

In his first visit as the UK Foreign Secretary to India, David Lammy met Indian Prime Minister Narendra Modi, External Affairs Minister Dr. S. Jaishankar and National Security Advisor Ajit Doval. During Lammy’s visit on 24 July, India and the UK launched a new bilateral framework called the UK–India Technology Security Initiative (TSI). TSI which has a focus on expanding cooperation “in critical and emerging technologies” has many similarities to an initiative called Initiative on Critical and Emerging Technology(iCET) between the US and India. While not analogues these initiatives could be seen as aimed at fostering high-tech cooperation similar to AUKUS elsewhere in the Indo-Pacific region.

Some highlights from the TSI Fact-sheet:

3. Japanese giants gear up for investment in high-tech production and supply chain realignment

According to a report in Nikkei Asia, Japanese semiconductor giants like Sony Group and Mitsubishi Electric are gearing up for substantial investments, committing nearly 5 trillion yen ($31 billion) collectively by 2029. Apart from semiconductors the investments are also aimed at bolstering the production of power devices, image sensors, components for Artificial Intelligence(AI) systems, electric vehicles(EV)s, and decarbonisation technologies. If handled correctly, the investment could lead the way for the strategic revival of Japan’s high-tech industry, which once held the dominant spot but has since fallen behind South Korean and Taiwanese competitors due to underinvestment in cutting-edge technologies.

Sony is leading the charge with a planned investment of 1.6 trillion yen from 2021 to 2026 to expand its image sensor production, particularly for smartphone cameras and emerging applications in autonomous driving and industrial monitoring. The company is establishing new facilities in Nagasaki and Kumamoto to support this expansion.

Meanwhile, Toshiba and Rohm are accelerating their investments in power devices, committing a combined 380 billion yen to increase production of silicon and silicon carbide devices, which are critical for AI data centres and EVs. Mitsubishi Electric is also expanding its production capacity for silicon carbide power devices, with plans to invest 100 billion yen by 2026 to compete with global leaders like Germany’s Infineon Technologies.

Japan’s renewed focus on semiconductors is partly driven by the government’s recognition of chips as a critical sector for economic security, especially in light of supply chain disruptions during the COVID-19 pandemic. This has led to substantial government support, including a 3.9 trillion yen subsidy program and specific aid for projects like Rapidus’s development of 2-nanometer logic semiconductors, expected to be in mass production by 2027.

As part of broader supply chain realignment, Japan is also investing in Southeast Asia to create more resilient supply chains that reduce dependence on China. The Japanese government is supporting various projects in the region, including semiconductor manufacturing in the Philippines and Vietnam. These efforts are intended to strengthen Japan’s market position in ASEAN countries and counter China’s growing influence.

Not all is well for the competition

In comparison, Taiwanese semiconductor leader TSMC is facing challenges in meeting the surging demand for AI application relevant chips, particularly due to production constraints in its advanced packaging technology, ‘CoWoS’. Despite the hurdles, TSMC remains confident, projecting capital spending of up to $32 billion in 2024 to expand its production capacity. The company is also progressing on its roadmap to introduce 2-nanometer technology by 2025, with even more advanced nodes planned for 2026.

Amid these developments, global semiconductor giants like Intel and Samsung are navigating their own challenges. Intel, for instance, is implementing cost-cutting measures, including a significant workforce reduction, to offset declining profits and increased competition from AMD and Nvidia. The company is also investing heavily in AI chips and domestic fabrication plants, supported by U.S. government grants.

Samsung, on the other hand, is playing catch-up in the advanced AI semiconductor market, where it lags behind SK Hynix in high-bandwidth memory (HBM) production. Despite recent improvements, Samsung faces ongoing challenges in securing approval for its latest HBM products from key clients like Nvidia. 

4. Potassium-ion batteries could end dependence on critical minerals
The first commercially available Potassium-ion battery (KIB) in the ubiquitous 18650 format has been released by a company called Group1, based out of Texas in the US. According to a press release by the company one of their aims with the KIB is to offer batteries “free from  critical minerals like nickel, cobalt, copper, and lithium”.  However they also claim that KIBs will “seamlessly integrate into existing” manufacturing processes and supply chain for traditional Lithium-ion counterparts. The premise for the value chain to not be re-aligned in the decoupling from the Lithium-ion focus in the battery industry is likely to be only partially true. Potassium and Prussian Blue the two main chemical components that go into the manufacturing of these batteries are more widely extracted, produced and processed and are likely to become opportunities for countries to de-couple and de-risk their supply chains from China, South American and African countries.

Source: Group1

5. China launches inaugural tranche of mega constellation of internet satellites

On August 6, 2024, a modified Long March-6 carrier rocket successfully deployed 18 satellites from the Taiyuan Satellite Launch Center in Shanxi Province. The launch carried the first tranche of satellites for China’s “Thousand Sails” communications constellation. The constellation is meant to establish a global satellite broadband internet network, rivalling similar ventures like Elon Musk’s Starlink or British company OneWeb’s constellation. The “Thousand Sails” project is ultimately aimed to deploy over 14,000 low Earth orbit (LEO) satellites.

The project is managed by an entity backed by Shanghai’s regional government called Shanghai Spacecom Satellite Technology (SSST). SSST aims to launch a total of 1,296 satellites in the first stage, 648 of which are expected to be in orbit by the end of 2025. The project’s broader goals are not just commercial but also strategic, securing critical orbital slots and frequencies, as well as enhancing China’s capabilities in space-based communications, which have potential military applications. 

For comparison Starlink the market leader in satellite mega constellation delivered internet services sector, according to Dr. Jonathan McDowell, an astronomer, currently has 6281 satellites in orbit out of which 6206 are active. Starlink ultimately aims to launch up to 42,000 satellites. OneWeb on the other hand boasts a much more modest 630 satellites in orbit according to its own website.

6. India’s path to seabed mining

The global demand for critical minerals is rising, particularly due to a shift towards renewable energy and electric vehicles that in turn rely on batteries and the associated technology. India is also looking to explore new avenues and forge international partnerships to address the technological and environmental challenges that come with the shift.

Deep-sea mining offers India a significant opportunity to reduce its dependency on import of critical minerals such as manganese, nickel, copper, and cobalt that are relevant to battery technology. The ‘Clarion-Clipperton Zone’ in international waters of the Pacific Ocean, is known for its abundant polymetallic nodules on the seabed – containing minerals, has become a key area of interest. Recognising the importance of these resources, according to a July 2024 Reuters report the Indian government is preparing to apply for exploration licences in the Pacific.

However, India faces substantial challenges in this endeavour. Despite progress in developing deep-sea mining technology – particularly Deep Submergence Vehicles(DSV)s, India is still several years away from being able to extract minerals from the ocean floor. The complexities of operating in deep-sea environments, coupled with the lack of experience, require significant time and investment to overcome. Moreover, deep-sea mining has sparked considerable debate due to its potential environmental impact. The deep ocean remains one of the least understood ecosystems on Earth, and disturbing the seabed could have irreversible consequences on marine life. Environmentalists and some nations have called for a moratorium on deep-sea mining until more is known about its effects, highlighting the need for India to proceed cautiously in this venture.

The International Seabed Authority (ISA), a UN-backed body that regulates deep-sea mining, plays a critical role in shaping the future of these activities. The ISA’s ongoing negotiations to finalise a mining code are essential for establishing the rules and regulations that will govern deep-sea mining. As a member of the ISA, India’s involvement in these discussions is crucial, as the outcomes will influence its ability to access and utilise these valuable resources. Balancing economic interests with environmental protection is central to these negotiations, and India must navigate these complexities carefully to protect its interests.

India is also actively seeking international collaborations to enhance its technological capabilities. According to a June 2024 report in Business Standard, India initiated talks with Russia to secure advanced mining technologies. Russia, with its extensive experience in mining and processing critical minerals, is seen as a valuable partner for India. This collaboration is part of a broader strategy to attract foreign investment and expertise into India’s mining sector, which is essential for developing the domestic infrastructure needed to effectively exploit deep-sea resources. Additionally, this partnership with Russia has geopolitical implications, as it strengthens ties between the two nations and bolsters India’s multi-aligned foreign policy.

Check these out:

1. The weakest link: The vulnerability of U.S. and allied global information networks in the nuclear age by Aron Bateman – Journal of Strategic Studies

2. The Strategic Implications of Chip War for India by Pankaj Phanase – Centre for Joint Warfare Studies

3. ISRO has a problem: too many rockets, too few satellites to launch by Pradeep Mohandas – The Hindu

4.  To engage in deep-sea mining or not to engage: what do full net cost analyses tell us? by U. R. Sumaila. et al. – Nature

5. The Security Implications of Quantum Computing and India’s National Quantum Mission by Ankit Tiwari – The Diplomat

6. National Strategy for Artificial Intelligence – NITI Aayog

7. AI Governance in a Complex and Rapidly Changing Regulatory Landscape: A Global Perspective – by Esmat Zaidan & Imad Antoine Ibrahim – Nature

Thank you for taking the time to read Ananta’s Geopolitics of High-tech newsletter this month. Stay tuned for our next edition, where we will continue to explore the intersection of international relations and technology.