India's Strategic Role in Southeast Asia's Semiconductor and Rare Earth Industries
India's Emerging Influence in Global Supply Chains
New Delhi, Aug 14: As Southeast Asia becomes a pivotal player in the global semiconductor and rare earth mineral sectors, India is poised to take on a crucial role amidst the evolving landscape of international trade and supply chains, particularly as tensions rise due to US tariffs.
While there is no single solution to dismantle China's long-standing dominance, a combination of US defense investments, EU market regulations, JOGMEC's diplomatic efforts, and India's exploration initiatives is beginning to alter the supply chain dynamics, according to a recent report.
JOGMEC diplomacy refers to the strategic actions taken by the Japan Organisation for Metals and Energy Security to secure Japan's energy and resource requirements while also contributing to global resource development.
According to the latest findings from the Politeia Research Foundation (PRF), a non-profit organization, "Nations that blend capital, innovation, and reliable standards are best positioned to navigate the rare-earth era without falling prey to strategic vulnerabilities."
The ongoing renegotiation of the ASEAN-India Trade in Goods Agreement (AITIGA) holds significant potential to transform trade relations and supply chain movements between India and Southeast Asian countries, as highlighted by Madhav Maheshwari, a lawyer and independent policy consultant.
India has proposed duty concessions on 71% of its tariff lines, while ASEAN nations have offered considerably less market access, with Indonesia opening only 41%, Vietnam 66.5%, and Thailand 67% of their tariff lines.
This disparity has resulted in a notable increase in India's trade deficit with ASEAN, which surged from $5 billion in 2010-11 to $43.57 billion in 2022-23, with semiconductors being a significant portion of these imports.
"India engages in substantial trade with Southeast Asian nations such as Singapore, Malaysia, and Thailand. This imbalance, along with the exploitation of rules of origin provisions, is a key factor driving the current renegotiation," the report stated.
The Comprehensive Strategic Partnership between India and Singapore, established in September 2024, includes a memorandum of understanding focused on semiconductor ecosystem collaboration, creating frameworks for strategic bilateral cooperation. The newly renegotiated agreement aims to address the challenges posed by China while also encouraging Singapore's involvement in India's rapidly expanding market.
Malaysia stands out as one of India's largest trading partners, with total trade reaching $20 billion in 2023-24.
"The trade imbalance with Malaysia indicates that greater market access may be necessary during the renegotiation process. Vietnam's role is also crucial as it exemplifies the type of manufacturing hub India is competing against," the report noted.
"Thailand and Indonesia are also vital in reshaping the dynamics, as they seek to position themselves as alternatives to China-dependent supply chains and products. This reflects a broader shift in the global semiconductor geopolitical landscape. ASEAN's strategic role in global semiconductor trade networks is significant," the report emphasized.
To disrupt China's monopoly on rare earth processing, particularly concerning Myanmar, "India could seize this opportunity as a neighboring country to help mitigate the Chinese dominance," the report suggested.
Furthermore, it was recommended that India and Southeast Asian nations prioritize enhancing their investments in Myanmar.
"Initiatives like the G7 Critical Minerals Action Plan, which have garnered support from Australia, India, and South Korea, should broaden the scope for targeted assistance in developing Southeast Asian processing capabilities and infrastructure," the PRF report concluded.