India's plan to expire the 1998 Digital Trade Agreement could worsen the chip shortage

India's plan to allow a moratorium on customs duties on cross-border digital e-commerce transactions could hurt India's ambitious plans to become a global chip leader. In the next five yearsReuters reported.

This could worsen global chip shortages by increasing semiconductor industry costs at a time when many governments around the world are investing heavily in expanding domestic chip supplies in an effort to keep up with rapidly advancing technologies.

Early next week, world leaders will meet at the World Trade Organization (WTO), just ahead of a March deadline to extend the ban. Since 1998, the moratorium has been renewed every two years—but India worries that it is losing significant revenue by not imposing taxes as demand for digital goods such as movies, e-books or games grows.

Hoping to change India's mind, the World Semiconductor Council (WSC), a global confederation of semiconductor industry associations, sent a letter to Indian Prime Minister Narendra Modi on Thursday.

A Reuters review of the letter warned Modi that ending the WSC ban „will impose tariffs on digital e-commerce and myriad chip design data exchanges, raising costs and worsening chip shortages.”

He points to Modi's $10 billion semiconductor stimulus package said Designed to advance India's industry by making „giant leaps” in its mission to become a technology superpower – the WSC warned that pressing tariffs could derail those global chip leader dreams.

Studies suggest that India should offer tax incentives, with no risk of imposing taxes on chip design data. The Semiconductor Industry Association and the India Electronics and Semiconductor Association included a study earlier this year after commissioning a report by the Information Technology and Innovation Foundation (ITIF).

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ITIF's goal is to assess „India's current semiconductor ecosystem and policy frameworks” and provide „recommendations to facilitate the long-term strategic development of complementary semiconductor ecosystems in the US and India.” Press release Said partly to „deepen trade relations” between the countries. There is also the Prime Minister's Office (PMO). reported A similar goal is to deepen trade ties with the EU.

Among its recommendations to „strengthen India's semiconductor competitiveness”, ITIF's report encouraged India to improve cooperation with the US and introduce policy reforms that would „lower the cost of doing business for semiconductor companies in India”. Expediting clearance time for goods entering the country.”

That's because duties could increase chip industry costs at a time of global cross-border data transfers It is expected to reach $11 trillion by 2025The WSC wrote that the duties could „hinder India's efforts to advance its semiconductor industry and attract semiconductor investment,” which could negatively affect „more than 20 percent of the world's semiconductor design workforce” in India.

The Prime Minister's Office did not immediately respond to Ars' request for comment.

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