GPU export curbs may derail India's AI ambitions, tech-driven growth

The outgoing Joe Biden administration in the United States (US) is proposing a framework restricting the export of advanced computer chips (mainly GPUs or graphics processing units) used to develop artificial intelligence (AI). Under the proposal, roughly 20 key US allies and partners will face no restrictions on accessing chips. But other countries will face caps on the number of chips they could import. India is one of the 120-odd countries that would have its imports of high-end GPUs curtailed if this proposal goes through. This is apparently an attempt to maintain US primacy in AI development with a strong focus on preventing China from outpacing America technologically. Even close US allies like Israel and several European Union members will suffer import restrictions. The proposal has to find bipartisan support since the incoming Donald Trump administration may choose not to go through with it. It would lead to potential supply-chain disruption, which is hard to assess. 

Key chips designed in the US by companies like Nvidia and AMD are fabricated abroad. Some of the key raw-material inputs are also drawn from nations that are not on the “favoured” list. In addition, research and development (R&D) centres for chip design and data centres may be located in nations, such as India, which face import curbs, and they may choose to retaliate. Navigating those geopolitical considerations may lead to the proposed framework being moderated or scrapped by the next administration. However, assuming it is not scrapped, it could put a crimp in India’s ambitious plans to develop large AI capacities. Those plans depend in the short to medium term upon imports of hardware and GPUs to build compute capacity. In the long run, policymakers hope that incentives will encourage the growth of a local fab industry. But India has no fabrication capacity to speak of now, and is unlikely to have one in the near term at the high end, which is being targeted by this proposal. It would take years to develop such capabilities at the required scales along with enormous investment from the very few transnational players with the requisite knowhow to build fabs at scale. 

India does have strong chip-design capabilities and it could potentially leverage those along with its many other ties with the US economy to win “favoured” status. It also has a high-growth data-centre industry, which could readily absorb GPUs and which can service global requirements. The knowledge base also exists for India to become a big player in the artificial-intelligence development ecosystem, exploiting its own large domestic market as a “testbed” to create and deploy new use cases. In the short term, it would require smart diplomatic negotiations along with leveraging soft power India possesses to try and circumvent such curbs. Both Nvidia and AMD have India exposure with R&D centres. India is also a key military ally of the US in its efforts to curb China. The Silicon Valley connections and the long-term relationships built by India’s information-technology services giants could also help the Indian government to persuade the US to pull India into the favoured list. 

If such efforts don’t work out, however, Indian AI ambitions would need to be scaled back until such time as alternative GPU sources could be developed. Ideally, those would be in fab units located within India, or in overseas facilities owned by Indian businesses. The timeline for this could be uncertain and raising domestic capital of the orders required would also be a challenge.