Editorials/Opinions Analysis For UPSC 09 March 2024

CONTENTS

1. India’s Push for Semiconductors
2. Patent Pooling: A Path to Welfare and Prosperity

India’s Push for Semiconductors

Context:

EAM S Jaishankar embarked on a tour to South Korea and Japan this week. The actual outcomes of the meetings in South Korea and Japan will be revealed in the coming months, as India positions itself to play a significant role in the semiconductor supply chain network. Given India’s strained relations with China, and with little prospect of improvement in the near future, India is turning to its traditional allies Japan and South Korea, with support from the US and EU, to secure a substantial share of the semiconductor manufacturing sector.

Relevance:

GS-2- Government Policies & Interventions

GS-3-

• Growth and Development
• Indigenization of Technology
• Industrial Policy
• Scientific Innovations and Discoveries

Mains Question:

With reference to the Indian External Affairs Minister’s recent visit to South Korea and Japan, discuss the relevance of these countries in the growth of India’s semiconductor industry. What is the global landscape of semiconductor manufacturing and how beneficial have government schemes been in this regard? (15 Marks, 250 Words).

About the Semiconductor Industry:

• Semiconductors, characterized by a conductivity level between conductors and insulators, encompass pure elements like silicon and germanium, as well as compounds such as gallium arsenide and cadmium selenide.
• Serving as the fundamental building blocks, these materials form the core of all contemporary electronics and information and communications technology devices.
• From automobiles and household gadgets to critical medical equipment like ECG machines, semiconductor chips have become integral components.
• In terms of significance, semiconductors play a crucial role in various sectors, including aerospace, automobiles, communications, clean energy, information technology, and medical devices.
• The soaring demand for these vital components has exceeded the available supply, leading to a global chip shortage and causing setbacks in economic growth and employment.
• Semiconductors and displays serve as the bedrock of modern electronics, propelling the next phase of digital transformation under Industry 4.0.
• However, as of 2022, the Indian semiconductor industry stands at USD 27 billion, with over 90% being imported, resulting in significant external dependence for Indian chip consumers.
• Major exporters of semiconductors to India include China, Taiwan, the USA, Japan, among others.
• Looking ahead, the Indian semiconductor market is projected to reach USD 55 billion by 2026, with domestic consumption expected to surpass USD 80 billion by the same year and reach USD 110 billion by 2030.
• This growth trajectory highlights the increasing importance of India in the global semiconductor landscape.

Current Global Landscape:

• Currently, the global semiconductor manufacturing landscape is dominated by Taiwan, South Korea, and China, with the US and Japan holding a minority share.
• The COVID-19 pandemic and China’s subsequent actions, including the weaponization of semiconductors (critical components in everything from toasters to high-end space rockets), have compelled countries worldwide to secure their supply chains and diversify.
• In the global race for technological supremacy, the US and China are vying for dominance, with chips (tiny integrated circuit boards requiring intricate multilayered design and manufacturing) serving as the foundational building blocks powering virtually every machine in today’s world.
• The US has already restricted the export of high-tech chips that could contribute to cutting-edge military technology, hindering China’s aspirations for total technological dominance.

Recent Developments by India on the Semiconductor Front:

India Semiconductor Mission –

Established as the primary agency responsible for the efficient and seamless implementation of schemes related to the Semiconductors and Display ecosystem, this mission is designed to steer long-term strategies for the sustainable development of the semiconductor and display ecosystem. The leadership of the Mission will comprise global experts from the semiconductor and display industry.

Semiconductor Design Companies –

• Support will be extended to 100 domestic semiconductor design companies focusing on Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), etc.
• The scheme aims to foster the growth of at least 20 such companies, with a target turnover exceeding Rs. 1500 crore within the next five years.

Semiconductor Fabs and Display Fabs –

• The Scheme for Setting up Semiconductor Fabs and Display Fabs in India will provide fiscal support of up to 50% of the project cost.
• The Central Government, in collaboration with State Governments, aims to approve applications for establishing a minimum of two greenfield semiconductor fabs and two display fabs in the country.

Fiscal Support –

• The Central Government has introduced incentives covering every aspect of the supply chain, including electronic components, sub-assemblies, and finished goods.
• A commitment of Rs. 2,30,000 crore (USD 30 billion) has been made to position India as a global hub for electronics manufacturing, with semiconductors serving as the foundational building block.

Production Linked Incentive (PLI) scheme for semiconductor –

• In September 2022, the Union Cabinet approved modifications to the Rs 76,000-crore semiconductor Production Linked Incentive (PLI) scheme.
• All semiconductor fab plants will now receive fiscal support of 50%, irrespective of node size, which refers to the smallest feature reliably manufactured on a semiconductor wafer using a particular fabrication process.
• The previous incentives were based on node size, with higher-end nodes receiving a 30% incentive.

Chips to Startup (C2S) programme –

The government has introduced the Chips to Startup (C2S) programme, aiming to train 85,000 engineers (Bachelors, Masters, and Research levels combined) qualified in Electronic System Design and Manufacturing (ESDM) disciplines over five years.

Vibrant Gujarat Summit:

• During the Vibrant Gujarat summit in January 2024, the state Chief Minister indicated that numerous South Korean and Japanese semiconductor firms are actively considering investments in Gujarat.
• The race to secure semiconductor manufacturing reflects the current geopolitical landscape, viewed through the lens of these minuscule chips.

Conclusion:

The Indian Prime Minister and the current government, anticipating a return to power in the middle of this year, are eager to swiftly establish large, employment-generating technology factories for the future. The recent visits of the External Affairs Minister to South Korea and Japan underscore the necessity of India’s ambitious journey for the next decade.

Patent Pooling: A Path to Welfare and Prosperity

Context:

Patent pooling involves an arrangement between two or more patent holders to combine their patents, enabling mutual cross-licensing among themselves or third parties. The historical progression of patent pools suggests their emergence in response to the complexity of multifaceted technologies, requiring the integration of various components from the technology landscape to achieve necessary and superior technical solutions.

Relevance:

• GS2- Health
• GS3- Innovations in Science and Tech, Intellectual Property Rights

Mains Question:

Explaining the concept of patent pooling, discuss its applications across various sectors and its associated concerns. (15 Marks, 250 Words).

Rationale Behind Patent Pooling:

• Beyond the technological considerations, the motivation for competitors entering into a patent pool may be to facilitate the sharing and transfer of patented technology, fostering innovation without triggering extensive legal disputes related to intellectual property.
• Patent pools streamline the licensing process, significantly reducing both the cost and time involved. They serve as a valuable mechanism for expediting the introduction of technology to the market in a more efficient and equitable manner, often at a more favorable overall cost for licensees.
• While the operations of patent pools may sometimes appear complex, they offer a level of transparency that contrasts with the often opaque conflicts between individual companies in the realm of Standard Essential Patent (SEP) licensing, as exemplified by disputes between Qualcomm and Apple.
• The economic implications of patent pools are significant in the context of inventing around technologies. By sharing patented technology, companies can save both time and money that would otherwise be spent on attempting to invent around the technology.

Working of a Patent Pool:

• In the operation of a patent pool, multiple patent holders combine their patent rights, creating a shared resource for both member and non-member licensees. Typically, the pool distributes licensing fees, collected from licensees, to each member based on the value of their respective patents.
• A patent pool can manifest as a collaborative effort, often in the form of a joint venture, where two or more patent holders join forces to collectively leverage their intellectual property rights.

The establishment of a patent pool agent is essential, as depicted in Figure below. This agent serves three primary purposes:

1. The agent gathers or collects essential patents, which may be owned by multiple licensors.
2. A licensee, seeking to use all patents within the patent pool, can obtain licenses through this central agent.
3. The calculation of the license fee to be paid by the licensee is performed by the patent pool agent, who then distributes payments to each licensor based on the number of patents they contribute.

Patent Pooling in the Telecommunications Industry:

• Opting for the creation of a patent pool is a preferable strategy compared to fostering reasons for patent lawsuits in industries where multiple players hold overlapping patent rights.
• The wireless and telecommunication industry, characterized by its progressive and dynamic nature, is an example of a technological sector with numerous patents.
• These patents often pertain to technologies that require the support of other related technologies with overlapping scopes to achieve the desired results.
• In essence, this sector provides room for many complementary patents that work together to produce specific outputs, and they are not interchangeable substitutes for each other.
• Some might assume that the technological landscape in question is conducive to extensive patent pooling. However, industry experts, such as Bowman Heiden, the deputy director at the Centre for Intellectual Property in Sweden and a renowned authority on standardization and patent pools, shed light on why telecommunications sector pools have faced challenges.
• He explains that major licensors in wireless technologies have traditionally preferred independent approaches in mobile telecom. This preference stems from the high concentration among standard implementers, such as Apple, Samsung, and Huawei, in the handset market.
• Licensing these key players like Apple, Samsung, and Huawei covers a substantial portion of potential total licensing income. Notably, prominent licensors like Ericsson, Qualcomm, and Nokia choose to handle these implementers individually.
• Despite this, it is premature to conclude that patent pooling is not gaining traction in the telecommunications sector.
• A recent development includes ASUS and IP Bridge joining Via Licensing’s 4G Multi-Generational Patent Pool, bringing the total number of licensors to twenty-one.

Patent Pooling in the Healthcare Domain:

• In the realm of public health, patent pools offer a means to enhance access to new medicines. These pools enable third parties to acquire non-exclusive licenses for the intellectual property necessary to develop products.
• While patent pools have been present in other technological fields for decades, they are a relatively recent concept in public health.
• The Medicines Patent Pool (MPP), established by the United Nations in 2010, serves as a pioneering public health patent pool.
• Initially focused on improving access to antiretroviral treatment for HIV infection in low and middle-income countries, its mandate later expanded to include treatments for tuberculosis and hepatitis C.
• The Medicines Patent Pool (MPP), endorsed by the United Nations, operates as a public health organization focused on improving access to life-saving medicines for low- and middle-income countries.
• The MPP aims at promoting generic drug manufacturing and the development of new formulations.
• The MPP’s experience in addressing access to HIV drugs serves as a concrete illustration of how patent pooling can effectively tackle innovation and access challenges in health technologies.
• In March 2020, the MPP expanded its scope to encompass any health technology contributing to the global response to Covid-19.

Concerns Associated with Patent Pools:

• While there is widespread agreement on the positive impact of patent pools and their efficiency-enhancing nature, there are instances where patent pools might raise concerns related to competition rules.
• For example, in the Summit vs. VISX case, two U.S. firms engaged in a patent pool for developing technology used in laser eye surgery. Both companies obtained individual patent protection successfully, and the Federal Trade Commission (FTC), a U.S. antitrust enforcement agency, determined that the patents were substitutes rather than complements.
• Consequently, the FTC found that the patent pool restricted competition that would have otherwise existed in the absence of the pool. It’s noteworthy that substitute patents address the same issues using alternative technologies, making them non-blocking.

Conclusion:

Despite the potential for competition law concerns, patent pooling is widely recognized as a powerful solution in technology, dating back to the Sewing Machine Combination of 1856. In recent times, it has gained prominence as a key approach for providing access to essential medicines in low and middle-income countries. The positive aspects, such as time and cost efficiency, resource management, and the reduction of intellectual property disputes, outweigh the negatives of patent pooling. The future is likely to witness a growing trend of patent pooling due to these inherent characteristics.