Semiconductor consortium urges India to rethink digital duties

A global consortium of semiconductor industry groups has asked India to reconsider its plan to push for duties on cross-border digital e-commerce and data transfers at an upcoming global trade meeting, warning that India's stance will stifle its own chip design industry.

Ministers from across the globe are convening for a World Trade Organization meeting in Abu Dhabi early next week to try to discuss several trade-related issues, including extending a moratorium in place since 1998 on applying duties on electronic transmissions.

Developing nations like India, South Africa and Indonesia are set to oppose efforts by US and Europe to extend the moratorium. If no agreement is made, the moratorium would expire this year.

The moratorium collapse would mean tariffs on digital e-commerce and an innumerable number of transfers of chip design data across countries, raising costs and worsening chip shortages, the World Semiconductor Council (WSC) wrote to Indian prime minister Narendra Modi on Thursday (22).

The chips sector is a key plank of Modi's agenda to push India's economic growth, with a $10 billion incentive package in place to boost the Industry.

Duties on data transfers would " also impede India's efforts to advance its semiconductor industry and attract semiconductor investment, especially as more than 20 per cent of the world's semiconductor design workforce is based in India," the group wrote in the letter, a copy of which was reviewed by Reuters.

The prime minister's office did not immediately respond to a request for comment.

WSC comprises of chip industry associations in regions like the US and China, which represent chip stalwarts such as Qualcomm, Intel, AMD and Nvidia.

New Delhi has said that physical goods like books and videos, once governed by traditional tariff rules, were now available as digital services and should be subject to duties. Developing nations are facing massive loss in potential revenue with such imports from developed countries on the rise, India maintains.

WSC in its letter also urged India to work toward a WTO agreement to permanently prohibit countries from subjecting cross-border data and digital tools to customs duties and procedures.

India's support to renewing the moratorium will "send a strong signal to semiconductor companies that India is an investment friendly environment," the group wrote.

(Reuters)