India's plan for AI hardware, which is essential for the local development of emerging technologies, will be challenged by the planned ban on exporting AI chips to non-key allies like India, according to the semiconductor industry group IESA.

Through public-private partnerships and a five-year investment of Rs 10,000 crore, India's National AI Mission seeks to build infrastructure with over 10,000 GPUs (graphics processing units).

Given national security concerns regarding the technology and the economic interests of manufacturers and other nations, the US administration has put up a new framework that limits the import of artificial intelligence chips.

There are limitations on the amount that can be transferred to other nations in Group 2, including India, but there are no restrictions on the proposal for the 18 important US allies that are grouped under Group 1.

The plan limits Group 2 countries' exports to fewer than 1,700 GPUs annually per company.

"In the short term, the new export controls may not significantly impact India. However, the uncertainty of securing licenses and trade negotiations could challenge India's ambitions for large-scale AI hardware deployment," India Electronics and Semiconductor Association (IESA) President Ashok Chandak said.

He stated that since India is not a hub for advanced compute production or a re-exporter of compute integrated circuits (ICs), it may be able to obtain General National Validated End User (NVEU) authorizations.

"Large-scale AI data centres, requiring several hundred thousand GPUs, may be delayed or scaled-down, putting global companies at a competitive advantage over Indian enterprises. However, small-scale setups could still enable experimentation, innovation, and restricted model development," Chandak said.

"This distinction, combined with the presence of significant Indian design centres for GPU makers like NVIDIA and AMD and their management commitment of support to India, could position India favorably for license approvals," Chandak said.

Under the suggested system, US-based providers such as Amazon, Microsoft, Meta, and others are anticipated to obtain worldwide authorizations, but they will only be permitted to use 50% of their AI processing capacity outside of the US.

According to Chandak, the export restrictions will go into force in 120 days, giving the incoming administration, led by President-elect Donald Trump, the opportunity to change the regulations.