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Summary
In a world where concentrated supply chains are leveraged to meet geopolitical ends and uncertainty surrounds chipmaker Taiwan, locally made semiconductors could determine global power equations. India needs to be a player.
India’s semiconductor ambitions have acquired a sharper strategic edge with Prime Minister Narendra Modi’s visit to the Netherlands last month emerging as a defining moment in New Delhi’s technological statecraft.
Tata Electronics signed a landmark Memorandum of Understanding with ASML, the world’s most critical supplier of advanced lithography systems that underpin modern semiconductor manufacturing.
Its symbolism is unmistakable: India is no longer content with remaining merely a consumer market or a back-end assembly destination in the global electronics ecosystem. It seeks to emerge as a consequential node in the semiconductor value chain.
The agreement is central to Tata Electronics’ proposed semiconductor fabrication facility in Dholera, Gujarat, envisioned as part of India’s first greenfield semiconductor city. With an investment estimated at nearly $11 billion, the project represents one of India’s most ambitious industrial bets.
The semiconductor push is being driven by a convergence of economic, strategic and geopolitical imperatives.
Economically, India is heavily dependent on imported chips even as electronics consumption expands rapidly. Chips today form the backbone of sectors ranging from automobiles and telecommunications to defence systems, artificial intelligence (AI) and digital infrastructure.
As India’s electronics imports continue to rise, reducing external dependence has become an issue not merely of industrial policy but of economic security.
The geopolitical context is equally significant. Global semiconductor supply chains are concentrated in Taiwan, South Korea, China and the US. Disruptions witnessed during covid, combined with intensifying US-China technological rivalry, have exposed vulnerabilities inherent to excessively centralized supply chains.
Consequently, major global firms and governments are diversifying under the broader ‘China-plus-one’ framework. India, with its large market, demographic depth and rising geopolitical relevance, is positioning itself as an attractive alternative destination.
Strategically, chip manufacturing carries implications beyond economics. Control over reliable supply chains is increasingly tied to national security, particularly in areas such as defence electronics, cyber infrastructure, telecom and AI-driven technologies.
In this context, semiconductors have emerged as the new strategic frontier of great-power competition, and India’s entry into this space reflects a recognition of fast shifting global realities.
New Delhi’s policy architecture has evolved. The India Semiconductor Mission (ISM), with an outlay of ₹76,000 crore, offers up to 50% fiscal support for approved fabrication projects, among the most generous globally. ISM 2.0, announced in the 2026–27 budget, expands the focus to semiconductor equipment, materials, intellectual property development, supply-chain resilience and research.
The focus is on building an integrated ecosystem rather than isolated manufacturing units.
Several projects are already moving from announcement to implementation. In Gujarat, besides the Tata-Powerchip fabrication project in Dholera, Micron’s ATMP facility, a CG Power-Renesas initiative and a Kaynes Semicon unit have emerged. Assam has secured Tata’s OSAT facility, while Uttar Pradesh (UP) is positioning itself as a sought-after destination through an HCL-Foxconn joint venture.
The UP Semiconductor Policy 2024 illustrates how states are supplementing central incentives with additional capital subsidies, tax exemptions, land rebates, power concessions and skilling initiatives. This interplay between a central strategic vision and state-level competition is producing a geographically distributed semiconductor ecosystem.
UP, for example, has pitched itself as one of India’s most ambitious players through an aggressive mix of policy incentives, infrastructure expansion and strategic positioning within the Delhi-National Capital Region economic corridor.
The state’s policy document reflects an attempt to align itself with New Delhi’s broader technological and manufacturing ambitions while trying to attract global capital on its own. In addition to incentives offered under the Centre’s ISM, UP offers investors substantial additional support.
In some ways, UP’s semiconductor push reflects a broader transformation underway in northern India, where industrial policy is being linked to technological upgradation, employment generation and integration into strategically important supply chains.
Yet, the challenges in creating a chips ecosystem are formidable. Semiconductor fabrication is among the world’s most capital-intensive industries, requiring reliable access to water, uninterrupted power, highly skilled labour and sophisticated supplier ecosystems.
Moreover, export-control regimes, geopolitical tensions and fierce international competition will continue to shape the sector’s global trajectory.
Even so, the direction of travel is clear. Recent agreements that have been signed show India’s semiconductor strategy has moved beyond rhetoric to industrial transformation.
By positioning itself as a significant participant in the global semiconductor industry, India is searching not just for economic gains, but strategic autonomy at a time when technological capability is becoming inseparable from national power.
The author is professor of international relations, King’s College London, and vice president for studies at Observer Research Foundation, New Delhi.
English (US) ·