INDIA'S SEMICONDUCTOR MOMENT: FROM STRATEGIC AUTONOMY TO GEOECOMIC POWER

Introduction:

A few technologies have acquired as much geopolitical significance as has the semiconductor. The chip, today, is simultaneously an industrial input, a strategic asset and an instrument of national power. The dependency on semiconductors today transcends the limit of one single idea: artificial intelligence, telecommunications, electric mobility, defence systems, space technology, data centres and autonomous systems all majorly depend upon semiconductor technologies. However, despite the invincibility, production of a chip today remains one of the most globally fragmented processes in modern industry. Design, intellectual property, electronic design automation (EDA), wafer fabrication, equipment, materials, packaging and testing are all distributed across economies. The OECD estimates that approximately 75 per cent of semiconductor value-added is generated by only five economies. Nearly 90 per cent of global wafer-fabrication capacity is concentrated only in China, Taiwan, South Korea, Japan and the United States.

The concentration is even sharper at particular stages. American firms dominate EDA and semiconductor intellectual property; Taiwan dominates advanced foundry manufacturing; South Korea is indispensable to memory; Japan remains critical to materials and equipment; the Netherlands occupies a strategic position in lithography equipment; while China has developed formidable capacity in mature-node manufacturing, assembly and packaging. Semiconductor intellectual property is similarly concentrated: China accounted for about 21,000 semiconductor priority patent families in 2024, followed by South Korea and Japan with roughly 7,000 each.

This structure has transformed commercial interdependence into geopolitical leverage. The US-China technology confrontation has progressively converted semiconductor trade into an arena of strategic competition, with Washington restricting China's access to advanced computing chips and semiconductor-manufacturing equipment. The resulting contest has encouraged governments across the world to subsidise domestic capacity, diversify supply chains and treat semiconductors as an element of economic security.

India's entry must therefore be understood against this larger transformation. The Covid-19 disruption exposed the vulnerability of excessive external dependence, while India's expanding digital economy, defence modernisation, space programme, automotive sector and artificial-intelligence ambitions created a structural requirement for reliable semiconductor supplies. India currently meets roughly 90–95 per cent of its semiconductor and component requirements through imports.

The India Semiconductor Mission, initially sought to establish foundational manufacturing and ATMP/OSAT capabilities, now with an approved outlay of ₹1.27 lakh crore represents a conceptual shift towards design, fabs, advanced packaging, machines and materials, research and talent. At the recently concluded SEMICON India 2026, more than 600 companies from 52 countries participated and 56 MoUs, announcements and strategic initiatives were recorded. The message was unmistakable: India no longer wishes merely to assemble chips; it seeks to build the ecosystem surrounding them.

The China-Taiwan Case: Learning from the Leaders:

Taiwan's rise demonstrates that semiconductor leadership is not created by capital expenditure alone. Its trajectory was built through state-supported technological institutions, skilled human capital, industrial clustering and an unusually effective relationship between government, research institutions and private enterprise. The creation of the Industrial Technology Research Institute (ITRI) in 1973 was particularly important. ITRI helped develop technologies and incubate companies, eventually contributing to the emergence of UMC and TSMC.

TSMC subsequently transformed the industry through the pure-play foundry model, allowing fabless companies elsewhere to design chips without owning fabrication plants. Taiwan now accounts for more than 60 per cent of global chip production and nearly 90 per cent of advanced-chip production. Its advantage is consequently not simply a collection of factories but a dense ecosystem of engineers, suppliers, equipment specialists, research institutions and customers.

China followed a different trajectory. Its enormous domestic market, manufacturing base and state-directed industrial policy enabled it to move progressively into semiconductor design, fabrication, assembly and packaging. US restrictions have accelerated rather than halted China's pursuit of technological self-reliance. Academic research suggests that Beijing has increasingly reorganised capital, talent and domestic demand around semiconductor development, even though significant gaps remain in advanced fabrication and equipment.

India therefore enters a field where incumbents possess decades of accumulated technological knowledge. Its vulnerability is particularly evident upstream. Semiconductor manufacturing requires ultra-pure chemicals, specialty gases, silicon wafers, precision machinery, lithography, metrology and other highly specialised inputs. No country presently controls the entire value chain. India will consequently remain interdependent with the United States, Taiwan, Japan, South Korea, Europe and, in some areas, China for the foreseeable future.

This however does not make India's ambition redundant. It makes the objective more realistic. Strategic autonomy in semiconductors cannot mean autarky; it must mean the capacity to withstand disruption, diversify suppliers and possess sufficient domestic capability to retain strategic choice.

Can India Become a Semiconductor Leader?

India's strongest comparative advantage lies in a stage that Taiwan and China did not initially dominate: human capital. India employs nearly 20 per cent of the global semiconductor chip-design workforce and hosts approximately 7 per cent of semiconductor-related global capability centres. Indian engineers are already involved in the design and verification of advanced chips. The challenge is therefore to connect this intellectual capital to the rest of the value chain.

At the design stage, India must move from engineering services towards indigenous intellectual property, fabless companies and complete system design. This would require patient venture capital, EDA access, university-industry research and assured domestic customers. At the fabrication stage, India needs technologically credible partners, reliable electricity and water, ultra-clean manufacturing environments and enormous capital commitments. Fabs should not be judged simply by whether they produce wafers; their sustainability also depends upon supplier density and process expertise. Therefore, at the materials and equipment stage, the objective should be localisation. But this should also be viewed through the lens of economic viability and not to only indiscriminately substitute import. India must develop domestic capabilities in specialty chemicals, gases, precision engineering, clean-room systems, packaging materials and maintenance services while securing diversified international supply agreements.

At the advanced-packaging stage, India may possess a more immediate competitive opportunity. OSAT can evolve into advanced packaging, chiplets and system-in-package technologies, allowing India to capture greater value without initially competing head-on with the semiconductor giants at the technological frontier.

Finally, India needs an institutional mechanism comparable in spirit to Taiwan's ITRI: an organisation capable of translating publicly funded research into commercially deployable technology. Semicon India 2026 already indicates movement in this direction, with the Government emphasising applied R&D, design, materials, equipment and talent alongside fabs. Thus, India’s comparative advantage could instead lie in integrating design, systems, advanced packaging, mature-node manufacturing, power electronics and a vast electronics market.

Better and Stronger Global Relations—or Stronger Enemies?

A successful Indian semiconductor industry would fundamentally alter India's foreign-policy calculus. For the United States, India would become a more valuable technology partner in building a resilient alternative to excessive China-centric supply chains. For Japan and South Korea, India could become a complementary manufacturing and investment destination. For Taiwan, India would represent both a market and a potential diversification partner. For Europe, particularly the Netherlands and Germany, India could become another node in a trusted technology ecosystem.

But strategic centrality also creates strategic vulnerability. The more important India's semiconductor industry becomes, the more exposed it will be to export controls, sanctions, technology restrictions, intellectual-property disputes, cyberattacks, supply disruptions and geopolitical coercion. The semiconductor race could therefore deepen India's partnerships while simultaneously making its diplomatic balancing act more difficult.

India should consequently avoid becoming an appendage of any technological bloc. Its objective should be strategic multi-alignment through technological diversification. Semiconductor diplomacy should become an extension of India's broader foreign policy: cooperate with Washington without becoming dependent on it; engage Taiwan without unnecessarily destabilising relations with Beijing; deepen ties with Japan and Korea; maintain European partnerships; and build alternative sources of critical minerals, equipment and technology.

Conclusion:

India's semiconductor ambition is neither a straightforward industrial project nor merely a response to the US-China trade war. It is a product of a deeper transformation in the international political economy, in which technological capabilities increasingly determine strategic autonomy.

The obstacles are formidable. India begins with limited fabrication experience, substantial import dependence, inadequate upstream ecosystems and a shortage of specialised manufacturing talent. Taiwan possesses decades of accumulated process knowledge; China commands scale and manufacturing depth; Japan controls crucial materials and equipment capabilities; the United States remains indispensable in EDA, IP and advanced technology. Yet India's advantages are equally significant: a large domestic market, an expanding electronics industry, a deep engineering base, nearly one-fifth of the world's semiconductor design workforce and a government increasingly willing to pursue long-horizon industrial policy. The transition from Semicon 1.0 to Semicon 2.0 is therefore strategically important because it recognises that factories alone cannot constitute an ecosystem.

If India succeeds, the rewards will extend far beyond chip production. Employment will rise, electronics value chains will deepen, import vulnerabilities will decline and new opportunities will emerge for domestic firms. More importantly, semiconductor capability would provide India with greater leverage in an increasingly contested international system. The ultimate objective, therefore, should not be to make India completely independent of the world, it should be to make the world sufficiently dependent on India that Indian strategic choices cannot easily be ignored.