India's Semiconductor Push: From Consumer To Creator | Opinion

India’s semiconductor ambitions have acquired a sharper strategic edge with Prime Minister Narendra Modi’s visit to the Netherlands in May 2026 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.

The symbolism of the agreement was 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 itself.

The agreement is central to Tata Electronics’ proposed 300mm 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 the most ambitious industrial bets undertaken by India in recent decades.

India’s semiconductor push is being driven by a convergence of economic, strategic, and geopolitical imperatives. Economically, the country remains heavily dependent on imported semiconductors even as electronics consumption expands rapidly. Chips today form the backbone of sectors ranging from automobiles and telecommunications to defence systems, artificial intelligence, 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 remain concentrated in Taiwan, South Korea, China, and the United States. The disruptions witnessed during the COVID-19 pandemic, combined with intensifying US-China technological rivalry, have exposed the vulnerabilities inherent in excessively centralised supply chains. Consequently, major global firms and governments are actively seeking diversification strategies under the broader “China+1” framework. India, with its large market, demographic depth, and growing geopolitical relevance, is positioning itself as an attractive alternative destination.

Strategically, semiconductor manufacturing carries implications far beyond economics. Control over secure and reliable chip supply chains is increasingly tied to national security, particularly in areas such as defence electronics, cyber infrastructure, telecommunications, and AI-driven technologies. In this sense, semiconductors have emerged as the new strategic frontier of great-power competition, and India’s entry into this space reflects a recognition of shifting global realities.

New Delhi’s policy architecture has evolved accordingly. The India Semiconductor Mission (ISM), backed by an outlay of Rs 76,000 crore, offers up to 50 per cent fiscal support for approved fabrication projects, among the most generous incentive frameworks globally. ISM 2.0, announced in the 2026–27 Budget, expands the focus toward semiconductor equipment, materials, intellectual property development, supply-chain resilience, and R&D capabilities. The emphasis is increasingly on building an integrated ecosystem rather than isolated manufacturing units.

Several projects are already moving from announcement to implementation. Gujarat has emerged as the epicentre, hosting the Tata-Powerchip fabrication project in Dholera, Micron’s ATMP facility in Sanand, the CG Power-Renesas initiative, and the Kaynes Semicon unit. Assam has secured Tata’s OSAT facility, while Uttar Pradesh is positioning itself aggressively through the HCL-Foxconn joint venture in Jewar near the upcoming Noida International Airport.

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 central strategic vision and state-level competition is gradually producing a geographically distributed semiconductor ecosystem.

Uttar Pradesh, for example, has positioned itself as one of the most ambitious players through an aggressive mix of policy incentives, infrastructure expansion, and strategic positioning within the Delhi-NCR economic corridor. The state’s Semiconductor Policy 2024 reflects an attempt to align itself with New Delhi’s broader technological and manufacturing ambitions while simultaneously leveraging competitive federalism to attract global capital.

In addition to the incentives provided under the India Semiconductor Mission (ISM), Uttar Pradesh offers substantial additional support in the form of capital subsidies, exemptions on stamp duty and electricity duty, land rebates, power incentives, and support for worker housing and skill development.

The state government has also emphasised the creation of integrated industrial ecosystems rather than isolated manufacturing units, linking semiconductor investments with electronics manufacturing, logistics infrastructure, and data-centre development.

In many ways, the state’s semiconductor push reflects a broader transformation underway in northern India, where industrial policy is increasingly being linked to technological upgrading, employment generation, and integration into strategically important global supply chains.

Yet the challenges remain formidable. Semiconductor fabrication is among the most capital-intensive industries in the world, 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 trajectory.

Even so, the direction of travel is increasingly clear. The Tata-ASML agreement, the operationalisation of Micron’s facility, and the launch of ISM 2.0 collectively indicate that India’s semiconductor strategy has moved beyond rhetoric into the realm of long-term industrial transformation.

By positioning itself as a credible and resilient participant in the global semiconductor order, India is seeking not merely economic gains but a greater degree of strategic autonomy in an era where technological capabilities are becoming inseparable from national power.

(The writer is the Vice President at the Observer Research Foundation. Views expressed are personal.)