In February, Minister of Electronics and Information Technology Ashwini Vaishnaw announced that the first commercially assembled chips would roll out by October 2025. Even as the Tata-PSMC fab—India’s only commercial chip manufacturing facility—takes shape in Dholera, another facility was announced by the Tata-PSMC-Himax consortium in March 2025 for making display driver chips. And in May 2025, the Union Cabinet approved the HCL-Foxconn display chip assembly at Jewar.
The fruition of these plans will likely lead to a reduction in strategic vulnerability by building base capabilities in an economically vital sector. However, none of these moves alone will help India capitalise on its potential strengths in the global semiconductor ecosystem. With some initial success under its belt, it is time for India to kick-start the next phase of its semiconductor strategy to gain strategic leverage. Here’s how:
Broadly speaking, we can infer three key objectives from current government policy. The primary goal is to reduce strategic vulnerability by building base capabilities in segments where India has no commercial presence. Hence, the focus is on building chip assembly and chip fabrication plants. Second, reduce dependence on China for imports. Hence, the financial incentives for fabs that make display panels. These components aren’t strategically essential but are currently imported mainly from China. The third and final objective is to capitalise on potential strengths. Hence, the Design Linked Incentive (DLI) scheme, which encourages India’s chip designers to establish new companies and develop innovative products. There’s no doubt that building capabilities across all important semiconductor supply chain segments will help create economic linkages and generate economic opportunities for India. Nevertheless, this order of priority doesn’t serve India’s strategic needs well for three reasons.
Downsides of the approach
One, strategic vulnerability will not be substantially reduced. A rough calculation suggests that the Dholera fab, once constructed, will serve less than 10 per cent of India’s total chip demand. India will continue to rely on foreign fabs and foreign-made manufacturing equipment for a long time, even if it were to introduce new incentives to attract companies in adjacent segments such as specialised gases and manufacturing equipment. Two, reducing imports of commodified chips and display panels from China doesn’t give India any strategic leverage. Even if China were to put India-specific export controls, there are other suppliers of these products in Japan and South Korea that can fill the gap. Three, from a strategic lens, building a fab and a few assembly units is primarily a defensive measure. These defensive investments are welcome but are insufficient for gaining a competitive edge.
That’s where the third goal of capitalising on potential strengths comes into play. As I discussed in my previous column, the vision of technological sovereignty that suits India best is about developing asymmetric technological power. This perspective calls for developing leverage by controlling a few critical nodes within global technology supply chains, dissuading technology denial by adversaries. This mindset implies moving beyond defensive positioning by playing catch-up in traditional manufacturing to actively building asymmetric advantages.
