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C3S ISSUE BRIEF 42/26 - Global Chip Dominance Race: India's Present and Future.
By Vadehi Gupta, Research Intern, C3S
Guided By Dr. Ashik Bonofer, Member, C3S
Abstract
In 2021, during the semiconductor shortage, it was unexpected that only a limited number of governments regarded it as a manageable market fluctuation. As the chip shortage intensified, automobile manufacturing plants in Europe and North America ceased operations, consumer electronics experienced multi-month delays, and defence procurement projects were postponed across various continents. This shortage was not an isolated event but a structural warning. The production of semiconductors, which constitutes the foundational hardware of the contemporary digital economy, was so concentrated in a few major firms and geographic regions that it proved incapable of withstanding failures in any single location, thereby triggering a domino effect that impacted national security, economic stability, and military readiness (Narvenkar 2025).
The geopolitical landscape surrounding this vulnerability has grown significantly more intricate. The Indo-Pacific region now serves as the central arena for strategic competition between the United States and China, with semiconductors representing a crucial point of contention (CSIS 2026). Export controls, tariffs, and industrial policies have transitioned from standalone instruments to components of an integrated security framework — an environment that nations must navigate with utmost caution (Just Security 2026).
This reconfiguration presents both risks and opportunities for India. The country exhibits a significant reliance on imported semiconductors, with the majority of necessary chips, particularly ICs (8542), accounting for the bulk of import expenditure (Narvenkar 2025). The primary suppliers are based in China, Taiwan, South Korea, the United States, and Singapore. These supplies are distributed via a limited number of seaports, whose disruption could precipitate cascading effects on the Indian economy and its defence infrastructure (Narvenkar 2025). Additionally, India currently lacks a domestic semiconductor fabrication facility, and the disparity between policy declarations and actual capacity remains substantial (Carnegie Endowment 2026).
The Indian government's initiative is represented by the India Semiconductor Mission, launched in 2021, which allocates 76,000 crore rupees to foster investments in fabrication, assembly, and design. This support is provided through fiscal incentives, production-linked incentives, and policy coordination at the state level (SIA 2025). Central to this initiative is the Tata Electronics fabrication facility in Dholera, Gujarat, a $6 billion USD project developed in partnership with Powerchip Semiconductor Manufacturing Corporation (PCSMC), a Taiwan-based semiconductor manufacturer. The facility aims to produce chips utilising process nodes ranging from 28 to 110 nanometres, with an intended capacity of 50,000 wafer starts per month (Carnegie Endowment 2026). The Government of India has committed to offering a 50 per cent fiscal subsidy on eligible project costs, while the Gujarat government has agreed to provide a 75 per cent subsidy on land acquisition costs under the Gujarat Semiconductor Policy 2022-27 (SIA 2025). This project is notably the first commercial semiconductor fabrication plant in India. Additionally, the new ecosystem being established around this plant, which includes assembly and testing facilities in Assam and Sanand, holds the potential to transform India from a mere consumer of semiconductors into a significant producer (Carnegie Endowment 2026).
This issue brief examines the issues, in the context of national security, concerning the Dholera project and India's broader semiconductor policy. It critically evaluates the semiconductor strategy implemented at the Dholera fabrication facility and its incentive framework, assessing their alignment with security objectives. The analysis explores how the policy aims to achieve strategic autonomy through measures such as tariff protections, supply chain restructuring, and defence integration (Just Security 2026; Chauhdry 2025). The conclusion highlights that India's semiconductor initiative represents a deliberate securitisation of its technological policy, despite existing limitations in the technology being produced, ongoing dependence on imports, and the geopolitical paradox of seeking self-reliance by establishing overseas partnerships (Chauhdry 2025). This study contributes to the scholarly literature by integrating semiconductor industrial policy, trade policy, and defence security within a unified analytical framework, with a focused case study on Dholera.
Read the full Issue Brief below:
(Vaidehi Gupta is a Research Intern at C3S. The views expressed here are of the author's own and do not reflect the views of C3S.)
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