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The geopolitics of chips and India
Semiconductors have become a central issue in global politics because so much advanced capacity is concentrated in a few places. This page explains why chips are strategic, how the main powers are responding, and where India fits, keeping the tone factual and acknowledging India's early stage and Taiwan's continued leadership.
Last checked 2026-08-11 · every figure below carries its source
Why chips became strategic
Semiconductors power almost everything modern, from phones and cars to data centres, medical devices, and defence systems. That ubiquity, combined with how concentrated advanced manufacturing has become, is what turned chips into a geopolitical issue. Leading-edge fabrication is dominated by a small number of players, with Taiwan holding the largest share through firms like TSMC, and the specialised equipment and materials that fabs depend on come from a similarly narrow set of suppliers across a few economies. This concentration means that any disruption, whether from natural disaster, conflict, or policy action, could ripple through the entire global economy. Governments came to see secure chip supply as a matter of national and economic security rather than ordinary trade. The 2020 to 2022 shortage made the risk concrete by showing how a supply squeeze could stall car factories and raise prices worldwide. Since then, chips have featured prominently in trade policy, export controls, and industrial strategy. The core dynamic is straightforward: a technology essential to everything is made in very few places, so control over and access to that manufacturing has become a strategic concern for major powers.
How the major powers are responding
The response has been a wave of industrial policy and, in some cases, restrictions. The United States passed the CHIPS Act, providing on the order of US$52 billion to support domestic manufacturing and research, and has also used export controls to limit the flow of the most advanced chip-making technology to certain destinations. The European Union, Japan, and South Korea have launched their own incentive programmes to build or retain capacity and reduce dependence on any single region. Underlying much of this is the broader China Plus One trend, in which companies diversify supply chains beyond China to spread risk. The common goal across these efforts is resilience: more geographic diversity in where chips and their inputs are made, so that no single point of failure can halt supply. It is worth noting that these policies are expensive, slow to bear fruit, and do not remove concentration overnight, since fabs take years to build and the frontier remains hard to replicate. Still, the direction is clear. Major economies now treat semiconductor manufacturing location as strategic and are willing to spend heavily to influence it.
Where India fits
India enters this landscape as an aspiring participant rather than an established power. Its strategy combines a large domestic market, an engineering workforce, and government incentives through the India Semiconductor Mission, launched in 2021 with an outlay of about Rs 76,000 crore, offering fiscal support of up to 50 percent of eligible project cost for approved fabs. The flagship is the Tata Electronics and PSMC fab at Dholera, approved on 29 February 2024, targeting mature and specialty nodes rather than the leading edge, alongside packaging plants such as Micron at Sanand. India-wide, there are around a dozen sanctioned semiconductor projects with a cumulative value on the order of Rs 1.64 lakh crore, a national total that should not be attributed to any single site. Geopolitically, India positions itself as a friendly, diversified alternative location for supply-chain investment, aligning with the China Plus One trend and partnerships with technology suppliers, including the ASML lithography partnership confirmed for the Dholera fab. The honest framing is that India is building a foothold and improving its strategic relevance, not yet holding significant leverage in the way that established manufacturing hubs do.
A realistic reading
It is easy to inflate the geopolitics of chips into grand narratives, so a grounded reading helps. The central facts are that advanced manufacturing is concentrated, that this concentration is a genuine strategic risk, and that major powers are spending heavily to diversify it. Within that, Taiwan remains the leader at the frontier and is not being displaced by current policy, since matching leading-edge capability requires the newest lithography, immense capital, and years of yield learning. India's role is that of a rising entrant at the mature-node and packaging tiers, backed by incentives and supply-chain diversification, with Dholera as a first anchor still under construction and no chip produced there yet. For India, the strategic payoff would come from reliably operating fabs, deepening its supplier ecosystem, and building trusted partnerships, all of which take years. Treating India as a serious new participant, while being clear that it does not yet rival established hubs, is the accurate stance. The geopolitics of chips will keep evolving, but the underlying constraint, that fabs are slow and costly to build, ensures that shifts happen gradually rather than overnight.