India’s Path in the Global Chip War
Explore how global chip tensions shape India’s tech strategy and security goals, with lessons from the US-China rivalry and paths to innovation.
Introduction: Global Chip War
Technology, once simply the engine of economic growth, has in the modern age become the very heart of international power struggles. In recent years, the delicate web of technology supply chains—especially in semiconductors and artificial intelligence—has become a key arena for global geopolitics. The article “The US Chip Recalibration and Its Strategic Lessons for India” by Kalpit A. Mankikar (ORF, July 29, 2025) explores this fraught landscape, revealing how developments in the United States and China ripple across the world, and examining how India must respond if it wishes to secure its own place at the high table of nations. This essay analyses the interconnected economic, security, and diplomatic factors shaping the global “chip war”, analysing the critical issues, underlying assumptions, and necessary policy shifts, before offering recommendations and a way forward for India’s technological future.
Supply Chains Exposed
At the heart of this issue lies the vulnerability of high-tech supply chains, particularly those relating to semiconductors—the tiny chips that power everything from mobile phones to advanced military equipment. For decades, the United States was unchallenged as the world leader in technology innovation, but China’s rise as a major manufacturing and critical minerals powerhouse has introduced new risks and rivalries. A case in point is the episode involving Nvidia, an American company famous for its advanced AI chips. When the United States restricted sales of its latest H20 chips to China, citing national security, the move set off alarms across the world. Yet, in a sign of how intertwined global interests have become, this restriction was partially rolled back after diplomatic negotiations and pressure, illustrating just how finely balanced—and sometimes contradictory—modern tech policy really is.
Complex China Dynamics
For India, the lessons of this high-stakes struggle are both urgent and complex. India’s relationship with China is a tangled one: while the two countries are major trading partners, they are also competitors and, at times, rivals with unresolved border disputes and a history of fluctuating cooperation. India’s ambition to become a global manufacturing leader, especially in electronics and electric vehicles, means it cannot ignore the risks posed by China’s dominance in the production of rare earth minerals and critical components. In today’s world, the ability to control advanced technology supply chains is not merely a question of economic success but one of national security and independence. This is a significant shift from the past, when economics and security were often considered separate concerns.
Security-Driven Strategy
The central argument that emerges from these developments is that India can no longer afford to treat its industrial and innovation policies as isolated from its security priorities. The story of the US-China chip rivalry underlines the need for an integrated, holistic approach that considers economics, technology, and geo-strategy as deeply interwoven. The disruptions caused by the COVID-19 pandemic, the global shortage of semiconductors, and China’s strategic use of export controls have laid bare the fragility of supply chains that depend too heavily on one nation. Overdependence is now seen not only as an economic risk, but as a potential weakness that could be exploited during times of crisis or conflict.
Building Self-Reliance
One may reasonably assume that by building greater self-sufficiency in the semiconductor sector, India could reduce its exposure to international supply shocks and strategic coercion. There is already a strong foundation on which to build. India has a large and talented pool of engineers, who make up a significant proportion of the world’s chip designers. The country has recently seen a wave of foreign investment in technology manufacturing, including Apple’s decision to ramp up its assembly operations in India—so much so that Indian factories now account for a sizeable share of global iPhone production. These achievements suggest that with the right policies and investments, India could not only weather external disruptions but also attract greater global interest and strengthen its national security by making critical technologies available domestically.
Geopolitical Leverage Evident
The evidence in support of this argument is compelling. Today, over three-quarters of all semiconductor manufacturing takes place in East Asia, concentrated in just a few countries: Taiwan, South Korea, and China. This intense geographic clustering makes the world vulnerable to both political and natural disruptions. When the United States restricted exports of certain chips, China responded with its own measures, threatening to cut off exports of rare earth minerals—elements that are crucial for the production of everything from smartphones to sophisticated defence equipment. The power that comes from such leverage is obvious, and it is a warning for nations like India that wish to be less dependent on any single source.
India’s own progress is also worth noting. The country’s efforts to attract major technology manufacturers have started to pay off, and its pool of skilled engineers and designers is the envy of many nations. However, China has not been shy about using its economic strength to influence India’s ambitions. In recent years, Chinese authorities have recalled their engineers from Indian factories, restricted the export of key minerals needed for India’s electric vehicle sector, and blocked the sale of vital machinery. These actions make it clear that technology and trade have become instruments of state power, wielded strategically to shape the behaviour of rivals and partners alike.
Self-Sufficiency Challenges
Despite the attractions of strategic self-sufficiency, it is important to recognise the limitations of this approach. The dream of complete independence in semiconductor manufacturing, for instance, is a daunting one. It demands vast amounts of money, expertise, and time. The global semiconductor value chain exists as it does because each region or country excels in a particular stage, whether it be research, design, fabrication, or assembly. Attempting to replicate the entire process domestically may not always be practical or cost-effective. Moreover, India’s own economic growth has been fuelled in part by trade with China, which remains a major source of investment and components. An abrupt or poorly managed break from these relationships could result in higher costs, delays to important infrastructure projects like Metro railways and high-speed trains, and setbacks for Indian industry more broadly.
There are also gaps in India’s capabilities that cannot be ignored. While Indian engineers are world-class chip designers, large-scale fabrication plants—or “fabs”—remain a new ambition for the country. Building such facilities demands not only money but also the development of a robust ecosystem, with reliable supplies of materials, a steady stream of skilled workers, well-funded research and development, and close international collaboration. Policymakers must be careful not to tip the balance too far in favour of security, lest they stifle innovation or create unnecessary bureaucratic obstacles that could hinder rather than help progress.
Lessons and Takeaways
What, then, are the key lessons for India as it navigates these turbulent waters? The first is that economic statecraft—the use of economic tools and policies to achieve strategic aims—is now central to international relations. China’s willingness to impose export controls on rare earths and other essential products demonstrates how trade can be weaponised in pursuit of wider geopolitical goals. Likewise, the US’s recalibration of its technology controls, sometimes tightening and sometimes relaxing restrictions to suit broader diplomatic objectives, shows that economic policy, industrial policy, and defence strategy are increasingly interwoven.
For India, this means that the traditional approach of compartmentalising economic and security policies is no longer viable. Policymakers must design national projects—such as the “Make in India” initiative and the Production-Linked Incentive schemes—with an eye not just on economic outcomes, but also on strategic vulnerabilities. It is crucial to identify which sectors and supply chains present the greatest risks, and to plan accordingly, balancing the need for growth with the imperative of security.
Diplomacy and Alliances
Diplomacy and alliances are more important than ever. Initiatives like the US-India Initiative on Critical and Emerging Technologies (iCET) are important platforms for investment, knowledge exchange, and the building of trusted supply chains. While such frameworks are not perfect, they offer a starting point for greater collaboration between “technology democracies”. At the same time, India must remain agile, adapting to shifts in global politics. The US’s willingness to negotiate or modify its own restrictions in pursuit of bigger diplomatic goals suggests that a rigid, one-size-fits-all policy will not work. India’s approach must be both robust and flexible, able to combine long-term safeguards with the capacity to engage dynamically with a rapidly changing world.
Strengthening Domestic Capabilities
Building up domestic capabilities will require a broad and determined effort. Infrastructure, investment incentives, and talent development are all essential. The government’s recent focus on artificial intelligence, the launch of the “IndiaAI Mission”, and new public-private partnerships in chip design are positive steps. Yet, much remains to be done to tie these initiatives together—to align public research with industry needs, attract more foreign investment in manufacturing, and ensure clear coordination between different government departments and industry players.
In charting a strategic path forward, India needs to embrace a joined-up, holistic approach. Regular reviews of sectoral risks and dependencies should become part of formal policy. Focused investment in manufacturing must be paired with measures to build the entire value chain, from design and fabrication to assembly, testing, and packaging. Deepening partnerships with friendly nations—learning from frameworks like the CHIPS Act, iCET, and the Quad—will help share both risk and expertise. Rather than seeking total separation from China, India should pursue a balanced policy of risk management and diversification, maintaining productive ties wherever possible.
Innovation will thrive only if there is a networked ecosystem, linking universities, startups, and established industry, supported by transparent guidelines and a commitment to accountability. Infrastructure bottlenecks, from power supply to logistics and data centres, must be tackled, and talent development needs to span the entire spectrum—from design to high-tech manufacturing and maintenance. Real-time monitoring of global supply chain risks will be crucial, so that India can remain agile, adjusting its policies as the world changes around it.
Conclusion
In conclusion, the US chip recalibration and China’s use of economic statecraft present both a cautionary tale and a roadmap for India. Technology is no longer simply about economic prosperity; it has become a battlefield of power and influence. For India, the challenge is not just to catch up with export controls or incentives but to fundamentally reshape its approach to economic and industrial security. The era of treating trade, technology, and strategic interests as separate is over. India’s ambitions to lead in technology and manufacturing will only be realised if it adopts a forward-looking, integrated policy—one that puts innovation and investment at its core, fortifies international partnerships, and always keeps the interests of its people in sight. Ultimately, India’s future success will depend on its ability to build a resilient, innovation-driven industrial base—one that is both globally competitive and secure from external shocks. The global chip war is not just a warning bell; it is a call for India to reaffirm its ambitions and chart a bold, strategic course for the years ahead.
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The Source’s Authority and Ownership of the Article is Claimed By THE STUDY IAS BY MANIKANT SINGH
