As of October 2025, India has transformed its long-held semiconductor ambitions into a tangible, rapidly accelerating national mission. Driven by a coherent, state-led industrial policy and substantial fiscal incentives under the India Semiconductor Mission (ISM), the country has successfully attracted over $18 billion in investment commitments for ten strategic projects, laying the groundwork for a foundational manufacturing ecosystem. This report provides a comprehensive analysis of India’s strategy, its physical implementation, its research and development infrastructure in a global context, and the critical geopolitical risks that temper its promise as a partner for the United States.
India’s strategy is distinguished by its pragmatic focus on mature process nodes (28nm and above) and advanced packaging (ATMP/OSAT). This approach wisely avoids direct competition with leading-edge foundries in Taiwan and South Korea, instead targeting the high-volume demand from its burgeoning domestic automotive, industrial, and consumer electronics markets. Major projects, including an $11 billion fab by Tata-PSMC and a $2.75 billion packaging facility by U.S.-based Micron, are progressing rapidly, with India’s first domestically produced chips from a pilot line becoming available in late 2025.
A key component of this ecosystem is talent development. The newly approved NaMo Semiconductor Laboratory at IIT Bhubaneswar, despite its prominent name, is a tactical, regionally-focused workforce development center with a modest budget of approximately $0.6 million. Its primary role is to supply skilled personnel to specialized compound semiconductor and packaging facilities planned for the state of Odisha, not to conduct frontier research. A comparative analysis reveals it operates on a fundamentally different scale and mission from premier R&D hubs like the Albany NanoTech Complex in the U.S. or Europe’s Fraunhofer and imec, which command multi-billion-dollar investments and focus on next-generation, pre-competitive research.
From a U.S. perspective, India’s approach is complementary rather than competitive. By building capacity in mature nodes, India can de-risk global supply chains for a vast category of essential chips, allowing the U.S. to focus its CHIPS Act resources on securing the leading edge for high-performance computing and national security.
However, this opportunity is shadowed by a critical geopolitical risk. This report identifies a “Trusted Partner Paradox”: while the U.S. cultivates India as a secure and democratic alternative to China, India has simultaneously become Russia’s second-largest supplier of restricted, dual-use technologies, including microchips and machine tools essential to Moscow’s war effort in Ukraine. This activity directly undermines Western sanctions and creates a potential vector for technology leakage, posing a significant compliance and reputational risk for U.S. firms investing in India. This fundamental contradiction presents a complex challenge for U.S. policymakers, who must balance the strategic imperative of diversifying supply chains with the immediate security threat posed by India’s continued material support for a primary U.S. adversary.
1. The Architecture of India’s Semiconductor Ambition
After decades of unrealized potential and several false starts, India’s semiconductor strategy has, since late 2021, coalesced into a formidable national priority, characterized by a coherent policy framework, substantial state funding, and accelerating execution. As of Q4 2025, the nation’s push is no longer aspirational but demonstrably in motion, attracting significant global investment and achieving key initial milestones. This transformation is rooted in a centrally coordinated, mission-mode approach that marks a significant departure from previous, less successful efforts.
1.1 Policy as Foundation: The India Semiconductor Mission (ISM)
The cornerstone of India’s current strategy is the India Semiconductor Mission (ISM), established in December 2021 as the nodal agency under the Ministry of Electronics and Information Technology (MeitY). With an initial outlay of ₹76,000 crore (approximately $9.2 billion), the ISM is designed to orchestrate the development of a comprehensive semiconductor and display ecosystem through a set of robust, direct-fiscal-support schemes. This structure represents a deliberate shift toward a state-led industrial policy, de-risking massive capital investments to a degree unseen in prior Indian initiatives and mirroring the successful early-stage industrial policies of East Asian semiconductor powerhouses.The primary incentive mechanisms are:
- Production Linked Incentive (PLI) Scheme: This is the financial engine of the ISM. It offers substantial fiscal support of up to 50% of the project cost, provided on a pari-passu (equal footing) basis, for companies establishing semiconductor wafer fabrication (fabs), display fabs, and back-end Assembly, Testing, Marking, and Packaging (ATMP) or Outsourced Semiconductor Assembly and Test (OSAT) facilities. This support can be augmented by state-level subsidies, which in some cases can bring total government backing to as high as 75% of the project cost. The overwhelming response to this scheme has led to the near-full commitment of the initial financial allocation by late 2025, prompting active discussions for a second phase of funding to accommodate further investment proposals.
- Design Linked Incentive (DLI) Scheme: Complementing the focus on manufacturing, the DLI scheme aims to cultivate a vibrant domestic ecosystem for fabless chip design and indigenous intellectual property (IP). The scheme provides financial incentives and design infrastructure support, such as access to expensive Electronic Design Automation (EDA) tools and foundry services, for early-stage startups. By September 2025, the DLI scheme was actively supporting 23 domestic chip design projects. This grassroots effort is already bearing fruit, with 28 student-designed chips from 20 different institutes having been successfully “taped out” (sent for manufacturing) at the government-owned Semiconductor Laboratory (SCL) in Mohali.
1.2 From Ambition to Execution: Milestones of 2025
The year 2025 has been pivotal, marking the transition of India’s semiconductor program from policy documents to tangible industrial and diplomatic achievements.
- SEMICON India 2025: Held from September 2-4 in New Delhi, the fourth edition of this flagship conference was widely regarded as a “watershed moment” for the nation’s semiconductor ascent. Organized jointly by the ISM and the global industry association SEMI, the event showcased India’s growing capabilities and attracted record participation, featuring dedicated global pavilions and country-specific roundtables. A total of 12 new Memorandums of Understanding (MoUs) were announced, signaling deepening collaboration with global industry leaders like Merck and academic institutions such as Arizona State University. A significant announcement was the formation of a Deep Tech Alliance with a $1 billion commitment to drive semiconductor innovation in frontier sectors.
- First ‘Made-in-India’ Chips: A powerful symbolic and practical milestone was achieved in Q3 2025 with the rollout of the first packaged semiconductor chips from the pilot assembly line of the CG Power-Renesas-Stars Microelectronics OSAT facility in Sanand, Gujarat. The first set of these domestically produced chips was formally presented to Prime Minister Narendra Modi in early October, providing a potent symbol of the “Make in India” initiative’s progress. This achievement, coupled with the Prime Minister’s announcement that commercial production of Indian chips will begin by the end of 2025, has galvanized the domestic industry.
- Solidifying International Partnerships: Throughout 2024 and 2025, India has successfully solidified its position within the global effort to build resilient and secure technology supply chains. It has signed formal MoUs and established partnerships focused on semiconductor supply chains with the United States, the European Union, Japan, and Singapore, underscoring its successful diplomatic outreach and its growing acceptance as a trusted partner among democratic nations.
1.3 Market Trajectory and Economic Impact
The rapid progress on the policy and industrial fronts is mirrored in the country’s economic projections. India’s domestic semiconductor market is on a steep growth trajectory, projected to expand from approximately $38 billion in 2023 to between $45 billion and $50 billion by the end of 2025.
The government has set an aggressive target for the domestic market to reach $100-110 billion by 2030. This target is not merely an economic aspiration but a cornerstone of India’s geopolitical strategy. If achieved, India’s domestic consumption would account for roughly 10% of the projected $1 trillion global semiconductor market in 2030. Such a large internal market provides a critical “demand cushion” for its nascent manufacturing facilities. This guaranteed domestic offtake significantly de-risks the massive capital expenditures required for fabs, making them economically viable even before securing large-scale export contracts—a key strategic advantage that differentiates India’s current push from its past endeavors.
This industrial expansion is also projected to have a significant impact on employment, with estimates suggesting the creation of up to 1 million jobs by 2026. The Tata-PSMC fab alone is expected to generate over 20,000 direct and indirect skilled jobs. Furthermore, India’s semiconductor exports are projected to generate more than $20 billion in 2025, indicating a rapid move to integrate into the global value chain.
2. Building the Industrial Ecosystem: A Status Report
Moving beyond policy frameworks, India’s semiconductor ambitions are now physically taking shape in the form of large-scale industrial projects across the country. As of October 2025, ten strategic projects have been approved under the ISM, with a cumulative investment commitment of approximately INR 1.60 trillion (about $18.23 billion). These projects span front-end fabrication, back-end packaging, and specialized compound semiconductors, forming the foundational pillars of a domestic manufacturing ecosystem.
2.1 The Fab Cornerstone: Tata Electronics and PSMC in Dholera
The centerpiece of India’s manufacturing strategy is its first high-volume wafer fabrication facility, a landmark project led by the Tata Group.
- Investment and Partnership: The project is an INR 91,000 crore (~$11 billion) joint venture between Tata Electronics, a subsidiary of Tata Sons, and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC). Located in the Dholera Special Investment Region in Gujarat, it represents one of the largest industrial investments in India’s recent history.
- Technology and Capacity: The fab is strategically targeting mature process nodes of 28nm and above. This focus is designed to cater to the high-volume needs of the automotive, computing, communications, and artificial intelligence markets, which rely heavily on these workhorse chips. The facility is planned to have a manufacturing capacity of 50,000 wafers per month.
- Timeline and Ecosystem Development: Construction of the fab began in 2024, with trial production anticipated to commence by early 2027. The project is serving as an anchor for a broader industrial ecosystem in Dholera. Ancillary industries are already setting up operations to support the fab, including a Rs 500-crore electronic specialty gas hub being built by Inox Air Products to supply the ultra-high purity gases essential for fabrication.
2.2 Mastering the Back-End: The ATMP/OSAT Landscape
Recognizing that value is added throughout the supply chain, India has placed equal emphasis on developing a robust back-end ecosystem for Assembly, Testing, Marking, and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT).
- Micron Technology (Sanand, Gujarat): U.S.-based memory giant Micron is establishing a $2.75 billion ATMP facility, a project that signals strong international confidence in India’s mission. As of January 2025, construction of Phase 1 was 60% complete, with the facility on track to become operational by late 2025. This will be India’s first major high-volume semiconductor plant and is expected to process up to 1.35 billion memory chips annually.
- Tata Electronics (Jagiroad, Assam): In addition to its fab, the Tata Group is making a colossal $27 billion investment in a state-of-the-art ATMP facility in Assam, demonstrating a vertically integrated strategy. This plant is expected to be operational by mid-2025, significantly boosting India’s domestic packaging capacity.
- CG Power (Sanand, Gujarat): This Rs 7,600 crore (~$910 million) OSAT facility is a tripartite joint venture between India’s CG Power, Japan’s Renesas Electronics, and Thailand’s Stars Microelectronics. The facility achieved a major milestone in Q3 2025 by rolling out the first “made-in-India” packaged semiconductor chips from its assembly pilot line, marking a tangible success for the ISM. It aims for a daily production capacity of 15 million units once fully scaled.
2.3 Beyond Silicon: Compound Semiconductors and Design Innovation
India’s strategy extends beyond traditional silicon-based manufacturing to include strategic investments in next-generation materials and higher-value design capabilities.
- Compound Semiconductors: There is a deliberate focus on developing capabilities in materials like Silicon Carbide (SiC) and Gallium Nitride (GaN). These materials are critical for high-power, high-frequency applications essential for electric vehicles (EVs), 5G telecommunications, defense systems, and space technology.Approved projects include an integrated facility for SiC-based compound semiconductors in Odisha and a GaN chip fabrication unit by Polymatech Electronics in Chhattisgarh.
- Advanced Design and Packaging: To move up the value chain, India is also investing in cutting-edge design and packaging technologies. In May 2025, the government inaugurated two state-of-the-art semiconductor design facilities focused on advanced 3-nanometer chip design, a significant leap in indigenous capability. Furthermore, an advanced 3D glass packaging facility has been approved for development in Odisha, aligning with the global trend towards heterogeneous integration and advanced packaging solutions.
The following table provides a consolidated overview of the ten strategic semiconductor projects approved under the India Semiconductor Mission as of October 2025.
| Company / Joint Venture | Location | Total Investment (Approx.) | Technology Focus | Projected Status / Timeline |
| Tata Electronics & PSMC | Dholera, Gujarat | ₹91,000 Cr ($11B) | 28nm+ Wafer Fabrication (Fab) | Trial Production by early 2027 |
| Micron Technology | Sanand, Gujarat | ₹22,516 Cr ($2.75B) | DRAM & NAND ATMP | Operational by late 2025 |
| Tata Electronics (TSAT) | Jagiroad, Assam | ~$27B (undisclosed INR) | ATMP | Operational by mid-2025 |
| CG Power, Renesas, Stars | Sanand, Gujarat | ₹7,600 Cr ($910M) | OSAT | Pilot line operational Q3 2025 |
| Kaynes SemiCon | (Location Undisclosed) | (Undisclosed) | OSAT / ATMP | First packaged chips by Oct 2025 |
| HCL & Foxconn | Jewar, Uttar Pradesh | (Undisclosed) | Display Driver Chip Packaging | Commercial Production in 2027 |
| SiCSem | Odisha | (Part of ₹4,600 Cr batch) | Silicon Carbide (SiC) Compound Semi | Approved Aug 2025 |
| CDIL | Mohali, Punjab | (Part of ₹4,600 Cr batch) | Compound Semi (Expansion) | Approved Aug 2025 |
| 3D Glass Solutions Inc. | Odisha | (Part of ₹4,600 Cr batch) | Advanced 3D Glass Packaging | Approved Aug 2025 |
| ASIP Technologies | Andhra Pradesh | (Part of ₹4,600 Cr batch) | Semiconductor Manufacturing | Approved Aug 2025 |
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3. The NaMo Semiconductor Laboratory: A Catalyst for Talent, Not Technology
In October 2025, the Indian government announced the approval of the ‘NaMo Semiconductor Laboratory’ at the Indian Institute of Technology (IIT) Bhubaneswar. While the name suggests a facility of national strategic importance, a detailed analysis of its mandate, funding, and scope reveals its true purpose: to function as a highly targeted, regional workforce development center designed to address a specific and immediate skills gap, rather than as a flagship for frontier research and development.
3.1 Mandate and Mission
The officially stated mission of the NaMo Semiconductor Lab is explicitly centered on human capital development. Its primary objectives are to “equip the youth with industry-ready skills” and to create a deep talent pool to support the chip manufacturing and packaging units being established across the country, particularly in the state of Odisha. The laboratory is intended to act as a “catalyst” for the ‘Make in India’ and ‘Design in India’ initiatives by positioning IIT Bhubaneswar as a regional “hub for semiconductor research and skilling”. The focus is overwhelmingly on training, fabrication instruction, and providing students with hands-on experience using industry-grade tools, thereby bridging the gap between academic knowledge and the practical requirements of a fab or an OSAT facility.
3.2 Scale, Scope, and Funding
The most revealing aspect of the NaMo Lab is its modest scale, which stands in stark contrast to its prominent branding.
- Funding: The total estimated cost for the project is a mere Rs. 4.95 crore (approximately $600,000 USD). This budget is allocated with Rs. 4.6 crore (~$550,000) for equipment and Rs. 35 lakh (~$42,000) for software. This level of funding is sufficient for a training and teaching lab but is orders of magnitude smaller than the budgets required for facilities engaged in genuine semiconductor R&D.
- Funding Source: The project is funded under the Members of Parliament Local Area Development (MPLAD) Scheme. This is a highly unusual funding mechanism for a national technology initiative. The MPLAD scheme provides each Member of Parliament with a small annual fund to recommend development works of a local nature within their constituency. Its use for this laboratory indicates that the project is likely a localized, politically driven initiative rather than a centrally planned component of the ISM’s core R&D strategy.
3.3 Strategic Significance vs. Technical Prowess
The true strategic value of the NaMo Lab lies not in its potential for technological breakthroughs, but in its precise alignment with the industrial ecosystem emerging in its home state of Odisha. The state has recently secured approvals for two major, specialized semiconductor projects under the ISM: an integrated facility for Silicon Carbide (SiC)-based compound semiconductors and an advanced 3D glass packaging facility.
IIT Bhubaneswar was chosen as the site for the lab because it already hosts the Silicon Carbide Research and Innovation Centre (SiCRIC). The NaMo Lab is designed to directly complement this existing infrastructure and, more importantly, to create a direct pipeline of trained technicians and junior engineers for the new SiC and 3D packaging plants. In this context, the lab is a crucial but supporting piece of infrastructure. Its purpose is to ensure that the multi-million-dollar industrial investments in Odisha do not falter due to a lack of skilled local manpower.
Therefore, any attempt to benchmark the NaMo Semiconductor Laboratory against major international R&D centers represents a fundamental category error. Its purpose is not to generate novel intellectual property or to pioneer next-generation process nodes. Rather, it is a tactical investment in human capital, a practical solution to a localized skills bottleneck, and a political signal of support for a specific regional industrial cluster.
4. A Global Benchmark: Comparing R&D Ecosystems
To accurately contextualize India’s current R&D capabilities and the role of the NaMo Semiconductor Laboratory, it is essential to compare it with leading international facilities that define the global state-of-the-art in semiconductor research. This comparison highlights the different models of R&D—from bleeding-edge, pre-competitive research to industry-focused applied development—and clarifies India’s current position on this spectrum.
4.1 The U.S. Model: The Albany NanoTech Complex (NY CREATES)
The Albany NanoTech Complex, managed by the non-profit NY CREATES, represents the pinnacle of the U.S. public-private partnership model for advanced R&D.
- Mission: Its core mission is to conduct pre-competitive research at the absolute frontier of semiconductor technology, focusing on developing the processes and materials for sub-5nm nodes and beyond. It serves as a bridge between fundamental research and commercialization, enabling industry giants to collaborate on high-risk, high-reward challenges that are too expensive for any single company to tackle alone.
- Scale and Funding: The complex is a massive, multi-billion-dollar ecosystem, with over $25 billion invested over several decades from a mix of state, federal, and private sources. A recent landmark initiative is a $10 billion partnership between New York State and a consortium of industry leaders—including IBM, Micron, Applied Materials, and Tokyo Electron—to establish North America’s first and only publicly owned High-NA Extreme Ultraviolet (EUV) Lithography Center. This center will house the most advanced chipmaking tool ever made, solidifying Albany’s role as a global R&D hub.
- Model: The complex operates as a shared R&D platform. NY CREATES owns and manages the state-of-the-art cleanroom facilities (over 165,000 sq. ft.) and infrastructure, which corporate and academic partners then utilize for collaborative research programs. This model allows for the pooling of resources, expertise, and risk, accelerating the pace of innovation for the entire U.S. semiconductor industry.
4.2 The German Model: Fraunhofer-Gesellschaft & imec (as a European benchmark)
Europe’s R&D ecosystem is characterized by a strong focus on applied research with direct industrial relevance, exemplified by Germany’s Fraunhofer-Gesellschaft and Belgium’s imec.
- Fraunhofer Institute for Photonic Microsystems (IPMS): As part of Germany’s vast Fraunhofer network of applied research institutes, IPMS’s mission is to translate scientific findings into industrial applications. It functions as a “one-stop shop” for industry partners, offering a complete range of services from initial conception and feasibility studies to process development and pilot production in its 150/200mm and 300mm cleanrooms. Its funding model is a hybrid, with over 50% of its budget coming from direct contracts with industry and the remainder from government base funding. Its research focuses on strategic areas with high commercial potential, such as Neuromorphic and Quantum Computing, Trusted Electronics, and Micro-Electro-Mechanical Systems (MEMS).
- imec (Belgium): Imec is arguably the world’s leading independent R&D hub for nanoelectronics, operating on a unique collaborative, pre-competitive research model. Its core offering is its Industrial Affiliation Programs (IIAPs), where multiple partners from across the semiconductor value chain—chipmakers, equipment suppliers, materials companies, and design firms—jointly fund and participate in long-term research programs on next-generation technologies. This model allows partners to share the high costs and risks of R&D while gaining early access to cutting-edge IP. Imec is a central player in the European Union’s strategy, hosting a key pilot line for the EU Chips Act to develop beyond-2nm technology.
The following table provides a direct comparison of these facilities, starkly illustrating the different strategic roles they play within their respective national and regional ecosystems.
| Facility | Country | Primary Mission | Funding Model | Key Research Areas | Approx. Scale / Budget | Key Partners |
| NaMo Semiconductor Lab | India | Regional workforce development and industry-specific skills training. | Government (MPLAD Scheme), a local development fund. | Basic training in semiconductor design, fabrication, and packaging. | ~$0.6 Million (Rs. 4.95 Crore) | IIT Bhubaneswar, local industry in Odisha. |
| Albany NanoTech Complex | USA | Pre-competitive, frontier R&D to develop next-generation (sub-2nm) chip technology. | Public-Private Partnership (State, Federal, and massive corporate investment). | High-NA EUV lithography, advanced materials, 3D integration, sub-2nm process nodes. | $10 Billion+(recent EUV center partnership); $25B+ total site investment. | IBM, Micron, Applied Materials, Tokyo Electron, ASML, TEL. |
| Fraunhofer IPMS | Germany | Applied R&D and technology transfer to solve direct industry challenges. | Hybrid: >50% from direct industry contracts, remainder from government base funding. | Quantum/Neuromorphic Computing, MEMS/MOEMS, Trusted Electronics, Photonic Microsystems. | Annual operating expense of €35 Million+; part of larger Fraunhofer network. | Broad base of German and European industrial firms (e.g., automotive, comms). |
| imec | Belgium | Collaborative, pre-competitive R&D hub for the global semiconductor ecosystem. | Industrial Affiliation Programs (IIAPs) with member fees, bilateral contracts, government funding. | Advanced logic & memory scaling, 3D integration, photonics, GaN, quantum computing. | Annual revenue >€1 Billion (2024); hosts EU Chips Act pilot line. | Global leaders across the entire value chain (e.g., ASML, TSMC, Intel, Samsung, GlobalFoundries, Synopsys). |
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5. Strategic Analysis: India’s Unique Path and U.S. Implications
India’s approach to building its semiconductor ecosystem is not a mere replication of strategies pursued by other nations. It is a distinct, pragmatic gambit tailored to its unique economic conditions, domestic market scale, and geopolitical positioning. This unique path presents both a significant opportunity for and a complex set of considerations for the United States.
5.1 The Pragmatist’s Gambit: Why Mature Nodes are India’s Unique Play
India’s decision to concentrate its initial fabrication efforts on mature process nodes—specifically in the 28nm to 65nm range—is a deliberate and strategically sound choice, not a sign of technological limitation. This “pragmatist’s gambit” is rooted in a clear-eyed assessment of market realities.
First, these mature nodes are the workhorses of the global electronics industry. They are essential for a vast array of high-volume applications, including automotive microcontrollers, power management ICs, display drivers, sensors, and IoT devices. These sectors constitute the bulk of India’s massive and rapidly growing domestic electronics market, which is projected to reach $110 billion by 2030. By focusing on these nodes, India’s first fabs, such as the Tata-PSMC facility, are guaranteed a high level of domestic offtake, ensuring their commercial viability from the outset.
Second, this strategy allows India to avoid a direct, prohibitively expensive competition with the established leaders of the leading edge, namely TSMC and Samsung. Instead of vying for supremacy at the 3nm or 2nm frontier, India is positioning itself to fill a critical and often underserved gap in the global supply chain for foundational chips. This approach mirrors the early industrial strategies of Taiwan and South Korea, which began by mastering mature technologies before progressively moving up the value chain.
5.2 Is India Doing Something the USA Isn’t?
While both India and the United States are aggressively pursuing national semiconductor strategies backed by substantial government funding, their approaches and objectives differ fundamentally.
The U.S. strategy, embodied by the CHIPS and Science Act, is primarily focused on re-shoring leading-edgemanufacturing (<7nm) and R&D leadership. The goal is to revitalize and advance a highly developed, existing ecosystem to regain technological supremacy, particularly in high-performance computing and AI, and to secure critical supply chains for national defense. It is an effort to reclaim a leadership position it once held.
In contrast, India’s strategy is a greenfield approach aimed at building a foundational ecosystem from the ground up. Its unique characteristic is the use of competitive federalism as a force multiplier. The central government’s ISM incentives create the baseline, but states like Gujarat, Uttar Pradesh, and Odisha then compete fiercely with one another, offering aggressive top-up incentives, land subsidies, and infrastructure support to attract anchor projects. This internal competition accelerates decision-making and enhances the overall attractiveness of India as an investment destination. The primary goal is not to immediately achieve technological parity at the leading edge, but to establish a high-volume, cost-competitive manufacturing base for the mature nodes that power its domestic economy and can serve as a reliable global alternative to China.
This strategic divergence means that India is not seeking to compete with the United States but rather to complement it within a reconfigured global supply chain. The global “China +1” diversification effort requires resilient and democratic sources for all types of semiconductors, not just the most advanced ones. As U.S. industry and policy focus on the capital-intensive frontier of high-performance chips, India is positioning itself to become the “foundry of the world” for the vast majority of semiconductors that underpin the modern economy. This creates the potential for a symbiotic relationship: U.S. automotive, industrial, and consumer electronics companies gain a stable, large-scale source for their essential components, while India builds its industrial base and integrates into the trusted technology network of democratic nations.
6. Geopolitical Risk Assessment: The Russia Factor
While India’s semiconductor ambitions align well with U.S. objectives for supply chain diversification, a significant and growing geopolitical risk casts a shadow over the burgeoning partnership. India’s persistent and deepening trade relationship with Russia, particularly in dual-use technologies critical to Moscow’s military, creates a fundamental contradiction that U.S. policymakers and industry leaders cannot ignore.
6.1 The Trusted Partner Paradox
The foundation of the U.S.-India technology partnership is the concept of a shared strategic outlook among democratic nations. High-level bilateral frameworks, such as the Initiative on Critical and Emerging Technology (iCET) and security dialogues within the Quad, explicitly identify semiconductors as a key area for collaboration. Investments by U.S. firms like Micron and Lam Research are publicly framed as contributions to building a more resilient, secure, and trusted global supply chain, with India positioned as a vital democratic alternative to authoritarian control over technology. This narrative of a “democratic chip alliance” is central to the geopolitical logic underpinning U.S. support for India’s semiconductor mission.
6.2 The Sanctions Blind Spot: India’s Dual-Use Trade with Russia
Concurrent with its deepening ties with the West, India has systematically expanded its role as a critical technology supplier to Russia, directly contravening the spirit and, in some cases, the letter of the Western sanctions regime imposed after the 2022 invasion of Ukraine.
Credible reporting and assessments from U.S. and European officials indicate that India has become Russia’s second-largest supplier of restricted critical technologies, surpassed only by China. This is not a matter of incidental trade; it appears to be a deliberate strategy. Leaked Russian state correspondence from as early as October 2022 detailed “confidential” plans for Russia’s Ministry of Industry and Trade to spend approximately $1 billion to procure “critical electronics through channels hidden in India”.
The data shows a dramatic surge in this trade. Indian exports to Russia of restricted dual-use items—including microchips, integrated circuits, and machine tools needed for weapons production—leaped to $95 million in July 2024 alone, a significant increase from earlier in the year. This trade is partly facilitated by the vast reserves of Indian Rupees that Russia has accumulated from its heavily discounted oil sales to India, creating a closed-loop financial incentive to procure goods from the Indian market.
Specific Indian companies have been identified as key intermediaries. For instance, between April and August 2024, one Indian firm allegedly exported over 1,100 high-performance Dell servers equipped with Nvidia AI processors to a non-sanctioned Russian entity, with the total value of high-tech products supplied by it and another Indian company to Russia since February 2022 estimated at $434 million. Ukrainian officials have also claimed to have found Indian-made components inside Russian Shahed-136 drones recovered from the battlefield.
6.3 Should the USA Be Concerned? A Nuanced Assessment
The United States should be deeply concerned by this activity. India’s role as a transshipment hub and direct supplier for Russia’s military-industrial base creates a structural conflict of interest that fundamentally undermines the premise of a “trusted” technology partnership. The risks for the U.S. are threefold:
- Direct Sanctions Evasion: India’s actions actively weaken the Western sanctions regime, providing Russia with the critical components needed to sustain its military production and prolong its war in Ukraine. This works directly against a primary U.S. and European foreign policy objective.
- Risk of Technology Leakage: As the U.S. and its allies invest in and transfer technology to India’s burgeoning semiconductor ecosystem, the presence of these illicit trade channels to Russia creates a significant risk of diversion. Sensitive U.S. technology, intellectual property, or manufacturing know-how present in the Indian ecosystem through partners like Micron, Applied Materials, or Lam Research could potentially be leaked or illicitly re-exported to Russia.
- Reputational and Compliance Contagion: For U.S. companies investing billions of dollars in India, this situation poses a severe reputational and legal risk. Their Indian supply chain partners, vendors, or customers could be implicated in sanctions-busting activities, potentially exposing U.S. firms to secondary sanctions or, at a minimum, significant compliance and due diligence burdens. The European Union has already sanctioned at least one Indian company, Si2 Microsystems, for its alleged role in supplying Russia, setting a precedent for future actions. U.S. Treasury officials have issued direct warnings to Indian industry associations about these very risks.
This dynamic places U.S. policymakers in a difficult position. They must manage the long-term strategic goal of building up India as a democratic counterweight to China in the technology sphere while confronting the immediate reality that India is acting as a critical economic and technological enabler for another primary U.S. adversary.
7. Conclusion and Strategic Outlook
7.1 Synthesis of Findings
As of late 2025, India has successfully launched a credible and potent national semiconductor mission, marking a decisive break from its history of unfulfilled ambitions. Driven by a well-funded, state-led industrial policy, the country is making rapid and tangible progress in establishing a foundational manufacturing ecosystem. Its pragmatic strategy, focusing on mature nodes and advanced packaging, is astutely tailored to leverage its vast domestic market and fill a critical gap in the global supply chain, positioning it as a complementary, rather than competitive, partner to the United States. The establishment of facilities like the NaMo Semiconductor Laboratory underscores a practical, ground-up approach focused on solving immediate workforce needs to support this industrial growth.
However, India’s rise presents a complex strategic duality. It is simultaneously emerging as a promising and vital partner for the West in the quest to build resilient, democratic technology supply chains, and as a critical economic lifeline and technology supplier for Russia’s sanctioned war economy. This “Trusted Partner Paradox” represents the single greatest challenge to the long-term trajectory of the U.S.-India technology partnership and introduces significant geopolitical risk into India’s semiconductor gambit.
7.2 Forward-Looking Scenarios for U.S. Policy
The inherent tension in India’s strategic posture creates a fluid situation that could evolve along several distinct paths, each with profound implications for U.S. policy and the global semiconductor landscape.
- Scenario A (Full Alignment): In this optimistic scenario, a combination of U.S. diplomatic pressure, the credible threat of secondary sanctions on its nascent and globally-integrated tech sector, and a strategic calculation of its long-term interests leads India to significantly curtail its dual-use technology trade with Russia. By implementing and enforcing stricter export controls, India would solidify its “trusted partner” status, removing the primary obstacle to deeper technological integration with the West. This would likely accelerate technology transfer, unlock higher levels of U.S. investment, and cement India’s role as a cornerstone of the secure global supply chain.
- Scenario B (Strategic Hedging): This scenario represents a continuation of the current status quo. India attempts to maintain its traditional policy of “multi-alignment,” balancing its deepening strategic and economic partnership with the United States against its long-standing ties with Russia. It would likely continue its dual-use trade with Moscow, perhaps more discreetly, while publicly emphasizing its commitment to the Western-led technology ecosystem. This path would lead to persistent friction with Washington and its allies. The U.S. response would likely involve targeted sanctions against specific Indian entities caught in illicit trade, continuous diplomatic engagement to manage the issue, and an implicit ceiling on the level of sensitive, cutting-edge technology the U.S. is willing to co-develop or transfer to India. This remains the most probable scenario in the near to medium term, presenting a complex and ongoing management challenge for U.S. policymakers.
- Scenario C (De-coupling): A major geopolitical event—such as a significant escalation of the conflict in Ukraine, a direct military confrontation between India and China, or a proven, large-scale diversion of sensitive U.S. technology from India to Russia—could force a strategic realignment. If India is compelled to choose and its actions are perceived as overtly siding with Russia’s interests over those of the West, the U.S. could be forced to fundamentally re-evaluate its partnership. This could trigger a chilling of investment, the imposition of broader sanctions, and a potential de-railing of India’s semiconductor ambitions, which remain heavily dependent on access to global capital, equipment, and technology.
Ultimately, India’s ability to navigate this geopolitical tightrope will determine whether its semiconductor gambit succeeds in positioning it as a true global powerhouse or whether its ambitions are constrained by the contradictions of its foreign policy. For the United States, managing this relationship will require a nuanced approach that continues to foster India’s growth as a supply chain partner while holding it accountable for actions that undermine collective security interests.
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