When Prime Minister Narendra Modi was in the Netherlands on May 16, he shook hands with two CEOs: Christophe Fouquet from ASML and Randhir Thakur from Tata Electronics. The symbolism was clear: India joins the most exclusive club of the global chip industry. However, geopolitics has more substance than ceremonial photographs show.
The celebratory occasion overseen by Modi was the signing of a memorandum of understanding between Tata Electronics And ASML. The Dutch technology company has agreed to help Tata establish and expand its manufacturing facility in Dholera, Gujarat, providing a comprehensive portfolio of lithography tools and solutions and enabling the city to grow its talent pipeline, supply chain resilience and R&D infrastructure. In partnership with Taiwan’s PSMC, the Dholera plant will produce 11 billion dollars of chips, spanning nodes from 28 nanometers to 110 nm, for automotive, AI and mobile applications. Construction is progressing; the first commercial chips of Indian origin are expected before the end of this year.
In order to understand the importance of this particular partnership, it is important to understand that ASML of the Netherlands is not just a technology company. It is the only company in the world to offer Extreme Ultraviolet (EUV) lithography systems, essential for the production of advanced node chips. Everyone major semiconductor Manufacturers – including Taiwan Semiconductor Manufacturing Co., South Korea’s Samsung and America’s Intel – rely on ASML machines to make their chips. There are no other providers available.
After years of work and billions of dollars invested in this technology, no country has succeeded in replicating it – not even China. China’s semiconductor equipment imports hit record high record $26 billion in 2024which included stockpiling in anticipation of tougher sanctions. But while Chinese equipment manufacturers progress, China is still far from being able to produce its own advanced EUV lithography machines.
This is the first reason why this deal is different from previous Indian semiconductor deals. This goes way beyond getting the gear; the agreement with ASML brings India in the supply chain from the only company whose cooperation cannot be replaced for any serious chip manufacturing operation.
Why India needs it and why now
Until recently, Indian semiconductor saga had been one of a specific asymmetry. The nation represents approximately 20 percent of global semiconductor design expertise and is home to the bulk of Taiwan’s fabless industrial companies, which create chip designs and outsource manufacturing to Taiwan. In other words, India was not an architect of its own value chain but rather a node in someone else’s.
Semiconductors are no longer just a consumer electronics product; they constitute a central element of technological sovereignty and national power. Microchips power today’s economies, ranging from AI Systems to sophisticated military technologies, from vehicles to data centers. This pandemic has highlighted the world’s reliance on a small number of production centers, with production disruptions affecting everything from automobile manufacturing to telecommunications and consumer electronics.
India’s response came in the form of India Semiconductor Missionwhich is in its second phase. The government has approved 12 semiconductor projects in six states under the ISM, with a total investment of around Rs 1.64 trillion as on May 5, 2026. The government had notified a special economic zone for Tata Semiconductor in Dholera on April 9. The site is now recognized as an inland container depot and has been granted permission to handle goods on site, facilitating logistics and improving efficiency. There is considerable co-investment: the Indian government is setting up 50 percent of the investment in the Dholera factory, which amounts to 450 billion rupees ($5.5 billion).
This is not about market discovery; it’s about industrial policy. The Indian government has determined that semiconductors are too critical an industry to be left to market forces. This is a fair statement. The question now is whether the policy framework established around this goal is sufficiently robust.
The Chinese problem is not going away
This is where the euphoric encapsulation of ASML agreement must be monitored. Although one critical choke point is mentioned in the MoU (lithography), the other dependency, much older and more pervasive, remains largely ignored. India remains dependent on China for critical minerals used in chips, chip manufacturing, and downstream products used by chips.
China accounts for 60 to 70 percent of global rare earth element production, 85 to 90 percent of rare earth processing, more than 90 percent of graphite processing, and 65 to 74 percent of cobalt processing. These are not background entries. They are used in a variety of permanent magnetsthe special alloys and processing materials used in any semiconductor factory throughout its production process.
Additionally, China has effectively used these minerals in geopolitical conflicts. Beijing does not hesitate to take advantage of its power. China implemented an export ban on essential elements such as terbium and dysprosium on April 4, 2025, in response to US President Donald Trump’s “Liberation Day” tariffs. Indian manufacturers like Bajaj Auto and Maruti Suzuki immediately raised the alarm.
China then adopted a new rule, MOFCOM Notice No. 61 of October 9, 2025, which expands the scope of its rare earth export control regime to include extraterritorial effects: Foreign companies will be required to obtain a Chinese export license if their products contain traces (0.1%) of rare earths of Chinese origin or include Chinese technology related to rare earths.
The numbers speak for themselves. India’s trade deficit with China has reached a new high of $99.2 billion in 2024-25, thanks to an increase in imports to $113.5 billion. Indian exports to China were just $14.3 billion. More than 90% of magnets and rare earth metals supplied to India came from China.
National Stock of Critical Minerals of India was announced in October 2025 in direct response to China’s export ban on key compound semiconductor ingredients: gallium, germanium and antimony. If a blockade scenario were to occur, it would affect 90% of advanced chip production in an instant.
The Dholera factory could produce “Made in India” chips using ASML lithography equipment, but while it sources its rare earths from Chinese supply chains, India has not yet achieved true self-sufficiency. This has simply moved the dependency a little further upstream, where it is not as obvious or politically easier to resolve.
The broader geopolitical architecture
The Tata-ASML pact comes as India and Netherlands are increasingly seeking to strengthen their economic and technological ties. The global semiconductor industry is being restructured by geopolitical and export control tensions between the United States and China, a major competitor in the chip technology sector. As Dutch semiconductor companies diversify into new markets and regions, India is trying to become an important manufacturing and technology hub.
ASML must find partners outside East Asia as risk concentrations increase in Taiwan. India is a partner from outside the region that is politically and economically attractive for the Netherlands. Beyond a nominal geographic spread, India offers supply chain security. Advanced chip companies can diversify their production to geographically separated but politically aligned democracies. India also has a comparative advantage: 20 percent of the world’s chip engineers are already in India, and 110 mining and engineering schools produce a scalable talent pool.
According to the Ministry of Foreign Affairs press release, Modi’s meetings in the Netherlands explored “close cooperation in various sectors, from defense to security, from innovation to green hydrogen to semiconductors.” The appearance of semiconductors and defense cooperation together in the same sentence is no coincidence; Both governments are well aware of the growing overlap between the semiconductor and security worlds.
The Sino-US technological rivalry is causing a sharp division into two parallel technological worlds: the US-centric world, which seeks to maintain a technological advantage with its trusted partners, and the Chinese world, which aspires to self-sufficiency and to become the world’s indispensable supplier of mature node chips. India made the conscious choice to join the first sphere, because the country is a member of the Quad and has signed agreements with ASMLPSMC, Intel and Micron.