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India’s Tata Electronics has signed an agreement with Dutch technology giant ASML (Advanced Semiconductor Materials Lithography) to build India’s first manufacturing facility for electronics manufacturing as New Delhi pushes for a domestic manufacturing base.
End-to-end manufacturing refers to the production of small circuits on a bare silicon substrate using a special lithographic machine. ASML is a pioneer of lithographic technology used in the production of microchips worldwide.
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“The fast-growing semiconductor industry in India represents many opportunities, and we are committed to establishing long-term partnerships in the region,” said Christophe Fouquet, CEO of ASML.
Semiconductor chips power today’s technology and are essential for everything from cell phones and cars to artificial intelligence and security technology.
The agreement was announced during Indian Prime Minister Narendra Modi’s two-day visit to the Netherlands, which ended on Sunday.
So what do we know about this deal, and what does it mean for Indian intelligence?
What are the contract details?
Under the agreement, ASML will provide advanced lithography technology to Tata Electronics, a multinational subsidiary of the Tata conglomerate, for the production of 300mm wafers. Tata Electronics plans to invest $11bn to build India’s first semiconductor manufacturing plant at Dholera in Modi’s state of Gujarat.
“ASML will support the establishment and renovation of Tata Electronics’ Dholera Fab with all its equipment and solutions,” the companies said in a joint statement.
The plant will produce chips for sectors that include automotive manufacturing, mobile devices and AI applications. Currently, India exports the most microchips because it does not produce high-end chips (such as sub-7 nanometer, or nm) for AI and smartphones.
In October, India unveiled its first semiconductor device – Vikram-32 (Vikram 3201). It is a 32-bit microprocessor designed to start the environment.
ASML, Europe’s largest technology company by market value, can provide India with technology that is considered essential for the production of advanced equipment. The Dutch company said it would help “establish and expand” production at the planned factory by supplying its advanced equipment.
Tata Electronics has also partnered with Taiwan Powerchip Semiconductor Manufacturing Corporation (PSMC), which is helping to set up the facility. The company is a leading semiconductor manufacturer, specializing in the production of memory chips. According to Tata, PSMC will share access to “technologies”, including 28nm, 40nm, 55nm, 90nm and 110nm manufacturing technologies.
The plant is expected to be ready by 2028according to Union Minister for Electronics and Information Technology Ashwini Vaishnaw.
India has been closely cooperating with Taiwanese companies in technology transfer, network integration and workforce development as it tries to build a domestic semiconductor ecosystem.
India and Taiwan have seen trade increase in recent years, including technology and AI, to reach $10bn in 2024. Taiwan is a major player in the production of semiconductors in the world.
What are 300mm semiconductor wafers?
The Gujarat plant will manufacture the chips using 300mm wafers, the international standard for manufacturing advanced semiconductor devices. The 300mm wafer is a small round silicon wafer where we make chips.
Large-scale processors are important because they allow manufacturers to produce more chips during production, lowering costs and improving control. Small chips used in AI servers, data centers, mobile phones and luxury cars are made on 300mm wafers.
In the semiconductor supply chain, 300mm production is at the peak of final production. This stage involves the design and manufacture of integrated circuits on silicon wafers before the chips are cut, packaged and tested in subsequent stages.
Why is this agreement important for India?
For India, cooperation is both industrial and strategic. It promotes self-reliance and strengthens relations with Europe, which signed a “The mother of all deals” free trade agreement in January.
“India wants to build its semiconductor industry by building 12nm chips. ASML can provide the necessary equipment to make them,” Sujai Shivakumar, director and director of the Center for Strategic and International Studies, told Al Jazeera.
“For this reason, it is an important factor in the growth of ASML’s markets and manufacturing capabilities in India.”
According to analyst Harsh V Pant, the deal is one of the “most important semiconductor deals India has seen in recent years”.
The agreement is important because it shows a change in India’s role in the AI economy “from mainly software services and AI technology to the infrastructure sector behind AI itself”, Pant, head of the Strategic Study Program at the Observer Research Foundation in New Delhi, told Al Jazeera.
“It may not make India a powerhouse overnight, but perhaps it is a clear sign that India wants to be a semiconductor producer, a trusted technology partner and AI player, not just a consumer of AI,” he said.
“I think that’s why this agreement is important and this is something that India can do.”
It also supports the government’s push to position the country as a global technology and AI player. “India only trails the US and China in terms of AI competition,” Shivakumar said.
About 20 percent of the world’s chip makers are Indians. So New Delhi can tap into this talent pool in its quest to become a center for semiconductor research and development.
However, Shivakumar says the industry, including the design sector, is “complex” and “globally connected”.
“Indian engineers working for US companies are part of that ecosystem. I think what we’re seeing now is the growth of that connection,” he added.
The European Union sees India, the world’s most populous country, as its most important trade partner and market for its goods and services amid a tariff war launched by US President Donald Trump.
Experts say the deal is important for India because semiconductor manufacturing is seen as a key factor in intellectual property rights.
However, India’s push to boost semiconductor production has met with challenges.
In 2023, Taiwan’s Foxconn pulled out of a $19.5bn semiconductor deal with Vedanta Group. According to reports, the deal fell through due to delays in approval by the Indian government.
What are India’s AI aspirations?
Modi has repeatedly expressed his desire to make India a world leader in AI and the digital economy. The Prime Minister’s government has promoted initiatives that focus on AI research, semiconductor manufacturing, digital infrastructure and supercomputers.
In 2024, India launched its flagship AI initiative, the India AI Mission, with $1.07bn over five years. The goals of the project, according to the government, include “expanding access to computing power, supporting research and supporting innovators”.
The project includes seven main pillars that include creating datasets for training samples, using government and non-government sources, building AI programs in sectors including health care and climate change, and providing financial support to AI startups.
In February, India hosted the AI Impact Summit in New Delhi, which saw world leaders and billionaires participate, including French President Emmanuel Macron and OpenAI CEO Sam Altman. It was billed as the largest such event to date, with an estimated attendance of around 250,000 people..
Modi has repeatedly argued that India’s large population, technology workforce and digital economy make it a great market for AI and a hub for innovation.
The government also sees semiconductor manufacturing as a way to boost the economy, attract foreign investment and support smart industries, including defense and communications.
However, while experts see India’s future in the AI space as bright, challenges remain.
According to Shivakumar, India’s biggest challenge will be “development”.
“By this I mean big, reliable, high-quality power, water and all the technology, at the highest level and at the highest level,” Shivakumar told Al Jazeera.
Furthermore, since the start of the US-Israel war on Iran, foreign investors have withdrawn more than $20bn from Indian assets, the largest such outflow ever.
The pressure has also weakened the rupee, forcing the central bank to use more of its foreign reserves to support the currency. The reserves have fallen to around $697bn from $720bn before the Middle East crisis began.
Who are the world’s leading chip makers?
The global semiconductor industry is dominated by a small group of companies and countries.
Major players include:
- ASML, based in Veldhoven, Netherlands
- Taiwan Semiconductor Manufacturing Company, located in Hsinchu City, Taiwan
- Samsung Electronics, based in Suwon-si, South Korea
- Intel, based in Santa Clara, California, US
- Nvidia, based in Santa Clara, California
- Qualcomm, based in San Diego, California
- Broadcom, based in Palo Alto, California
What is on Modi’s world tour?
After leaving the Netherlands, Modi continues his five-nation tour. According to India’s Ministry of External Affairs, it is focusing on trade, energy and investment cooperation.
Modi’s first stop was in the United Arab Emirates, where he signed a defense and energy pact. India has also signed an agreement with the UAE to increase its oil reserves as New Delhi has been grappling with the oil crisis that fueled the Iran war.
Modi on Monday arrived in Norway after signing a security agreement with Sweden. His visit will end in Italy, where he is expected to meet Prime Minister Giorgia Meloni.
The Indian Prime Minister also attended a European business conference in Sweden along with European Commission President Ursula von der Leyen.
“This new era in EU-India relations opens up many opportunities, and we are determined to seize them,” said von der Leyen.
Modi will participate in the India-Nordic Summit in Norway, where he will be the first Indian Prime Minister to visit in 40 years. The summit is about trade and economic activities.
The visit is seen as a way to secure India’s economic and strategic ties with the UAE and Europe amid recent changes, particularly the cooling of India-US relations under the Trump administration.
