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India Just Signed Its Most Consequential Chip Deal. The Hard Part Starts Now.

The Tata-ASML MoU puts India inside the world’s most exclusive technology partnership, but Beijing still controls the inputs used to make chips.

Indian Prime Minister Narendra Modi and Dutch Prime Minister Rob Jetten oversee the signing of an MoU between Tata Electronics CEO Randhir Thakur and ASML CEO Christophe Fouquet in The Hague, Netherlands, May 16, 2026.

When Prime Minister Narendra Modi was in the Netherlands on May 16, he shook hands with two CEOs: ASML’s Christophe Fouquet and Tata Electronics’ Randhir Thakur. The symbolism was clear: India is joining the most exclusive club of the world’s chip industry. However, there is more substance to the geopolitics than the ceremonial photographs showed.

The celebratory occasion that Modi oversaw was the signing of an MoU between Tata Electronics and ASML. The Dutch technology firm has agreed to help Tata establish and ramp up its fabrication facility in Dholera, Gujarat, by providing a comprehensive portfolio of lithography tools and solutions and enabling the city to build up its talent pool, supply chain resilience, and R&D infrastructure. In partnership with Taiwan’s PSMC, the Dholera fab will produce $11 billion worth of chips, covering nodes from 28 nanometers to 110 nm, for automotive, AI and mobile applications. Construction is progressing; the first Indian-origin commercial chips are expected before the end of this year.

In order to grasp the significance of this particular partnership, it is important to understand that ASML of the Netherlands is not just a tech firm. It is the only company in the world to offer Extreme Ultraviolet (EUV) lithography systems, which are crucial for the production of advanced-node chips. All the world’s major semiconductor manufacturers – including Taiwan Semiconductor Manufacturing Co., South Korea’s Samsung, and the United States’ Intel – rely on ASML machines to manufacture their chips. There is no other supplier available. 

After years of work and billions of dollars invested in the technology, no country has duplicated it – not even China. Chinese imports of semiconductor equipment hit a record $26 billion in 2024, which included stockpiling ahead of more stringent sanctions. But while Chinese equipment manufacturers are making progress, China is still far from being able to produce its own advanced EUV lithography machines.

This is the first reason that this deal is different from India’s previous semiconductor deals. This is more than obtaining the equipment; the deal with ASML brings India into the supply chain of the one company whose cooperation cannot be replaced for any serious chipmaking operation.

Why India Needs This, and Why Now

Until recently, India’s semiconductor saga had been one of a specific asymmetry. The nation accounts for about 20 percent of the world’s semiconductor design expertise and is home to the bulk of Taiwan’s fabless industry companies, which create chip designs and outsource the 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 product of consumer electronics; they are a central part of technological sovereignty and a national power. Microchips power today’s economies, ranging from AI systems to sophisticated military technologies, from vehicles to data centers. This pandemic shed light on the world’s reliance on just a few manufacturing centers, with interruptions in production affecting everything from car-making to telecoms and consumer electronics.

India’s answer came in the form of the India Semiconductor Mission, which is in its second phase. The government has approved 12 semiconductor projects across six states under the ISM with a total investment of around 1.64 trillion rupees as of 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 granted permission to handle cargo on the premises, enabling easier logistics and improved efficiency. There is considerable co-investment: The government of India is putting up 50 percent of the investment in the Dholera fab, which is equivalent to 450 billion rupees ($5.5 billion).

This is not about market discovery; it is about industrial policy. The Indian government has determined that semiconductors are too critical an industry to be left to market forces. That’s a fair statement. The question now is whether the policy framework being established around this goal is strong........

© The Diplomat