India’s Tata Electronics has signed a deal with the Dutch technology giant ASML (Advanced Semiconductor Materials Lithography) to build India’s newest venture into front-end semiconductor fabrication plant as New Delhi pushes to develop a domestic semiconductor manufacturing base.
Front-end manufacturing refers to the building of microscopic circuits onto a blank silicon wafer using specialised lithographic machines. ASML is a pioneer of lithographic technology used in the mass production of microchips across the world.
“India’s rapidly expanding semiconductor sector represents many compelling opportunities, and we are committed to establishing long-term partnerships in the region,” ASML CEO Christophe Fouquet said.
Semiconductor chips power modern technology and are critical for everything from smartphones and cars to artificial intelligence systems and defence 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 the deal, and what does it mean for India’s artificial intelligence ambitions?
Under the agreement, ASML will supply advanced lithography technology to Tata Electronics, which is a subsidiary of the multinational Tata conglomerate, for the manufacture of 300mm wafers. Tata Electronics plans to invest $11bn to build India’s first semiconductor fabrication plant in Dholera in Modi’s home state of Gujarat.
“ASML will enable the establishment and ramp-up of Tata Electronics’ Dholera Fab with its holistic suite of lithography tools 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 imports the bulk of its microchips because it does not manufacture advanced chips (such as sub-7 nanometre, or nm) for AI and smartphones.
In October, India unveiled its first indigenous semiconductor chip – the Vikram-32 (Vikram 3201). It is a 32-bit microprocessor designed for space launches.
ASML, Europe’s biggest technology company by market value, can provide India with the technology considered essential for advanced chip manufacturing. The Dutch company said it would help “establish and ramp up” production at the planned plant by supplying its cutting-edge chipmaking tools.
Tata Electronics has also teamed up with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), which is helping set up the plant. The company is a major semiconductor powerhouse, specialising in the making of memory chips. According to Tata, PSMC will share access to a “broad technology portfolio”, including 28nm, 40nm, 55nm, 90nm and 110nm chip-making technologies.
The plant is expected to be ready by 2028, according to Union Minister for Electronics and Information Technology Ashwini Vaishnaw.
India has increasingly partnered with Taiwan firms for technology transfers, supply-chain integration and workforce development as it tries to build a domestic semiconductor ecosystem.
India and Taiwan have seen increased trade in recent years, including in technology and AI, reaching $10bn in 2024. Taiwan is a major player in the production of global semiconductors.
The Gujarat plant will manufacture chips using 300mm wafers, the global industry standard for advanced semiconductor fabrication. A 300mm wafer is a thin circular slice of silicon on which chips are built.
Larger wafers are important because they allow manufacturers to produce more chips per production cycle, lowering costs and improving efficiency. Many cutting-edge chips used in AI servers, data centres, smartphones and advanced vehicles are produced on 300mm wafers.
In the semiconductor supply chain, 300mm fabrication is at the core of the front-end manufacturing process. This stage involves designing and fabricating integrated circuits onto silicon wafers before the chips are cut, packaged and tested in later back-end stages.
For India, the deal is both industrial and strategic. It furthers self-sufficiency and strengthens ties with Europe, with which it signed a “mother of all deals” free trade agreement in January.
“India is seeking to build out its semiconductor industry by building 12nm chips. ASML can supply the equipment needed to produce them,” Sujai Shivakumar, a director and senior fellow at the Center for Strategic and International Studies, told Al Jazeera.
“In this respect, it is an important development in the growth of markets for ASML as well as the capacity for production within India.”
According to analyst Harsh V Pant, the deal is one of the “most important semiconductor developments India has seen in recent years”.
The deal is significant because it signals a shift in India’s role in the AI economy “from mainly software services and AI talent toward owning part of the physical infrastructure behind AI itself”, Pant, head of the Strategic Studies Programme at the Observer Research Foundation in New Delhi, told Al Jazeera.
“It may not necessarily make India a semiconductor powerhouse overnight, but it is probably the clearest sign yet that India wants to become a serious semiconductor manufacturing nation, a trusted geopolitical tech partner and eventually an AI infrastructure player, not just an AI consumer,” he pointed out.
“I think that’s why this deal is important and this is something that India would be carrying forward.”
It also supports the government’s broader push to position the country as a major global technology and AI player. “India trails only the US and China in terms of AI competitiveness,” Shivakumar said.
Nearly 20 percent of the world’s chip design engineers are Indians. So New Delhi can use this talent pool in its pursuit to become a hub for semiconductor research and development.
However, Shivakumar says the industry, including the design part, is “inherently complex” and “globally interconnected”.
“Indian engineers working for US companies are part of this ecosystem. I think what we’re seeing now is an intensification of those connections,” he added.
The European Union sees India, the world’s most populous nation, as an important trading partner and market for its goods and services amid the tariff war unleashed by United States President Donald Trump.
Experts said the deal is highly significant for India because semiconductor manufacturing is seen as essential for technological independence.
However, India’s push to ramp up semiconductor manufacturing has suffered setbacks.
In 2023, Taiwan’s Foxconn withdrew from a $19.5bn semiconductor joint venture with the Vedanta conglomerate. According to reports, the deal fell through due to a delay in incentive approval by the Indian government.
Modi has repeatedly expressed his desire for India to become a global AI and digital economy leader. The prime minister’s government has promoted initiatives focused on AI research, semiconductor manufacturing, digital infrastructure and advanced computing.
In 2024, India launched its flagship AI initiative, the India AI Mission, earmarking $1.07bn for it over five years. The initiative’s goals, according to the government, include “expanding access to computing power, supporting research and helping start-ups”.
The mission encompasses seven key pillars that include creating datasets for training models, using government and nongovernment sources, building AI applications for sectors including healthcare and climate change, and providing financial support to AI start-ups.
In February, India hosted the AI Impact Summit in New Delhi, which saw the participation of heads of state and tech billionaires, including French President Emmanuel Macron and OpenAI CEO Sam Altman. It was touted as the biggest edition of the event held so far, reportedly attended by about 250,000 people.
Modi has repeatedly argued that India’s large population, engineering workforce and digital economy make it well placed to become a major AI market and innovation hub.
The government also sees semiconductor manufacturing as a way to boost the economy, attract foreign investment and support strategic industries, including defence and telecommunications.
However, while experts see India’s future in the AI space as bright, challenges remain.
According to Shivakumar, the main challenge for India will be “infrastructural”.
“By that I mean significant, reliable, high-quality power, water supplies as well as all levels of skill, both at the high skill as well as the skilled technical level,” Shivakumar told Al Jazeera.
Moreover, since the outbreak of the US-Israel war on Iran, overseas investors have pulled more than $20bn out of Indian equities, the sharpest outflow ever recorded.
The pressure has also weakened the rupee, forcing the central bank to spend heavily from its foreign exchange reserves to support the currency. Those reserves have fallen to about $697bn from more than $720bn before the Middle East crisis began.
The global semiconductor industry is dominated by a small group of companies and countries.
Key players include:
After leaving the Netherlands, Modi is continuing his five-nation trip. According to India’s Ministry of External Affairs, it is focusing on trade, energy cooperation and investment.
Modi’s first stop was in the United Arab Emirates, where he signed a deal on defence and energy. India also signed a deal with the UAE to boost its strategic oil reserves as New Delhi has been reeling from the oil shock triggered by the Iran war.
Modi on Monday arrived in Norway after inking a strategic defence partnership agreement in Sweden. His trip will conclude in Italy, where he is expected to meet Prime Minister Giorgia Meloni.
The Indian prime minister also attended a European business forum in Sweden alongside European Commission President Ursula von der Leyen.
“This dynamic new era in EU-India relations opens historic opportunities, and we are determined to seize them,” von der Leyen said.
Modi will participate in the India-Nordic Summit in Norway, where he will become the first Indian prime minister to visit in 40 years. The summit is to focus on trade and economic activity.
The trip is seen as a move to secure India’s economic and strategic ties with the UAE and Europe amid recent geopolitical shifts, most notably India’s own cooling of relations with the US under the Trump administration.
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