The PM wants India to go big on the global semiconductor supply chain. That’s a laudably ambitious plan. The country offers a facilitating policy environment and a growing market for chips. But there are challenges. Keeping itself out of a regional trade bloc that dominates the global semiconductor supply chain is one. The China-led bloc would have found it easier to diversify chip-making to India if its tariffs were not an impediment. On the other hand, the investment incentives New Delhi is offering to seed a chip industry in the country has to compete with handouts being offered by the US and EU to keep chip production at home, or in their immediate neighbourhood. India’s best hope are Taiwan and the US. Taiwan is seeking to diversify its chip manufacturing base, but is inextricably tied up by Chinese manufacturing to maintain its competitive advantage. The US could offer India a peripheral role at best as it builds its own semiconductor capacity.

Declustering of semiconductor production from East Asia will be expensive and drawn-out. Over the course of the next decade, government-led industrial programmes will seek to mimic the efficiency the chip industry has acquired by being concentrated in China, Taiwan and South Korea. If governments elsewhere falter in their resolve to make chip supply more resilient, markets will tend to favour East Asia’s established advantage in materials production. There is also an element of uncertainty over investment decisions as demand is altered by tech such as AI. Finally, mismatches can emerge in the talent pool for research, design and production of semiconductors.

Yet, the opportunity is too big to be disregarded. The world is expected to invest 3x in chip-making over the current decade than it has over the previous one. Diversification is projected to spread to Europe, the Americas and Southeast Asia. India can’t afford to miss the bus. It’ll have to position itself with the right combo of policy and talent offerings. And, yes, it’ll have to be more aggressive with its silicon diplomacy.