India and China Take Divergent Roads in the Global Chip Race

• China is pushing to reduce dependence on foreign chipmaking technology China is pursuing semiconductor self-reliance by developing domestic DUV lithography machines.

• India is focusing on joining the global chip supply chain rather than replacing it.

• Tata Electronics’ reported ASML talks could boost India’s precision manufacturing credibility.

• ASML may see India as a future growth market as China localizes.

• Equipment supply chains could become India’s deeper semiconductor opportunity.

Comparing India and China’s semiconductor strengths today can easily lead to the wrong conclusion. China already has a broad and mature chip ecosystem that spans design, wafer fabrication, packaging, testing, materials, and a growing base in semiconductor equipment. India, by contrast, is still in the early stages of creating its first serious semiconductor manufacturing foundation.

In simple terms, China is working to push deeper into technological independence, while India is still building the base of an industry it has historically lacked.

Even so, two recent developments show how differently the two Asian economies are approaching the same strategic race.

In China, reports indicated that a government-backed initiative has started mass production of locally developed immersion DUV lithography machines, a field long dominated by the Dutch company ASML. Soon after, ET reported that Tata Electronics has entered early-stage discussions with ASML to explore making components and subassemblies for the company’s highly advanced lithography systems.

The contrast is striking. China is attempting to create domestic substitutes for crucial semiconductor technologies. India, meanwhile, is trying to secure a place inside the existing global chipmaking network.

Two Different Semiconductor Strategies

The chip industry is often described as a supply chain, but that description understates its complexity. It is better understood as a deeply connected technology ecosystem, where thousands of specialized companies contribute to a final product. Few companies represent this model better than ASML.

ASML manufactures the lithography equipment required to produce the world’s most advanced semiconductors. Its extreme ultraviolet, or EUV, machines are among the most sophisticated industrial systems ever built. Each machine depends on hundreds of parts sourced from suppliers across many countries. ASML operates largely as a master systems integrator, bringing together optics, precision engineering, software, electronics, and advanced manufacturing capabilities from a global supplier base. Analysts estimate that about 80% of the content in its machines comes from external suppliers.

This is where China and India begin to move in opposite directions.

China’s strategy is centered on reducing exposure to foreign technology. Years of investment, combined with tighter US-led restrictions on the sale of advanced ASML systems to Chinese customers, have pushed Beijing to accelerate domestic alternatives across the chip value chain. The reported production of homegrown immersion DUV lithography tools is a sign of that long-term policy direction.

India’s approach is different. Rather than trying to displace global leaders immediately, India is seeking to become part of the semiconductor ecosystem that already exists. Its first major fabrication projects are being developed with overseas technology partners. Equipment is expected to come from established international suppliers. Government incentives are aimed at attracting global companies, not replacing them. The reported Tata-ASML discussions fit neatly into this strategy.

Why Tata’s Talks With ASML Are Important

At first, the idea of making subassemblies for lithography equipment may appear limited in ambition. The parts under discussion could include precision mechanical structures, cabling, connectors, power distribution units, vibration-control systems, and mechatronic assemblies. These may not sound as dramatic as EUV optics or advanced light sources, but they are essential to some of the most complex machines in modern industry.

The importance lies not only in what is being manufactured, but in the standards required to manufacture it.

Supplying ASML demands extraordinary precision. Components must meet tolerances measured in microns. Production systems must demonstrate strict process control, quality assurance, traceability, and long-term reliability. A supplier to ASML is not just another vendor; it becomes part of a highly integrated engineering network.

For India, that could be a major step forward. Analysts note that once a company qualifies as a supplier for ASML, it can improve its credibility with other major semiconductor equipment makers such as Applied Materials and Lam Research. In other words, Tata’s potential role would not only be about one partnership. It could help India build the capabilities needed to participate in the wider semiconductor equipment industry.

That is why the talks matter. India is not only trying to build chip fabrication plants. It is also trying to move into the upstream machinery and manufacturing ecosystem that makes such fabs possible.

China’s Progress Forms the Backdrop

The timing of the Tata-ASML discussions is notable. Just days before the report on Tata’s talks emerged, China was said to have begun producing domestic immersion DUV lithography systems.

That development needs perspective. Making a limited number of lithography tools is not the same as creating machines that can operate reliably at high volume in commercial chip production. Major challenges remain, including throughput, yield, performance consistency, reliability, and long-term maintenance. Even favorable estimates suggest China may initially produce only dozens of such systems a year. ASML, by comparison, plans to make more than 100 immersion DUV machines this year.

Still, the shift is significant. Export controls were designed on the assumption that restricting China’s access to advanced lithography equipment would slow its chipmaking progress. While those controls have created obstacles, they have not stopped China from trying to build its own alternatives. In some ways, they may have strengthened Beijing’s resolve to localize critical technologies.

Whether Chinese DUV machines can eventually match ASML’s performance is not the only point. The larger issue is that China is building capacity in a field once considered far beyond its reach. That has implications not only for China’s semiconductor ambitions but also for ASML’s future market position.

Why India Could Matter More to ASML Over Time

Despite restrictions, China has remained an important market for ASML. Chinese customers have accounted for roughly 14% to 16% of the Dutch company’s sales in recent quarters. However, that share has already fallen from earlier highs as export rules have tightened. If China’s domestic lithography program continues to advance over the next decade, its reliance on imported DUV tools could gradually decline.

ASML is not at risk of losing its leadership anytime soon. It remains far ahead in technology, production scale, supplier depth, and service capability. But investors are already watching whether Chinese progress could eventually affect one of ASML’s major revenue sources.

This is where India becomes relevant.

India’s semiconductor goals are large and still at an early stage. The Tata-PSMC fabrication plant in Dholera alone involves an investment of about $11 billion. Several other packaging, assembly, and manufacturing projects are also moving forward. The government’s next phase of the India Semiconductor Mission is expected to place greater emphasis on machinery, materials, and local supply-chain development.

As India’s semiconductor base grows, demand will rise for lithography systems, maintenance services, skilled engineers, equipment suppliers, and precision manufacturing partners. For ASML, India represents a market that is not yet mature but could become strategically important over the next five to ten years.

China was once one of ASML’s biggest growth stories. If China gradually reduces its dependence on imported systems, India could become one of the next long-term demand centers for the company.

India’s Bigger Semiconductor Opportunity

The most meaningful part of the Tata-ASML discussions may go beyond ASML itself.

India’s semiconductor conversation is often dominated by fabrication plants because fabs are visible, politically attractive, and involve massive investments. But the deepest and most durable advantages in the chip industry are often found outside the fabs.

Companies that produce precision equipment, industrial software, specialty chemicals, advanced materials, and engineered components often hold highly defensible positions in the global semiconductor ecosystem. ASML is the best example. It does not make semiconductors, but its role in the industry is more influential than that of many chipmakers.

For India, joining semiconductor equipment supply chains could create benefits far beyond a single commercial relationship. Precision manufacturing capabilities developed for ASML could be applied to other industries. Engineering standards learned through one global supplier network could help create new domestic industrial strengths. Supplier credibility earned in one part of the chip ecosystem could open doors elsewhere.

That is why the reported discussions over subassemblies deserve close attention. They suggest a possible future in which India is not merely a destination for semiconductor investment, but an active contributor to the machines, components, and technologies that support the global chip industry.

China and India are both pursuing semiconductor ambitions, but they are doing so from very different starting points. China is seeking independence from the global system. India is trying to enter and strengthen its role within it. Both strategies carry risks, but for India, even a small foothold in ASML’s supplier network could mark a meaningful step toward building a more complete semiconductor ecosystem.