Creating semicon dependency?
India’s push to build semiconductor packaging facilities in Odisha risks dependency on U.S. trade policies, as Washington imposes tariffs and export controls that threaten the viability of domestic manufacturing. The country’s focus on low-margin assembly and packaging, rather than high-value chip design, traps it in a 'Silicon Shackle,' where it remains reliant on foreign-owned intellectual property and supply chain rules.
India is rapidly constructing semiconductor packaging facilities in Odisha, marking a step toward self-sufficiency in electronics manufacturing. However, the country’s progress is undermined by U.S. trade policies, including a 10% tariff imposed in February and aggressive Section 301 investigations targeting 16 economies, which create uncertainty for Indian industries. The U.S. strategy in the Indo-Pacific prioritizes onshoring high-margin chip design and AI research while outsourcing labor-intensive assembly, testing, and packaging (ATP) to partners like India. This leaves India with low-profit-margin operations, as ATP accounts for less than 10% of the semiconductor industry’s total profit, while design and intellectual property capture nearly 50%. Without indigenous chip design capabilities, India risks becoming a dependent subcontractor rather than an independent player. A case in point is the 3D Glass Solutions partnership in Odisha, which generates jobs but lacks the design infrastructure to ensure long-term viability. Without domestic control over chip architecture, India’s manufacturing remains vulnerable to sudden shifts in foreign export policies, undermining its sovereignty. Beyond hardware, India faces digital dependency through U.S. restrictions on computing power. The National AI Mission requires GPUs subject to National Validated End-User (NVEU) authorizations, delaying deployments and forcing Indian data centers to operate under foreign oversight. Over 80% of Indian AI startups rely on U.S.-hosted proprietary models, creating a 'Token Tax' where every API call or data analysis funnels capital and behavioral data abroad. The U.S. approach extends beyond hardware, shaping global tech governance to favor American dominance. India’s electronics import bill is projected to exceed $120 billion this fiscal year, with AI adoption adding further costs. Without addressing these structural dependencies, India’s manufacturing and AI ecosystems will remain constrained by external rules rather than driven by domestic innovation.
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