“The chip industry doesn’t just make the modern world work—it makes the modern world go to war.” — Chris Miller, Chip War
Behind every smartphone, electric vehicle — whether manned or autonomous, including military platforms — lies a component so small yet so vital that its control now defines global power. The microchip has emerged as the central currency of the 21st century, shaping the balance of power in economic competitiveness, military prowess, technology dominance and diplomatic leverage. As nations decouple from old supply chains and reposition in the new hierarchical order, semiconductors have become both the prize and the battlefield.
Microchip revolution
The story of the microchip began in 1958 with the invention of the integrated circuit. Over the next few decades, the U.S. led both innovation and manufacturing, with firms like Fairchild Semiconductor and Intel defining the early era. But as chips grew more complex and expensive to produce, manufacturing gradually shifted eastward. Taiwan, driven by strategic industrial policies and a highly skilled workforce, soon emerged as the global epicentre of advanced chipmaking. Today, Taiwan Semiconductor Manufacturing Company (TSMC) alone produces over 90% of the world’s most advanced chips, forming a chokepoint in the global economy.
As Chris Miller puts it in Chip War, “TSMC is the most geopolitically important company in the world.”
Design to fabrication
By the late 1980s, a new business model began to dominate—fabless chip design. Companies like Apple, Nvidia, and Qualcomm focused on chip architecture while outsourcing fabrication to foundries in East Asia. This allowed faster innovation and lower costs, but it also created a dangerous asymmetry. Just a handful of firms—primarily TSMC and Samsung—now hold the capacity to manufacture the world’s leading-edge chips. Steve Jobs’ Apple exemplified this model: the iPhone’s chip is American in design, but Taiwanese in execution.
As Miller notes, “The iPhone may be American in design, but its brain is born in Taiwan.”
The military usage
What began as a consumer electronics revolution soon became a military imperative. Semiconductors now underpin everything from guided missiles and surveillance systems to cyber defence and unmanned drones. During the Gulf War, U.S. dominance in chip-enabled systems created a decisive edge. Today, the battlefield extends to AI algorithms, electromagnetic warfare, and space-based surveillance—all of which are powered by advanced chips. The F-35 fighter jet, for instance, contains hundreds of custom-designed chips and millions of lines of code. As Miller writes, “A modern military without semiconductors is like a Navy without steel or an Air Force without aviation fuel.”
China’s emerging chip power
China, which has long been dependent on chip imports, is now the largest consumer of semiconductors, spending more on chips than on oil. Alarmed by its vulnerability, especially after the U.S. imposed sanctions on Huawei and banned advanced chipmaking tools, Beijing has launched a massive drive for self-sufficiency. Through initiatives like “Made in China 2025,” over $150 billion has been invested in building national champions, such as SMIC and Yangtze Memory Technologies.
Despite these efforts, China still lags behind Taiwan by several technological generations. Yet the stakes are rising. The Chinese Communist Party views reunification with Taiwan as a political inevitability. For the U.S. and its allies, Taiwan’s chip ecosystem has become a “silicon shield.” Any attempt by China to forcibly take control could spark not just a regional crisis, but a global supply shock.
The chip war escalates
The United States has responded with a layered containment strategy. The CHIPS and Science Act (2022) allocates $52 billion to boost domestic manufacturing. Washington has banned the export of cutting-edge chips and chip-making tools to China. It has also pressured allies like Japan and the Netherlands to restrict sales of lithography and etching equipment, especially to Chinese fabs. A strategic coalition of tech democracies—dubbed “Chip 4” (comprising the U.S., Taiwan, South Korea, and Japan)—is emerging to coordinate supply chains. In turn, China has retaliated with export controls on rare earths and gallium, both of which are critical to chip production, and has banned companies like Micron from its market. A new kind of Cold War is unfolding—not over ideology, but over silicon.
India’s chip challenge
India stands at a critical juncture. Today, over 90% of India’s semiconductor demand is met through imports. The COVID-19 pandemic exposed the risks: auto production lines shut down, electronic assembly slowed, and critical infrastructure projects were delayed.Recognising this vulnerability, the Indian government has launched a ₹76,000 crore SemiconIndia Programme, aimed at building domestic chip manufacturing and design capabilities. The policy includes financial incentives for fabrication, assembly, and packaging units, as Well as Partnerships with global players such as Micron (U.S.), ISMC (Israel), and Tower Semiconductor (Japan). Additionally, it involves the creation of the India Semiconductor Mission (ISM) to coordinate national efforts.
However, there are formidable challenges. Building a chip foundry requires massive capital, uninterrupted power, ultrapure water, a reliable logistics network, and highly skilled engineers. Moreover, global talent and machinery are already in short supply amid rising geopolitical competition.
Strategic options for India
India cannot—and does not need to—replicate Taiwan or South Korea overnight. Instead, it can carve a smart strategy built on the following pillars:
- Focus on strength areas: India can specialise in legacy chips, power electronics, and compound semiconductors for defence, automotive, and industrial applications.
- Leverage trusted partnerships: Align with like-minded nations through Quad, I2U2, and Chip 4 dialogues to ensure secure and diversified access to technology and equipment.
- Promote design and R&D: India already has over 20,000 VLSI designers. Building a robust chip design ecosystem linked with IITs, CDAC, and private players can be a key differentiator.
- Create long-term talent pipelines: Encourage semiconductor curricula, research funding, and industry-academia partnerships to nurture the next generation oftechnologists.
Microchips have quietly become one of the most strategic assets of our time. Control over them will increasingly determine not just technological leadership, but economic sovereignty and military power. For India, this is both a warning and an invitation. The country must shift from being a passive participant in global supply chains to becoming a trusted, tech-enabled stakeholder. It must strike a balance between self-reliance and international collaboration, and transform its vulnerabilities into platforms for leadership. As the world fractures into tech blocs, silicon will shape not only the machines of the future but also the power equations of the next era.
In the battle for chips, the stakes are no longer just economic. They are existential.
[Maj. Gen. BK Sharma (Retd.)—Director General of the United Service Institution of India—is the Head of United Services Institute, a 125-year-old think tank which is internationally acclaimed.]
