In a transformative move for global supply chains, Japan and India are deepening their economic partnership by relocating production of legacy semiconductors, liquid crystal displays (LCDs), and storage batteries to India. This strategic shift, driven by the need to reduce reliance on Chinese manufacturing, is set to reshape the technological and economic landscape of the Indo-Pacific region. Announced on August 28, 2025, this initiative is a cornerstone of Japan-India collaboration, aiming to bolster economic security and foster self-reliance in critical technology sectors.

Strategic Context and Rationale

The decision comes amid escalating geopolitical tensions and supply chain vulnerabilities exposed by China’s dominance in critical materials like gallium, which accounts for 98% of global production. Japan, a former semiconductor powerhouse with a market share that plummeted from 50% in the 1980s to under 10% today, is leveraging this partnership to maintain competitiveness in legacy technologies while countering China’s influence. For India, the move aligns with Prime Minister Narendra Modi’s vision of achieving manufacturing self-reliance under the “Make in India” initiative, positioning the country as an alternative manufacturing hub.

The Japan External Trade Organization (JETRO) and the Confederation of Indian Industry (CII) have jointly developed a comprehensive plan, unveiled on August 28, 2025, ahead of Modi’s summit with Japanese Prime Minister Shigeru Ishiba. This plan focuses on transferring mature manufacturing technologies for semiconductors used in electric vehicles (EVs), inverters for energy-efficient appliances, and LCDs for displays, as well as solar power equipment and compressors.

Why Legacy Technologies?

Legacy semiconductors, typically produced using mature manufacturing nodes (28nm and above), remain critical for industries like automotive, consumer electronics, and renewable energy. Unlike cutting-edge chips, these technologies are less capital-intensive, making their transfer to India technically and economically viable. Japan’s expertise in these areas, combined with India’s cost-competitive workforce and growing electronics market, creates a synergistic opportunity. For instance, India’s electronics industry, heavily reliant on Chinese imports, stands to benefit significantly from localized production.

Economic and Geopolitical Implications

This partnership is a win-win for both nations. For Japan, it offers a hedge against low-cost Chinese competitors and a chance to tap into India’s burgeoning market. For India, it’s a leap toward technological self-sufficiency, reducing dependence on Chinese components amid strained trade relations, including U.S. tariffs on Indian goods due to New Delhi’s Russian oil purchases. Additionally, India is adopting legislation akin to Japan’s to prevent technology leakage, addressing intellectual property concerns critical to high-tech manufacturing.

The move also strengthens the India-Japan Semiconductor Supply Chain Partnership, initiated in July 2023, which builds on frameworks like the India-Japan Digital Partnership (IJDP) and Industrial Competitiveness Partnership (IJICP). This collaboration extends beyond manufacturing to include R&D, design, and workforce training, with Japanese giants like Tokyo Electron expanding their presence in India.

Data and Insights

The following table highlights the scope of the Japan-India production transfer:

Sector	Key Applications	Expected Impact
Legacy Semiconductors	EVs, inverters, consumer electronics	Reduced import reliance, job creation
LCD Screens	Displays for TVs, smartphones, monitors	Boost to domestic manufacturing, export potential
Storage Batteries	EVs, renewable energy storage	Enhanced energy security, cost competitiveness
Solar Power Equipment	Solar panels, inverters	Support for India’s renewable energy goals
Compressors	Refrigeration, air conditioning	Improved supply chain resilience

Chart: Global Semiconductor Market Share (1988 vs. 2023)
To illustrate Japan’s historical dominance and current position, the following chart compares global semiconductor market shares:

Insight: The chart underscores Japan’s drastic decline in semiconductor market share, highlighting the urgency of strategic moves like the India partnership to reclaim relevance in legacy technologies.

Challenges and Risks

Despite the optimism, challenges remain. India’s semiconductor ecosystem, while growing, lacks the infrastructure for advanced chip production, and the focus on legacy technologies may limit long-term competitiveness. Additionally, China’s retaliatory measures, such as restrictions on gallium exports, could disrupt supply chains, as Japan’s gallium imports from China dropped 85% between August 2023 and August 2024. Coordinating intellectual property protection and ensuring technology transfer efficiency will also be critical.

Looking Ahead

The Japan-India partnership is a bold step toward diversifying global supply chains and reducing China’s stranglehold on critical technologies. For India, it’s a chance to emerge as a manufacturing powerhouse, leveraging Japanese expertise and its own cost advantages. For Japan, it’s a strategic pivot to maintain relevance in a China-dominated market. As Modi and Ishiba formalize this agreement, the world watches a new chapter in Indo-Pacific economic cooperation unfold, with the potential to redefine global technology dynamics.

also read: Top 10 Venture Capital Firms Actively Investing In 2025