“China spends more on importing semiconductors than on oil.” Chris Miller wrote in his bestselling book Chip War: The Fight for the World’s Most Critical Technology, and it’s a fact that caught my attention.
Semiconductors topped China’s 2024 imports at $385 billion, surpassing the $325 billion spent on oil.
Think about that for a moment. The world’s manufacturing hub, a country that consumes more energy than any other, is even more dependent on tiny silicon chips than the oil that powers its factories.
This is a glimpse into how power shifts in the 21st century. Coal built the first industrial age. Steel shaped the second. Oil dominated the third. Now, semiconductors are writing the rules of the fourth.
I’ve been tracking the semiconductor industry because it intersects with everything we invest in: from the AI stocks in our portfolios to the electric vehicles transforming transportation. But what caught my attention was closer to home. Prime Minister Modi received India’s first indigenously manufactured chip, “Vikram,” at Semicon India 2025—a symbolic moment that signals our entry into what might be the most strategic industry of our time.
This newsletter explores what wealth creators in India need to know as semiconductors become the backbone of the Fourth Industrial Revolution.
In this edition, we’ll look at:
- How silicon became the most valuable material
- The people who built Silicon Valley
- Understanding the business of the semiconductor industry
- The abundance paradox in chips
- India’s semiconductor ambitions
- Lessons for investors
- What should creators watch out for
Let’s dive in.
How silicon became the most valuable material
At its simplest, a semiconductor is a material, usually silicon, that can act as both a conductor and an insulator. That property makes it the perfect switch.
Think of a light switch in your home—it’s either on or off. Now imagine shrinking that switch to the size of a few atoms and packing 50 billion of them onto something smaller than your thumbnail. That’s a modern chip. Each tiny switch can flip between on and off billions of times per second, and together they create the magic we call computing.
But let me show you just how far we’ve come. In 1945, the world’s first computer, ENIAC, filled an entire room. It weighed 30 tons, used 17,000 glowing glass tubes, and broke down constantly. All that engineering effort produced less computing power than the fitness tracker on your wrist today.
Think about the leap mankind has made in less than a century. As Gordon Moore, co-founder of Intel, once observed: “What you can do with silicon is astonishing. It’s like nothing else in human history.”
His famous “Moore’s Law” predicted that the number of transistors on a chip would double roughly every two years, leading to exponential growth in the complexity and power of computer chips. Every couple of years, chips doubled in power while becoming cheaper to produce.
Let that sink in —
- Your phone today has more computing power than NASA had when it sent men to the moon.
- A luxury car now runs on 100 million lines of code, more than a fighter jet.
- Nvidia, once a maker of gaming chips, is now valued at over $4 trillion — roughly equal to India’s GDP.
The global semiconductor industry and its ancillaries today are worth trillions of dollars in market value. Nvidia alone sits at over $4 trillion, TSMC is near the $1 trillion mark, and Broadcom has crossed $1 trillion as well. Firms like Samsung, Intel, and ASML remain critical pillars of the ecosystem. The chart below captures the landscape as of end-2024 — valuations have moved since, but the takeaway holds: a handful of players now anchor one of the most valuable and indispensable industries on earth
The people who built Silicon Valley
The story begins in 1947 at Bell Labs, where John Bardeen, Walter Brattain, and William Shockley invented the transistor — a tiny switch that replaced bulky vacuum tubes and became the seed of the digital world. Shockley later set up his own firm in California, but poor leadership drove eight engineers to leave and form Fairchild Semiconductor.
Fairchild thrived. It built the first commercially viable integrated circuits, powered NASA’s Apollo missions, and supplied chips for Cold War defence. More importantly, it became a talent factory, spawning a family tree of firms including Intel, AMD, and National Semiconductor — the DNA of Silicon Valley.
Intel, founded by Robert Noyce and Gordon Moore, shipped the first commercial microprocessor in 1971 — shrinking a room-sized computer onto a sliver of silicon.
And here’s where it gets interesting – The US Department of Defense became one of the first big buyers, ensuring demand long before consumer electronics took off. And thus began the growth of the semiconductor industry.
Understanding the business of the semiconductor industry
What makes semiconductors fascinating is the business choices that shaped it. Over time, the industry evolved into three dominant playbooks: integrated, foundry, and fabless. Each major turning point in its history can be traced back to these models.
Take Intel, the original titan. It followed the integrated model, designing and manufacturing under one roof. This approach gave Intel dominance through the PC era. When IBM launched its personal computer in 1981, it chose Intel’s microprocessor. That decision created the Wintel era, with Intel chips and Microsoft software powering the rise of personal computing for two decades.
But the same model made Intel rigid. In 2006, when Apple approached Intel to build the first iPhone chip, Intel declined, dismissing mobile as a low-margin distraction. It proved to be a historic blunder. Apple went on to design its own chips and relied on TSMC for manufacturing. The iPhone became the defining product of our time, and Intel, once the undisputed leader, was left out of the biggest growth wave in technology.
That brings us to TSMC, the company that rewrote the rules of chipmaking. Morris Chang bet on a simple but radical idea: specialise only in manufacturing. TSMC would not design chips or compete with its customers. It would focus on building the world’s most advanced fabs and deliver with unmatched reliability.
Initially, few believed the model would work. Why would companies like Apple or Nvidia entrust their most valuable designs to a third party? Yet that very neutrality became TSMC’s strength. Apple’s decision to source its iPhone processors from TSMC proved the model, and today the company produces more than 90 percent of the world’s most advanced chips.
ARM followed yet another path. It doesn’t design complete chips, nor does it manufacture. It licenses the instruction set architecture (ISA) — the recipe others build from. Every smartphone chip today carries ARM’s blueprint. It’s an IP-driven, asset-light model that generates royalty streams with no factories at all. Quiet, invisible, but indispensable.
And then there is Nvidia. A fabless firm that designs chips but outsources manufacturing to TSMC. Its true moat isn’t just hardware, it’s the CUDA software ecosystem — the platform developers rely on to build AI models. By pairing chips with software lock-in, Nvidia turned itself into the pick-and-shovel provider of the AI gold rush.
Four companies, four playbooks. Intel showed the limits of integration. TSMC proved the power of focus. ARM demonstrated that intellectual property alone can dominate an era. And Nvidia revealed how hardware combined with software can create an ecosystem moat.
The abundance paradox in chips
More than a trillion chips are produced every year. By sheer volume, semiconductors are among the most abundant manufactured goods in human history. Yet despite the scale, advanced chips depend on a few choke points in the global supply chain:
- TSMC (Taiwan): More than 90% of the world’s most advanced chips are made in Taiwan by TSMC. Its fabs supply Apple, Nvidia, and Qualcomm, making it the single most critical manufacturer in the digital economy.
- ASML (Netherlands): ASML is the sole producer of extreme ultraviolet (EUV) lithography machines, each costing around $200 million. Without these machines, no company can manufacture the latest chip.
- ARM (United Kingdom): ARM provides the ISA behind 99% of smartphones. It licenses designs to chipmakers like Apple and Qualcomm, while foundries like TSMC manufacture them. If ARM’s designs vanished, billions of devices would stop working.
This is the paradox of abundance: the future of the digital economy hinges on a few companies. Their dominance creates extraordinary moats but also systemic risk; a single disruption, whether from geopolitics, supply shocks, or IP battles, could ripple through every industry and portfolio.
India’s semiconductor ambitions
Walk into the R&D centres of Intel, Qualcomm, or AMD and you’ll find Indian engineers everywhere. Nearly 20% of the world’s chip design talent sits here. What we lacked was manufacturing muscle — the fabs, the packaging plants, the ecosystem that converts designs into silicon.
That is beginning to change.
At Semicon India 2025, the Prime Minister received “Vikram,” the first indigenously manufactured chip — a symbolic milestone. Alongside it, the Tata–PSMC joint venture is building a ₹91,000 crore fab in Gujarat, targeting mature 28nm nodes for autos, telecom, and industrial use. Micron is setting up a ₹22,500 crore Assembly, Testing, Marketing and Packaging (ATMP) unit. Around these anchors, opportunities are opening up in chemicals, materials, and outsourced semiconductor assembly and test (OSAT).
The government is preparing a fresh $20 billion incentive programme under ISM 2.0, aimed at building the entire value chain from chip design and new materials to India’s first display fab. The plan also envisions scaling up fabless design startups, supporting component makers, and nurturing local champions across the ecosystem
India isn’t trying to make the most advanced, smallest, and most complex chips right now — like the 3-nm or the 5-nm chips used in the latest iPhones or AI servers. Instead, the strategy is to build credibility on mature nodes, where demand is steady and scale can be achieved. Critics have been quick to point out that 28nm chips were mastered by the world long ago and that’s true. But it is also true that over 90% of industrial and consumer applications still run on these mature nodes. Specialisation at the cutting edge will take time, but that does not make the first step less meaningful.
Lessons for investors
If there’s one lesson from chips, it’s that wealth flows to those who control the leverage points:
- Ecosystem lock-in is the most durable advantage. Nvidia’s CUDA software platform has become the default environment for AI developers. Once developers build on CUDA, they are tied to Nvidia hardware — a level of stickiness that justifies its premium valuation. The leap from $15 billion to $4 trillion in just 15 years is the scale of advantage ecosystems can create.
- Standards can generate annuity-like returns. Qualcomm earns steady royalties by licensing mobile communication standards. In FY2024, over $6.3 billion of its revenue came from licensing alone — high-margin income that flows every time a handset is sold, regardless of who makes the chip inside.
- Integration can amplify value capture. Apple’s chips aren’t sold externally, but by tightly integrating its silicon with iOS, it delivers performance advantages that keep users locked into the ecosystem. Its in-house A-series and M-series chips helped Apple capture over 85% of global smartphone profits in 2023, despite shipping less than 20% of units.
- Capital can itself be a barrier to entry. A single advanced fab costs upwards of $20 billion. TSMC’s planned fab in Arizona, for example, carries a price tag of $40 billion. Few companies can raise such sums, and fewer still can execute at the required precision. This scale has allowed TSMC to command more than 90% of the world’s most advanced chip production.
- Technology chokepoints capture disproportionate value. ASML’s monopoly in extreme ultraviolet (EUV) lithography means it controls the gateway to the most advanced chips. Without ASML’s machines, no 3-nm processors can be produced.
What should creators watch out for:
Policy catalysts ahead: The government’s ISM 2.0 program will likely expand beyond manufacturing into semiconductor design software, specialised equipment, and advanced materials—areas where global supply constraints persist and India’s engineering talent can make an immediate impact. Each policy announcement could unlock new investment themes.
Ecosystem plays emerging: The real alpha may come from ancillary businesses that few are tracking yet. Companies supplying ultra-pure chemicals, specialty gases for chip manufacturing, and assembly/testing services (OSAT) could access public markets years before the headline-grabbing fabs become operational. These are often higher-margin, less capital-intensive plays.
Talent arbitrage opportunities: India’s semiconductor push hinges on human capital as much as policy support. Watch for senior global executives—particularly those with fab management or advanced packaging experience—relocating to lead Indian operations. This talent migration will signal whether our ambitions have credible execution backing them.
Supply chain localisation themes: As geopolitical tensions reshape global chip supply chains, businesses serving the domestic semiconductor ecosystem—from precision equipment maintenance to specialised logistics—could benefit from the “India for India” manufacturing push.
Closing thoughts
The new rules of economic power
Every industrial revolution creates a new class of assets that matters more than the previous one. Steam engines made coal regions powerful. Steel mills built industrial empires. Oil reserves shaped 20th-century geopolitics.
Now, in what Klaus Schwab calls the Fourth Industrial Revolution, semiconductors have become the foundation layer. They’re the control systems of modern civilization. They determine how fast AI learns, how efficient our energy systems become, how autonomous our transportation gets, and how seamlessly our digital economy operates.
The convergence is what makes this different. Unlike previous industrial shifts that were driven by single breakthrough technologies, today’s transformation spans artificial intelligence, biotechnology, clean energy, robotics, and quantum computing simultaneously. The common thread? They all run on silicon.
For investors, this creates a fascinating dynamic. The companies that control semiconductor chokepoints—whether through manufacturing precision, design leadership, or ecosystem lock-in—are essentially controlling the pace of innovation across every sector we invest in.
That’s why this is an economic leverage story. The countries and companies that master semiconductors will set the tempo for the next wave of global growth.
And excitingly, India is positioning itself to be a key player in this game.
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