In an era of weaponized interdependence, economic security has become the organizing principle of the India-Japan partnership. However, economic security partnerships are only as strong as the industrial ecosystems that underpin them. As the India-Japan Economic Security Initiative takes shape, its success will depend not on strategic convergence alone but on industrial capacity – the ability to manufacture, process, refine, design, and scale strategic technologies within trusted networks. While India-Japan strategic alignment is real and the institutional architecture is substantial, they will still need an industrial ecosystem capable of translating that convergence into competitive advantage.
When China weaponized rare earth exports against Japan in 2010, Tokyo recognized the strategic costs of excessive dependence on a single supplier. Subsequently, Tokyo systematically invested in diversification: supply relationships with Australia, processing capacity in Vietnam, domestic recycling and magnet substitution technologies. When China tightened export controls again in 2026, Japan was better prepared.
Recently, India has emerged as an important strategic partner because of its substantial rare earth reserves and growing commitment to critical minerals cooperation. But India, despite this deepening economic security axis, remains a promising partner for Japan only in theory, not yet in practice.
The paradox is striking: India has the world’s third-largest rare earth reserves, yet contributes less than 1 percent of global production, with resources predominantly concentrated in Light Rare Earth Elements (LREE). India doesn’t lack resources or strategic intent; the bottleneck lies in developing the midstream and downstream industrial ecosystem that transforms mineral resources into strategic capability. That gap between diplomatic rhetoric and industrial reality is real, and closing this gap is the decisive challenge for the next decade.
The institutional architecture of India-Japan economic security cooperation is deep. The 2023 Semiconductor Supply Chain Partnership formalized cooperation across design, manufacturing, equipment, and talent development. The 2025 India-Japan Economic Security Initiative deepened that framework, with dedicated Economic Security Dialogues and private-sector tracks. Additionally, the Quad Critical Minerals Initiative – bringing together India, Japan, Australia, and the United States – reflected a broader recognition that supply chain resilience requires multilateral coordination.
But is this institutional density actually building industrial depth that makes economic security durable? The litmus test for India-Japan economic security cooperation will be in building supplier networks, training engineers, stabilizing manufacturing yields, and developing the processing ecosystems that transform raw materials and design talent into strategic industrial power.
On paper, India and Japan are complementary partners. India holds substantial rare earth reserves, industrial potential, and scale. Japan brings advanced manufacturing, precision engineering, technological expertise, and patient capital, reinforced by a 10 trillion yen private investment commitment that underscores its strategic stake in India’s industrial transformation.
The 2025 Memorandum of Cooperation on Mineral Resources further formalized a relationship already visible in long-standing partnerships such as the Toyota Tsusho-Indian Rare Earths Limited collaboration in Andhra Pradesh, which processes rare earth oxides for Japanese industrial use. Meanwhile, Proterial’s consideration of a neodymium magnet manufacturing facility in India – targeting magnets that reduce dependence on heavy rare earths – represents a potentially significant step toward downstream value addition.
But the midstream layer – separation, refining, and the conversion of raw ore into the high-purity materials that strategic industries require – remains a critical gap. India currently produces roughly 1 percent of global rare earth output despite its reserve base. China controls approximately 90 percent of global rare earth refining capacity. The distance between holding reserves and operating a competitive refining ecosystem is measured in industrial depth, technical expertise, and the kind of accumulated process knowledge that takes decades to develop.
If critical minerals are the building blocks of strategic technologies, semiconductors represent their most consequential application. India and Japan have made notable progress through partnerships involving companies such as Tokyo Electron-Tata Electronics and Renesas-CG Power-Stars Microelectronics. Projects such as Dholera in Gujarat and the Jagiroad assembly and testing plant in Assam represent considerable advancement in India’s ambition to establish a domestic semiconductor industry while embedding itself within trusted global supply chains.
Yet, India-Japan semiconductor cooperation is currently concentrated in the least technologically complex segment of the value chain. These projects largely involve assembly, testing, marking, and packaging – an essential but comparatively downstream segment of the semiconductor value chain. They are creating jobs, developing manufacturing discipline, and beginning the process of embedding India into international production networks. But they occupy a different position in the value chain than wafer fabrication, semiconductor equipment manufacturing, advanced materials, or chip design ecosystems.
Micron Technology’s investment in Gujarat – an important milestone in India-U.S. semiconductor cooperation – is likewise centered on assembly, testing, marking and packaging (ATMP), rather than wafer fabrication. The distance between packaging a chip and fabricating one is a measure of industrial depth. While outsourced semiconductor assembly and testing (OSAT) strengthens manufacturing capabilities, it does not by itself create the broader industrial ecosystem required for technological competitiveness.
The Dholera fab targets initial production at 28-nanometer nodes – mature technology that marks a humble beginning for India’s large-scale commercial semiconductor fabrication project. The hope is that it is a stepping stone to something bigger for India: a supplier ecosystem for specialty gases, ultra-pure chemicals, precision equipment, and process engineering talent. Japan’s materials and equipment strengths – Tokyo Electron alone commands a significant share of global semiconductor equipment – are directly relevant to closing these gaps.
But equipment supply and process know-how transfer are not the same as ecosystem formation. India’s semiconductor infrastructure gaps remain substantial: grid reliability, ultra-pure water supply, and specialty chemical availability. While India accounts for 20 percent of the global semiconductor design workforce, there is a projected shortfall of 250,000 to 300,000 skilled process engineers by 2027. Competitive semiconductor industries depend on dense networks of suppliers producing semiconductor-grade chemicals, specialty gases, silicon wafers, manufacturing equipment, precision tooling, logistics, and highly specialized engineering talent. These ecosystems evolve over decades through cumulative learning rather than through isolated investments.
Going forward, the central challenge is whether India-Japan cooperation can generate the industrial ecosystem necessary for deeper technological and manufacturing capabilities. Taiwan’s dominance in advanced fabrication reflects not policy design but decades of co-location between fabs, suppliers, equipment manufacturers, process engineers, and customers – an accumulation of industrial knowledge and infrastructure. Japan’s own strength in semiconductor materials and equipment is similarly a product of long industrial evolution.
Relatively, India is at a nascent stage. Its strengths are real: it has skill at scale in semiconductor design talent, a growing domestic market, policy momentum, and geological endowment in critical minerals. Under the India Semiconductor Mission 2.0, the focus is increasingly shifting toward design, equipment, advanced packaging, and ecosystem consolidation.
Japan is well positioned to accelerate India’s industrial learning – through equipment supply, process knowledge transfer, workforce development, and ecosystem anchoring. Companies like Tokyo Electron are not just investors; they are potential transmission mechanisms for the tacit industrial knowledge that ecosystems require. The industrial gaps – in materials, chemicals, specialized equipment suppliers, and process engineering talent – will close through sustained effort over decades.
Co-creating supply chain resilience is a dominant narrative in India-Japan economic security analysis. But resilience built on packaging plants and downstream processing, without the upstream ecosystem depth to sustain it, remains fragile. The next phase of the India–Japan partnership will be defined by whether existing investments translate into cumulative industrial upgrading capable of sustaining durable economic security.
Challenges persist – regulatory harmonization, implementation pace, talent development and scaling midstream capabilities will test execution. But the partnership is entering its most consequential phase, one where the metrics of success shift from agreements signed to addressing asymmetries and building industrial ecosystems.
