Global Economic Context: Continuity and Change
Enduring Structural Continuities
- The North–South divide in per capita income, technological capability, and resource consumption continues to define the global economy despite decades of globalisation.
- Advanced economies still dominate high-value manufacturing, frontier technologies, and intellectual property, while developing countries remain resource suppliers or low-end manufacturers.
Structural Shifts in Growth Drivers
- Semiconductors and Artificial Intelligence (AI) have emerged as core drivers of economic power, productivity, and national security in the 21st century.
- Control over critical minerals, especially Rare Earth Elements (REEs), has become central to technological competitiveness and geopolitical influence.
Relevance
- GS 2: India’s foreign policy, minilateral groupings, strategic partnerships, and technology diplomacy.
- GS 3: Critical minerals, semiconductors, AI, supply-chain resilience, industrial policy, and economic security.
Pax Silica Summit 2025: Origins and Objectives
Background and Timing
- On 12 December 2025, the United States convened the inaugural Pax Silica Summit to secure supply chains for semiconductors, AI, and critical minerals.
- The term ‘Pax Silica’ symbolically links peace with silicon-based technologies, signalling that trusted technology supply chains are now integral to global stability.
Declared Objectives
- According to the Pax Silica Declaration, the initiative aims to:
- Reduce coercive dependencies
- Secure global semiconductor and AI supply chains
- Build trusted digital and manufacturing infrastructure
Membership Composition: Strategic Logic
Core Members and Their Comparative Advantages
- United States & Japan: Global leaders in advanced technology, research, and semiconductor design ecosystems.
- Australia: Leading exporter of lithium and holder of significant REE reserves, critical for batteries and electronics.
- Netherlands: Home to ASML, the world’s sole supplier of extreme ultraviolet (EUV) lithography machines.
- South Korea: Global manufacturing leader in memory chips (DRAM, NAND).
- Singapore: Long-standing semiconductor manufacturing hub integrated with U.S. firms.
- Israel: Strength in AI software, defence technologies, and cybersecurity.
- United Kingdom: Hosts the third-largest AI market with a strong research and start-up ecosystem.
- Qatar and UAE: Possess large sovereign wealth funds and are investing heavily in AI and advanced technology ecosystems.
Observers and Potential Expansion
- Canada, EU, OECD, and Taiwan participated as observers, indicating scope for future expansion and institutionalisation.
Countering China: Strategic Rationale
China’s Dominance in REEs
- China controls a dominant share of global REE processing, giving it leverage over high-tech supply chains.
- In response to U.S. tariff measures, China suspended REE exports to the U.S. and others, weaponising resource dominance.
Impact on India
- India faced disruptions in rare-earth magnet imports, affecting automobile and electronics manufacturing.
- Supplies resumed only after Indian firms complied with stringent Chinese licensing conditions, including assurances against defence or dual-use applications.
Lessons from the Pandemic
- COVID-19 exposed vulnerabilities of single-country-dependent supply chains, accelerating diversification and “friend-shoring” strategies.
India and Supply Chain Resilience Efforts
Existing Initiatives
- Supply Chain Resilience Initiative (SCRI) launched in 2021 with Japan and Australia.
- Quad Critical Minerals Initiative launched in 2025 to strengthen supply chains for emerging and critical technologies.
India’s Exclusion and Prospective Entry
- Despite participation in similar initiatives, India was not invited to the inaugural Pax Silica Summit.
- On 12 January 2026, the new U.S. Ambassador to India indicated that India will soon be invited to join Pax Silica.
What India Brings to Pax Silica ?
Strengths
- Strong digital public infrastructure and rapidly expanding AI adoption across enterprises.
- Launch of IndiaAI Mission and Semiconductor Mission with substantial public funding.
- Growing investments by Indian firms (e.g., Tata Group) and foreign players like Micron in semiconductor manufacturing.
- Expanding pipeline of AI start-ups and a large pool of Indian students trained in advanced STEM fields abroad.
Human Capital Advantage
- Large number of Indian graduates and PhDs in computer science and engineering trained in the U.S.
- Restrictive U.S. visa policies may trigger reverse brain gain, strengthening India’s domestic AI and semiconductor ecosystems.
Strategic Opportunities for India
Technology Ecosystem Scaling
- Participation in Pax Silica could help India scale collaborations with Japan, Singapore, Israel, and the U.S.
- Opportunity to integrate into trusted semiconductor and AI value chains beyond low-end manufacturing.
Long-Term Strategic Alignment
- Given historical India–West collaboration in IT services, India may naturally gravitate towards Pax Silica’s supply chain framework.
Challenges and Risks for India
Developmental and Strategic Asymmetry
- Pax Silica members are largely high-income U.S. allies, while India would be the first developing country and non-ally entrant.
- This may create an expectation gap on security alignment and policy convergence.
Strategic Autonomy Concerns
- India’s foreign policy responses may differ in nuance from U.S. allies, requiring careful balancing to avoid dilution of strategic autonomy.
Industrial Policy Tensions
- India will seek to protect its nascent ecosystems through subsidies, government procurement preferences, and calibrated import controls.
- Such policies may conflict with prevailing preferences in Washington and some Pax Silica economies.
The Road Ahead: Competing Supply Chain Blocs
Dual Supply Chain World
- China is likely to maintain and strengthen its REE export control regime to preserve dominance.
- Pax Silica may develop a parallel export regulation and supply chain framework.
- Over time, two major REE and tech supply chains—China-led and Pax Silica-led—may dominate the global economy.
India’s Strategic Choice
- Given strained India–China economic ties and longstanding collaboration with Western firms, India may tilt towards Pax Silica, while seeking policy space.
- India will need sustained dialogue to shape Pax Silica’s evolution in ways compatible with its developmental needs and strategic autonomy.
Strategic Assessment
- Pax Silica reflects the geopoliticisation of technology and supply chains, where economic efficiency is subordinated to security and trust.
- For India, participation offers technology access and resilience, but requires careful negotiation to avoid strategic and industrial policy constraints.
