AI, semicon, global value chains: How globalization isn't dying—it's evolving
Recent trade data and analysis indicate that globalization is not reversing but restructuring: merchandise (goods) trade growth is slowing relative to services trade, and cross-border capital is increasingly concentrated in strategic technology sectors such as artificial intelligence and semiconductors.
Global value chains (GVCs) are reconfiguring around geopolitical alignment rather than pure cost efficiency, with firms diversifying production locations away from single-country concentration.
India is positioning itself to capture a larger share of this reconfiguration through semiconductor manufacturing incentives, AI infrastructure investment, and expanding digital services exports.
The World Trade Organization's outlook shows services trade consistently outpacing goods trade growth through 2025-26, reflecting the structural shift described.
Global Value Chains (GVC) and Their Reconfiguration
A Global Value Chain describes the fragmentation of production of a good or service across multiple countries, with each country specialising in a stage (design, components, assembly, branding) based on comparative advantage, coordinated typically by multinational lead firms. GVC participation is measured by the share of a country's exports that use imported inputs (backward participation) or contribute inputs to other countries' exports (forward participation).
Key Details
- The 2008 financial crisis and, more sharply, the COVID-19 pandemic (2020) and the Russia-Ukraine war (2022) exposed the fragility of concentrated, "just-in-time" GVCs, triggering a shift toward "just-in-case" resilience strategies.
- Three restructuring strategies are now standard terminology: reshoring (bringing production back to the home country), nearshoring (relocating to geographically proximate countries), and friendshoring — a term first used publicly by US Treasury Secretary Janet Yellen in April 2022, meaning relocation of supply chains to politically aligned, trusted partner countries regardless of geographic distance.
- India's "China+1" positioning — attracting firms diversifying away from over-reliance on a single manufacturing base — is a direct beneficiary of the friendshoring/nearshoring trend.
The article's framing that globalization is "evolving, not dying" describes exactly this shift — from efficiency-only GVCs to resilience- and alignment-weighted GVCs, with India, Vietnam, and Mexico among the states seen as beneficiaries of the reconfiguration.
Services-Led Trade and Digital Trade Governance
Traditionally, GATT (1947, now under WTO) governed trade in goods, while trade in services was brought under multilateral discipline only with the General Agreement on Trade in Services (GATS), part of the WTO agreements from 1995. Services trade includes categories such as Mode 1 (cross-border supply, e.g., IT/BPO), Mode 2 (consumption abroad, e.g., tourism), Mode 3 (commercial presence, e.g., a bank's foreign branch), and Mode 4 (movement of natural persons).
Key Details
- According to WTO's 2025-26 trade outlook, global commercial services trade grew about 5.3% in 2025 and is projected to grow roughly 4.8% in 2026, consistently outpacing goods trade growth (around 4.6% in 2025, slowing sharply to about 1.9% in 2026).
- India is among the largest exporters of digital/IT services globally, with services exports (led by IT-BPM and increasingly Global Capability Centres, or GCCs) forming a growing share of India's overall export basket.
- Digital trade (cross-border data flows, e-commerce, cloud services) remains a contested area at the WTO given the absence of a binding multilateral digital trade agreement; India has historically been cautious about data-flow commitments citing data sovereignty and the (draft/evolving) Digital Personal Data Protection framework.
The shift the article describes — trade growth concentrating in services rather than goods — is precisely the WTO-tracked divergence between services (~5%) and goods (~2-4.6%) trade growth, a trend India is positioned to benefit from through its services export strength.
Strategic Technology and India's Semiconductor Push
Semiconductors (integrated circuit chips) sit at the centre of the current GVC reconfiguration because chip fabrication is extremely capital- and technology-concentrated (dominated by Taiwan's TSMC, South Korea's Samsung, and a handful of others), making it a national-security-sensitive chokepoint analogous to oil chokepoints in the physical trade world.
Key Details
- India launched the India Semiconductor Mission (ISM) in December 2021 under a Production Linked Incentive (PLI)-linked scheme with an outlay of about ₹76,000 crore (~$10 billion), the first dedicated national programme targeting this industry.
- The first round of applications under the Semicon India Programme attracted proposals worth about $20.5 billion from companies seeking to set up fabs and display units in India.
- The broader PLI scheme, spanning 14 sectors since 2020-21, has drawn approximately $22.2 billion in cumulative investment and generated about $208 billion in incremental production as of 2026, per government-cited estimates.
The article's reference to capital "pivoting toward strategic technology" reflects exactly this pattern — semiconductors and AI infrastructure now attract targeted state incentives (PLI/ISM) and foreign investment interest in a way ordinary manufacturing sectors do not, because these technologies are treated as strategic assets rather than purely commercial ones.
- WTO 2025-26 outlook: services trade growth ~5.3% (2025) → ~4.8% (2026); goods trade growth ~4.6% (2025) → ~1.9% (2026) — services consistently outpacing goods.
- "Friendshoring" term coined/popularised by US Treasury Secretary Janet Yellen, April 2022.
- GATS (General Agreement on Trade in Services) came into force in 1995 as part of the WTO framework; defines four modes of services trade supply.
- India Semiconductor Mission: launched December 2021, PLI outlay ~₹76,000 crore (~$10 billion); first-round proposals worth ~$20.5 billion.
- PLI scheme overall (14 sectors, since 2020-21): ~$22.2 billion investment, ~$208 billion incremental production, ~1.26 million jobs (2026 estimates).