August 2025
India, long recognised as a powerhouse of software and IT services, is now making a strategic push into semiconductor manufacturing — a domain critical to powering everything from smartphones and electric vehicles to defense systems and data centres. Driven by geopolitical shifts, supply chain disruptions, and the global race for chip sovereignty, India’s semiconductor strategy is evolving rapidly. With multi-billion-dollar commitments from global giants, an expanding talent base, and government-backed incentive programs, the nation aims to transition from being a net importer of chips to a competitive player in the global semiconductor supply chain.
The Global Context
The semiconductor industry has emerged as a strategically important sectors globally. The COVID-19 pandemic exposed vulnerabilities in supply chains, particularly in chip-dependent sectors like automotive, consumer electronics, and telecommunications. Countries are now rethinking their dependence on a handful of manufacturing hubs — namely Taiwan, South Korea, and the US — and India sees this as an opportunity to carve out its role.
Globally, semiconductor fabrication (fab) facilities require massive investment, sophisticated technology, and skilled manpower. India’s entry into this high-barrier industry is being shaped by a blend of domestic demand, government incentives, and partnerships with established global players.
Government Initiatives and Policy Support
The Indian government has recognized that semiconductor manufacturing is a strategic necessity, not just an economic opportunity. Over the past few years, it has rolled out a series of aggressive policies, incentives, and mission-driven programs to position the country as a competitive global hub.
The flagship initiative is the Semicon India Program, launched in December 2021 with a ₹76,000 crore (around $10 billion) outlay to support the development of semiconductor and display manufacturing ecosystems. This program provides financial incentives covering up to 50% of project costs for companies establishing fabs, compound semiconductor units, OSAT (Outsourced Semiconductor Assembly and Test) facilities, and specialized display fabs in India.
To complement this, the government has set up the India Semiconductor Mission (ISM) — a specialized and empowered body to drive policy execution, facilitate technology tie-ups, and ensure that infrastructure, water, power, and logistics requirements are met for fab projects. ISM is designed to operate with speed and flexibility, bypassing bureaucratic delays that often plague large-scale industrial projects.
Several state governments have also launched their own incentive packages. Gujarat, Karnataka, and Tamil Nadu have been particularly aggressive, offering land at concessional rates, capital subsidies, tax breaks, and dedicated semiconductor parks with plug-and-play infrastructure. Gujarat’s “Semicon City” in Dholera Special Investment Region (YouTube Video: Dholera – Semicon City | NICDC ) is a flagship example, positioned to host fabs, ATMP facilities, and R&D centers in one integrated ecosystem.
Policy support has also been extended to R&D and design capabilities. The Design Linked Incentive (DLI) scheme encourages local startups and companies to develop semiconductor IPs, chipsets, and embedded systems by offering product development grants and reimbursement of design-related costs.
On the trade side, India has been actively signing technology-focused bilateral agreements with countries such as the US, Japan, and South Korea. For instance, the India-US Initiative on Critical and Emerging Technologies (iCET) explicitly includes semiconductor supply chain resilience as a key area of cooperation, facilitating technology transfer, joint R&D, and talent exchange programs.
Taken together, these government initiatives are not just about attracting foreign investment; they are about building a self-reliant, resilient, and globally competitive semiconductor ecosystem that can serve both domestic needs and export markets.
Demand Drivers in India
India’s demand for semiconductors is not just growing — it is accelerating at a pace that could reshape global market dynamics. The country is expected to become one of the largest consumers of electronic devices by the end of this decade, and each of these devices, from the simplest household gadget to the most advanced electric vehicle, depends on chips.
The automotive sector, in particular, is emerging as a high-growth segment for semiconductor consumption. With India’s electric vehicle (EV) market projected to grow at a compound annual growth rate (CAGR) of more than 40% till 2030, the need for chips in battery management systems, power electronics, motor controllers, infotainment, and ADAS (Advanced Driver Assistance Systems) is climbing sharply. Even in internal combustion engine (ICE) vehicles, the increasing adoption of connected vehicle features and stricter emission regulations is pushing the integration of more electronic control units (ECUs).
In 5G and telecommunications, the rollout of high-speed networks is fueling demand for networking chips, signal processors, and IoT modules. India is not only a huge market for mobile devices but is also expanding its telecom infrastructure, which requires high-performance, energy-efficient chips for base stations, network switches, and routers.
Consumer electronics remain the backbone of chip demand, with India being the second-largest smartphone market globally. Alongside smartphones, there is growing adoption of wearables, smart TVs, and smart home devices — each reliant on integrated circuits (ICs), sensors, and connectivity chips.
Defense and aerospace have also emerged as strategic demand drivers. India’s focus on indigenization in defense production, including radar systems, avionics, secure communication devices, and missile guidance systems, is increasing the need for specialized, high-reliability chips that can operate in extreme conditions.
Additionally, industrial automation and Industry 4.0 adoption are accelerating demand for microcontrollers, programmable logic devices, machine vision processors, and AI-enabled edge devices used in smart factories. As manufacturing plants modernize with robotics and predictive maintenance systems, the requirement for industrial-grade semiconductors will surge.
India’s Position in the Global Semiconductor Supply Chain
Today, India occupies a strategically promising but still nascent position in the global semiconductor supply chain. While it is not yet a major fabrication hub, it has already carved out a strong niche in chip design, verification, and embedded software development — areas that are indispensable to the semiconductor lifecycle.
Global semiconductor giants such as Intel, Qualcomm, AMD, NVIDIA, Texas Instruments, and Broadcom have large R&D and design centers in India, particularly in Bengaluru, Hyderabad, and Noida. These centers contribute to everything from architecture design and system-on-chip (SoC) development to AI accelerator chips and wireless communication modules. In fact, India is estimated to contribute over 20% of the world’s chip design workforce, a statistic that underscores its design prowess.
However, the manufacturing side tells a different story. India’s current contribution to wafer fabrication is negligible, with only a few small-scale fabs producing older-generation chips for defense, research, and industrial use. This makes India heavily dependent on imports from Taiwan, South Korea, China, and the US for cutting-edge semiconductors.
In the assembly, testing, marking, and packaging (ATMP) segment, India is starting to gain momentum. Micron’s investment in Gujarat, Sahasra Semiconductors’ packaging facility in Rajasthan, and the proposed OSAT units by Tata Group are steps toward making India a credible player in the downstream part of the value chain.
India’s position is further strengthened by geopolitical trends. As global manufacturers look to diversify supply chains away from over-dependence on East Asia due to trade tensions and natural disaster risks, India’s stable political climate, large domestic market, and improving infrastructure make it an attractive “China+1” alternative.
That said, for India to be a true end-to-end player in the semiconductor supply chain, it must close the gaps in wafer fabrication, specialty materials production, and high-precision equipment manufacturing. This will require long-term policy consistency, global technology partnerships, and significant investment in both infrastructure and workforce skilling.
Major Partnerships and Joint Ventures
Partnerships and joint ventures are the backbone of India’s semiconductor manufacturing ambitions, as the country works to bridge its technological and capability gaps by collaborating with global leaders.
One of the most high-profile ventures has been the Vedanta–Foxconn joint project, initially announced in 2022, with the goal of setting up a $19.5 billion semiconductor and display fabrication plant in Gujarat. While Foxconn exited the partnership in 2023 due to strategic realignments, Vedanta has retained the project and is actively pursuing new technology partners from countries such as Japan and South Korea. This facility, once operational, could be a cornerstone in India’s chip-making infrastructure, focusing on 28nm process nodes and display panel manufacturing.
The ISMC (International Semiconductor Consortium), comprising Abu Dhabi-based Next Orbit Ventures and Tower Semiconductor of Israel, is working on establishing a $3 billion analog semiconductor fab in Karnataka. This fab will target analog and mixed-signal chips used in automotive electronics, industrial equipment, and communication devices — segments where India has significant demand and export potential.
Tata Electronics has emerged as a formidable player, forming collaborations with Renesas Electronics (Japan) and Powerchip Semiconductor Manufacturing Corp. (Taiwan) to design and eventually manufacture chips for automotive, industrial, and IoT applications. Tata’s strategy is focused not only on manufacturing but also on integrating packaging, testing, and design services to create an end-to-end ecosystem.
In packaging and assembly, Micron Technology’s collaboration with the Government of India and the Gujarat State Government stands out. Micron is investing $2.75 billion in an ATMP (Assembly, Testing, Marking, and Packaging) facility in Sanand, which is expected to begin operations by end of this year (2025). This plant will serve both domestic and export markets, particularly in memory products.
Sahasra Semiconductors has partnered with SEMI South Korea to develop India’s first commercial DRAM and NAND flash packaging and testing capabilities. By focusing on memory chips, Sahasra aims to address one of India’s most critical import dependencies while tapping into the growing global memory market.
These partnerships are vital not only for bringing in capital but also for transferring cutting-edge fabrication and packaging technologies to India, enabling the country to develop its own skilled workforce and industrial ecosystem in the semiconductor space.
Opportunities and Strategic Advantages for India
India’s semiconductor journey is backed by a unique combination of market size, human capital, and geopolitical positioning. The country boasts one of the largest and fastest-growing electronics markets, driven by its role as the second-largest smartphone market, a rapidly expanding EV ecosystem, and increasing adoption of automation in industries. This massive domestic demand provides an assured market for locally manufactured chips, reducing the risk for investors setting up fabrication units.
Equally important is India’s talent pool. The country produces hundreds of thousands of engineers annually, with a significant portion specializing in electronics and semiconductor design. In fact, more than 20% of the world’s semiconductor design engineers are of Indian origin, a strength that can be leveraged to integrate manufacturing with design capabilities — a model that has proven successful in countries like Taiwan and South Korea.
From a geopolitical standpoint, India is well-positioned to benefit from the ongoing global diversification of semiconductor supply chains. Many countries and companies are actively seeking alternatives to East Asian manufacturing hubs to mitigate geopolitical risks. India’s stable democracy, growing infrastructure, and strong trade ties make it a compelling alternative destination.
Furthermore, India’s long-established strength in IT services and chip design offers a foundation to build upon. This combination of design expertise and an emerging manufacturing ecosystem gives the country a strong chance to position itself not just as a manufacturing hub, but as an integrated semiconductor innovation centre.
Challenges Hindering Rapid Growth
Despite the optimism, India faces several structural and operational challenges that could slow its ascent in semiconductor manufacturing. The first and most obvious is the sheer capital intensity of setting up advanced fabrication units — a state-of-the-art fab at leading-edge process nodes can cost upwards of $10 billion, with long payback periods and high operational expenses.
Technology remains another critical hurdle. While India can start with mature process nodes like 28nm or specialty semiconductors, manufacturing at cutting-edge nodes such as 5nm or 3nm requires access to proprietary technologies held by a handful of global players like TSMC and Samsung. Building such capabilities will require not only partnerships but also sustained R&D investment over years, if not decades.
Infrastructure constraints also pose a significant barrier. Fabs require uninterrupted power, large volumes of ultra-pure water, and world-class logistics — all of which must be scaled up in India to match global standards. Delays or deficiencies in these areas can impact both production quality and investor confidence.
The supporting supply chain is still underdeveloped. Semiconductor manufacturing depends on specialized chemicals, gases, silicon wafers, photolithography equipment, and cleanroom technologies, most of which India currently imports. Developing local suppliers for these inputs is essential for long-term competitiveness and supply chain resilience.
Finally, the global semiconductor market is fiercely competitive, with established players backed by decades of investment and experience. India’s challenge will be to find the right niches — such as specialty chips, automotive-grade semiconductors, and OSAT services — where it can build a competitive edge before scaling into more advanced and capital-intensive segments.
Future Outlook
India’s semiconductor ambitions are a long-term play. While full-scale advanced logic fabs may take years, the near-term growth will likely come from:
1. ATMP/OSAT Expansion – Lower entry barrier and quick scalability.
2. Specialty Semiconductors – Power electronics, automotive-grade chips, and sensors.
3. Collaborative R&D – With global players to build domestic capabilities.
4. Policy Refinements – Faster approvals, more incentives for ancillary industries.
If executed strategically, India could emerge as a semiconductor manufacturing hub not just for domestic consumption but also for export markets — capturing a meaningful slice of the global $1 trillion semiconductor market projected by 2030.
Please note: Content curated and structured with the assistance of ChatGPT by OpenAI
