As the global race for semiconductor self-reliance accelerates, India is placing a bold bet. The country has announced investments of 1.6 trillion rupees ($18.2 billion) to establish a domestic chip ecosystem — from design and fabrication to testing and packaging — aiming to become a significant player in the world’s most critical technology sector.
The semiconductor race intensified in 2022 when the United States restricted exports of advanced AI chips to China, sparking a wave of national strategies worldwide. For India, it opened a window to reduce its dependence on imports, secure chips for strategic sectors, and capture a larger share of the global electronics supply chain, which is gradually moving away from China.
Despite being one of the largest consumers of electronics globally, India currently has no local chip manufacturing industry and plays only a minor role in the semiconductor supply chain. New Delhi’s “Semiconductor Mission” aims to change that reality and secure the country’s place in this high-stakes industry.
So far, India has greenlit 10 semiconductor projects with total investments worth $18.2 billion. Highlights include:
A $11 billion fabrication plant in Gujarat, spearheaded by Tata Electronics in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp. This facility will produce chips for AI, automotive systems, data storage, and computing devices.
A compound semiconductor fab in Odisha, developed by the U.K.’s Clas-SiC Wafer Fab and India’s SiCSem, targeting applications in defense, electric vehicles, consumer appliances, and renewable energy.
In addition, many medium-sized firms and Indian conglomerates are entering chip packaging and testing (OSAT), an area that requires lower capital and offers higher margins compared to fabs.
India’s strongest advantage is its pool of engineering talent, which has long been engaged in chip design for global companies since the 1990s. However, experts warn that talent alone will not suffice.
According to Stephen Ezell, Vice President of Global Innovation Policy at the Information Technology and Innovation Foundation, semiconductor giants evaluate up to 500 discrete factors before investing in a fabrication facility — including taxation, labor laws, infrastructure, customs policies, and access to ultra-high purity materials. These remain areas where India must improve significantly.
Moreover, chip fabs require highly specialized conditions, such as locations free from seismic activity or floods, robust transportation links, and a reliable supply of chemicals that meet ultra-pure standards. These pose logistical and infrastructural challenges for India’s ambitions.
To address bottlenecks, New Delhi has broadened its incentive scheme. The government now covers 50% of project costs for all fabs and OSAT units, regardless of chip size. Previously, incentives were largely reserved for advanced chips of 28nm or below.
Another new initiative provides financial support for domestic electronic component manufacturing, helping create a buyer-supplier ecosystem that can sustain local chip demand. This is seen as crucial in ensuring long-term growth for India’s semiconductor industry.
The Tata-Powerchip project in Gujarat remains India’s flagship effort, while the Clas-SiC-SiCSem venture represents the first step toward diversifying into compound semiconductors. These facilities could play a critical role in powering industries such as defense, AI, and renewable energy.
According to PwC India, the next 3–4 years will be decisive. Establishing operational fabs, ensuring supply chain readiness, and overcoming infrastructural barriers will determine whether India can move beyond promises to actual production.
However, achieving breakthroughs in 2nm chips — the cutting-edge technology being mass-produced by Taiwan Semiconductor Manufacturing Company (TSMC) later this year — remains far out of reach. While India has a strong base in design talent, the core intellectual property for advanced chip design is concentrated in the U.S., Europe, and Singapore.
Indian engineers are often tasked with non-core activities such as design validation and testing, but moving into core design and IP ownership will require updated intellectual property laws and stronger enforcement mechanisms.
India’s $18 billion semiconductor push reflects both ambition and urgency in a world where chips are often called the “new oil” of the digital age. With favorable policies, significant investments, and a pool of engineering talent, New Delhi has the foundation to carve out a place in the global supply chain.
Yet, challenges in infrastructure, IP protection, and advanced manufacturing capabilities mean the journey will be long and complex. If India succeeds, it will not only reduce its import dependence but also emerge as a key player in shaping the future of global technology.
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