In today’s world with increasing dependence on devices of all kind making forays into virtually every sphere of the human life, semiconductors have emerged as the bloodline of the modern computing industry. From the smart mobile phone to bulky supercomputers and machines running on AI, semiconductors are the most essential part of these machines. Semiconductors sometimes measuring no more than 2 nanometres (nm)—are the backbone of modern electronics, indispensably lodged at the intersection of a wide range of industries, besides helping in reducing the size or miniaturising these machines.
During Covid-19 pandemic, with global supply chains disrupted, the electronics and computer industries worldwide were affected most by the shortage of semiconductors. Further adding to the woes was the US-China rivalry on semiconductors, with China restricting their supply to the US.
Given their broad applicability, countries across the globe are strategising to mitigate risks associated with over-reliance on a single supply source of semiconductor chips. This also serves to fortify national security and economic well-being, considering recent geopolitical conflicts.
Advantage India
As per a Deloitte report published in 2024, India’s semiconductor industry is on a rapid growth trajectory, driven by strong government support, strategic global partnerships and rising domestic demand. Analysts forecast that the Indian semiconductor market will be valued at $64 billion by 2026, growing at a CAGR of 19%.
At present, India has 20 per cent of the world’s semiconductor design workforce, a rapidly evolving technology landscape and a thriving domestic market, all of which are conducive in building an indigenous semiconductor ecosystem. At the governmental level, initiatives such as the National Electronics Policy or the US $10 billion PLI scheme for semiconductor manufacturing, are also boosting India’s chipmaking aspirations. The Indian government has been proactive in fostering a conducive environment for semiconductor industry in India through a series of strategic initiatives.
India Semiconductor Mission (ISM) was launched in 2021 with a substantial allocation of $10 billion. The ISM aims to establish a comprehensive semiconductor ecosystem encompassing design, fabrication, and ATP units. This mission is pivotal in reducing dependency on imports and positioning India as a global semiconductor hub.
The Indian government has allocated an additional $1.2 billion in 2024 to expand the India Semiconductor Mission (ISM). This includes funding for AI-powered semiconductor design startups and new R&D initiatives for advanced chipmaking technologies. Initiatives like Electronics Systems Design and Manufacturing (ESDM) are one of the key sectors under Make in India, or the India Semiconductor Mission and Semicon India programme have helped create an ecosystem to support the industry.
Additionally, the Product-linked Incentive (PLI) Scheme offers financial incentives to companies establishing semiconductor manufacturing facilities in India, thereby attracting both domestic and international investments. The global semiconductor market is expected to reach USD 1 Trillion by 2030 with India’s market occupying a substantial portion of it. Amidst these global vulnerabilities, India stands at a crossroads of opportunity.
Given their broad applicability, countries across the globe are strategising to mitigate risks associated with over-reliance on a single supply source of semiconductor chips. This also serves to fortify national security and economic well-being, considering recent geopolitical conflicts
India in the global semiconductor market
Though the global demand for chips is skyrocketing, the supply chain remains very fragile owing to the concentration of the industry in a few limited geographies. There is a clear need for global diversification of manufacturing worldwide. In this regard, India is emerging as a dominant player.
India has the capacity to emerge as a key contributor to the 3 primary pillars of the semiconductor manufacturing supply chain: Equipment- leveraging a strong base of MSMEs to produce components for semiconductor equipment; Materials – India is a rich source of chemicals, minerals and gases which can be utilised by semiconductor supply chain companies; and Services (R&D, logistics and supply chain), major talent in AI, big data capacity, and cloud computing expertise.
Tata Electronics (TEPL) is set to be India’s biggest semiconductor manufacturing company, with a significant investment in advanced fabrication plants (fabs) in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp (PSMC). In addition to prominent SPEL Semiconductor and Tata Elxsi, Tata Electronics’ massive investment and focus on domestic chip manufacturing position it as the leading domestic player.
To address the growing need for a skilled workforce, collaborations between industry and academia are also being strengthened. For example, under the Skill India Semiconductor Program (SISP), Tata Electronics has partnered with IIT Gandhinagar to enhance skill development in the semiconductor sector, to train 100,000 engineers in chip design, fabrication, and testing by 2025. This will ensure a steady pipeline of qualified professionals to support the industry’s expansion.
Further, to cultivate a self-reliant semiconductor ecosystem, India is focusing on several strategic areas, such as:
Building state-of-the-art fabrication plants and Advanced Technology Processing (ATP) facilities equipped with cutting-edge machinery and innovative processes to meet global industry standards and ensure high-quality production capabilities.
The $10 billion India Semiconductor Mission (ISM) aims to establish at least two cutting-edge semiconductor fabs by 2026.
Encouraging innovation through increased R&D investments is critical for driving technological advancements and economic growth. A prime example is NXP Semiconductors, which has committed over US $1 billion to strengthen its R&D efforts in India.
Forming strategic alliances with international semiconductor companies to facilitate technology transfer and best practices, is also crucial. The partnership between Israel’s Tower Semiconductor and India’s Adani Group, involving a US $10 billion semiconductor project in Maharashtra, is a testament to such collaborations.
Factors inhibiting the sector’s growth
However, India currently lacks the advanced fabrication facilities (fabs) required to produce cutting-edge chips (e.g., 5nm or 3nm nodes). The focus is currently on mature nodes and back-end processes, leaving India behind the technological frontier.
Setting up and operating semiconductor fabs is extremely expensive, requiring billions of dollars in investment and sustained R&D. Competing with established players with decades of experience requires a massive and continuous financial commitment.
Despite its large engineering talent pool, India faces a shortage of highly specialised professionals in core areas like advanced fabrication, materials science, and process engineering. Estimates suggest a talent gap of over 250,000 professionals by 2027.
Semiconductor manufacturing requires a reliable supply of high-purity water, uninterrupted power, and a robust logistics network. India’s existing infrastructure presents bottlenecks that increase operational costs and risks.
India remains heavily dependent on imports for critical raw materials, manufacturing equipment, and specialised chemicals. This reliance leaves the country vulnerable to global supply chain disruptions and geopolitical tensions.
India Semi-conductor Mission (ISM) was launched in 2021 with a substantial allocation of $10 billion. The ISM aims to establish a comprehensive semiconductor ecosystem encompassing design, fabrication, and ATP units. This mission is pivotal in reducing dependency on imports and positioning India as a global semiconductor hub
Looking Ahead
Despite, the bottlenecks, India is on a determined path to build a robust semiconductor ecosystem. The current focus on design, mature-node manufacturing, and assembly and testing is a realistic and strategic entry point into the global value chain. These developments underscore India’s emerging role as a critical player in the global semiconductor value chain, with the potential to influence global supply dynamics and drive innovation in the industry. However, Success is far from guaranteed and will hinge on India’s ability to consistently execute its ambitious plans while navigating fierce global competition besides building a robust public and private sector participation.
India imports its maximum semiconductors and raw materials from China and Taiwan, with China being a major supplier of basic and affordable chips and Taiwan being the leader in advanced, high-end components like integrated circuits. Other key suppliers to India include South Korea, Japan, Singapore, and Hong Kong.
Keeping the geopolitical sensitivities in mind and considering the recent thaw in India-China relationship, India will have to balance its imports from China and Taiwan, as Taiwanese company, the Taiwan Semiconductor Manufacturing Company (TSMC), produces over half of the world’s semiconductors, including the most advanced chips and remains one of the bigger exporters along with China to India.
Ultimately the crucial factor is to balance its imports along with increasing its manufacturing capacity utilising its talented and skilled workforce, and promoting private sector partnership
-The writer is a New Delhi-based senior commentator on international and strategic affairs, environmental issues, an interfaith practitioner, and a media consultant. The views expressed are personal and do not necessarily carry the views of Raksha Anirveda
