Forging India’s Silicon Future
An Analysis of Government Initiatives to Establish a Semiconductor Hub
Key Points
Research suggests India’s government is actively working to establish a semiconductor hub through initiatives like the India Semiconductor Mission (ISM), with significant financial outlays and partnerships.
It seems likely that these efforts aim to boost economic growth, create jobs, reduce import dependence, enhance national security, and foster technological self-reliance.
The evidence leans toward challenges like high capital costs and infrastructure gaps, but opportunities include a large domestic market and geopolitical advantages.
Strategic Rationale
India’s semiconductor ambitions are driven by the need to reduce reliance on imports, currently over $38 billion annually, and build a self-reliant ecosystem. This aligns with economic growth goals, creating high-value jobs, and enhancing national security, especially in defense and telecom sectors. The growing domestic demand for electronics, projected to reach $103.4 billion by 2030, and geopolitical shifts, like US-China tensions, position India as an alternative in global supply chains.
Policy Initiatives and Financial Outlays
The ISM, launched in 2021 with ₹76,000 crore ($10 billion), is central to these efforts. Key schemes include:
50% fiscal support for semiconductor fabs, like Tata-PSMC’s $11 billion fab in Gujarat.
DLI scheme supporting 12 startups with ₹11-12 billion for chip design.
ATMP facilities, such as Micron’s $2.75 billion plant in Gujarat, receiving 50% central and 20% state funding.
These initiatives aim to attract global players and foster domestic innovation, with total incentives estimated at ₹2.3 trillion ($30.16 billion).
Investment and Collaboration Landscape
Major investments include Tata Group’s $14.26 billion in fabs and ATMP facilities, Micron’s $825 million, and CG Power’s $916 million with Japanese partners. Collaborations with the US, Japan, Taiwan, and Malaysia highlight India’s appeal, driven by incentives and a growing market. However, high capital costs and competition pose challenges.
Ecosystem Development
Beyond manufacturing, India focuses on design (DLI scheme), R&D (AMD-IIT Bombay partnership), and workforce training (Tata training 1,500 youths, government targeting 85,000 engineers by 2025). These efforts aim to build a skilled talent pool and foster innovation.
Infrastructure and Supply Chain
Land allocations, like 48 acres in Noida for HCL-Foxconn, and EMCs in Karnataka support infrastructure. However, water and power supply remain bottlenecks. Supply chain integration with global partners is underway, but local supplier development is crucial.
Challenges and Opportunities
Challenges include high costs, infrastructure gaps, and competition from China and Taiwan. Opportunities lie in a large domestic market, government support, and geopolitical shifts, aiming for 10% global share by 2030 and 20-25% by 2047.
Future Outlook and Recommendations
India’s sector is poised for growth with operational facilities by 2025, but achieving long-term goals requires sustained efforts. Recommendations include expanding incentives, investing in talent, developing infrastructure, fostering R&D, and ensuring policy stability.
Survey Note: Forging India’s Silicon Future:
India’s ambition to become a global semiconductor hub is a strategic endeavor, reflecting its broader goals of economic growth, technological self-reliance, and national security. As of April 8, 2025, the government has launched a series of initiatives to foster a robust semiconductor ecosystem, covering design, manufacturing, and assembly, testing, marking, and packaging (ATMP). This survey note provides a detailed analysis of these efforts, drawing on recent developments and projections.
Strategic Rationale Behind India’s Semiconductor Ambitions
The strategic rationale for India’s semiconductor push is multifaceted, driven by economic, technological, and geopolitical imperatives. Research suggests that the global semiconductor industry, valued at over $500 billion and projected to reach $1 trillion by 2030, is critical for modern electronics, including smartphones, EVs, and AI systems. India, currently importing over $38 billion worth of semiconductors annually, aims to reduce this dependence to mitigate supply chain vulnerabilities, as highlighted during the COVID-19 pandemic. The evidence leans toward economic growth and job creation as key drivers, with the sector offering high-value employment opportunities. National security is another priority, given semiconductors’ role in defense and telecommunications, ensuring greater control over critical technologies. Technological self-reliance is also central, aligning with the “Atmanirbhar Bharat” vision to move up the global value chain. Geopolitical advantages are evident, with India positioning itself as an alternative to China amid US-China tensions, leveraging its democratic credentials and growing ties with Western nations. The domestic market, projected to grow from $52 billion in 2024 to $103.4 billion by 2030, driven by mobile handsets, IT, telecommunications, consumer electronics, automotive, aerospace, and defense, further supports this ambition. The government’s target of achieving 10% global semiconductor production by 2030 and potentially 20-25% by 2047 underscores its long-term vision.
Key Policy Initiatives and Financial Outlays
The India Semiconductor Mission (ISM), launched in December 2021, is the cornerstone of India’s strategy, with an initial outlay of ₹76,000 crore (approximately $10 billion). This specialized division within the Digital India Corporation aims to build a vibrant semiconductor and display ecosystem, enabling India’s emergence as a global hub for electronics manufacturing and design. Key policy initiatives include:
Modified Scheme for Semiconductor Fabs: Offers 50% fiscal support on capital expenditure for setting up fabrication plants (fabs) across all technology nodes. A notable example is Tata Electronics’ partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp (PSMC) for a $11 billion fab in Dholera, Gujarat, focusing on 28-nanometer technology for automotive, consumer electronics, and defense sectors.
Modified Scheme for Compound Semiconductors/ATMP/OSAT Facilities: Provides 50% fiscal support for capital expenditure on compound semiconductors, silicon photonics, sensors fabs, and ATMP facilities. For instance, CG Power, in collaboration with Japan’s Renesas Electronics and Thailand’s Stars Microelectronics, is setting up a $916 million specialized chip facility in Sanand, Gujarat, with a daily production capacity of 15 million chips for niche sectors like defense and EVs.
Design Linked Incentive (DLI) Scheme: Supports semiconductor design startups with financial assistance. As of 2025, 12 startups have received support out of 59 applicants, with 21 under review, and incentives ranging from ₹11-12 billion (approximately $132-144 million). This scheme aims to foster innovation in chip design, with companies like Saankhya Labs and Mindgrove Technologies benefiting.
Program for Development of Semiconductors and Display Manufacturing Ecosystem: Approved with a package of ₹760 billion (> $10 billion), this initiative includes total incentives estimated at ₹2.3 trillion ($30.16 billion), aiming to attract international manufacturers and support local innovation.
Other supporting schemes include the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Production Linked Incentive (PLI) for large-scale electronics manufacturing, which boost domestic value addition and attract investments. These initiatives are crucial for creating a competitive environment, with recent approvals like Kaynes Semicon’s $394 million unit in Sanand, Gujarat, and Tata Semiconductor Assembly and Test Pvt Ltd’s (TSAT) $3.26 billion facility in Morigaon, Assam, underlining the government’s commitment.
Investment and Collaboration Landscape
India has successfully attracted significant investments from both domestic and international players, reflecting its growing appeal as a semiconductor hub. Key investments include:
Tata Group: With a total investment of $14.26 billion, Tata Electronics, in partnership with PSMC, is establishing India’s first state-of-the-art fab in Dholera, Gujarat, while TSAT is setting up an ATMP facility in Morigaon, Assam, focusing on advanced packaging technologies for automotive and consumer electronics.
Micron Technology: The US-based company is investing $825 million in an ATMP plant in Sanand, Gujarat, with total project costs, including government incentives, reaching $2.75 billion. This facility, operational by early 2025, is expected to create 5,000 direct jobs and 15,000 community employment opportunities, with 50% funding from the central government and 20% from Gujarat state.
CG Power-Renesas-Stars Microelectronics: A $916 million project for specialized chip manufacturing in Sanand, Gujarat, catering to defense, space, EVs, and high-speed trains, with a daily production capacity of 15 million chips.
Kaynes Semicon: Approved for a $394 million unit in Sanand, Gujarat, under the ISM, marking the fifth unit in the region.
International collaborations are pivotal, with strategic partnerships enhancing India’s position:
US-India Partnership: Through initiatives like the Initiative on Critical and Emerging Technology (iCET), signed in January 2023, both nations are deepening cooperation in semiconductors, focusing on R&D, student exchanges, and supply chain resilience.
Malaysia-India Collaboration: As of March 18, 2025, Malaysia expressed interest in partnering with India in semiconductor equipment, assembly, and testing, leveraging India’s expertise and creating prospects for trilateral business partnerships with companies having operations in both countries.
Japan: Japanese firms like Renesas Electronics are investing, as seen in the CG Power collaboration.
Taiwan: PSMC’s partnership with Tata Electronics highlights Taiwan’s role in technology transfer, crucial for advanced manufacturing.
Factors attracting these investments include government incentives (up to 50% reimbursement of project costs), a growing domestic market projected to triple from $38 billion in 2023 to $109 billion by 2030, and geopolitical stability. However, challenges in securing more investments include high capital costs, competition from established hubs like China and Taiwan, and the need for a robust local ecosystem, which major players often wait for before committing.
Ecosystem Development: Beyond Manufacturing
India’s focus extends beyond manufacturing to building a comprehensive semiconductor ecosystem, encompassing design, R&D, and workforce development:
Design and Innovation: The DLI scheme is a cornerstone, providing financial assistance to startups for chip design. As of 2025, 12 startups, including Saankhya Labs, Mindgrove Technologies, and Numelo Technologies, have received support, with 21 under review. The scheme has allocated ₹11-12 billion (approximately $132-144 million), fostering innovation in areas like energy-efficient Spiking Neural Network (SNN) chips. AMD’s partnership with the Society for Innovation and Entrepreneurship (SINE) at IIT Bombay, announced on July 15, 2024, provides grants to startups, with Numelo Technologies receiving the first grant for ultralow power quantum tunneling on silicon on insulator (SOI) technology.
Research and Development: Academic institutions play a vital role, with collaborations like AMD-IIT Bombay enhancing R&D capabilities. The government is also modernizing the Semiconductor Laboratory (SCL) in Mohali with a $1 billion investment to achieve volume production and create profitable assets, focusing on indigenous chip development.
Skilled Workforce Development: Training programs are a priority, with Tata Group training 1,500 youths from Assam, predominantly women, at its facilities in Bangalore for leadership roles in its upcoming semiconductor facility in Jagiroad, Assam, set to begin operations in 2025. The government has launched an initiative to train 85,000 engineers in advanced semiconductor and electronics manufacturing by 2025, addressing the talent gap. This is particularly relevant for regions like Madhya Pradesh, where skill development programs could create opportunities for ancillary industries in the long run.
Government Schemes: Schemes like SPECS and PLI for large-scale electronics manufacturing and IT hardware indirectly support the ecosystem by boosting domestic electronics production, creating a demand pull for semiconductors.
These efforts are crucial for fostering innovation, ensuring a steady supply of talent, and building a self-sustaining ecosystem, with startups like Terminus Circuits, Morphing Machines, and FermionIC Design strengthening the foundation.
Infrastructure and Supply Chain Considerations
Semiconductor manufacturing is infrastructure-intensive, requiring reliable power, water, logistics, and a robust supply chain. The government’s plans and actions include:
Land Allocation and Industrial Parks: Dedicated land parcels are being allocated for semiconductor projects. For instance, the Yamuna Expressway Industrial Development Authority (YEIDA) provided a 48-acre land parcel in Noida Sector 28, Uttar Pradesh, to Vama Sundari Investments, a joint venture between HCL Group and Foxconn, as reported on March 9, 2025. This location features critical infrastructure, including proximity to the Medical Device Park and other operational industries, facilitating logistics and supply chain integration.
Electronics Manufacturing Clusters (EMCs): States like Karnataka are developing EMCs, with two clusters in Mysuru and Hubballi receiving letters of intent from electronics manufacturers, supported by the “Special Incentives Scheme for the ESDM Sector 2020–2025,” which includes a 20% capital investment subsidy for plants and machines, 25% subsidy for land up to 50 acres, and reimbursements for stamp duties and electricity duties.
Resource Management: Semiconductor fabs are water-intensive, with challenges in ensuring sustainable water supply. The government needs to implement efficient water management strategies, especially in water-scarce regions, to support operations.
Power and Logistics: Reliable power supply is critical, with states like Gujarat and Assam offering incentives for power infrastructure. Logistics infrastructure, including connectivity to ports for exports, is being enhanced, but bottlenecks remain in last-mile connectivity.
Supply Chain Integration: India is working on reducing dependencies on imports by developing local suppliers for critical components and materials. Collaborations with Malaysia, as mentioned on March 18, 2025, aim to integrate supply chains, creating prospects for trilateral partnerships. The US-India Semiconductor Supply Chain and Innovation Partnership, signed in March 2023, focuses on deepening cooperation in supply chain resilience.
Potential bottlenecks include inconsistent power supply, water scarcity, and underdeveloped local supplier ecosystems. Strategies to address these include targeted investments in infrastructure, incentivizing local manufacturing of components, and fostering public-private partnerships for supply chain development.
Challenges and Opportunities: A Critical Evaluation
India’s semiconductor ambitions face significant challenges but also present substantial opportunities:
Challenges:
High Capital Costs: Setting up semiconductor fabs requires billions of dollars, with projects like Tata-PSMC’s $11 billion fab illustrating the scale. This high barrier can deter smaller players and increase reliance on government subsidies.
Infrastructure Gaps: Reliable power, water, and logistics infrastructure are essential, but gaps persist, particularly in water management and last-mile connectivity, as noted in recent assessments.
Skilled Workforce Shortage: Despite training programs, there is a shortage of specialized talent in semiconductor manufacturing and design, with the government aiming to train 85,000 engineers by 2025 to bridge this gap.
Competition from Established Players: China, with a 30% global market share, and Taiwan, dominating 90% of advanced chip production, pose significant competition, requiring India to differentiate through incentives and innovation.
Supply Chain Dependencies: India currently relies on imports for critical components, with local value addition targeted at 25% by 2025-26 and 40% by 2030, necessitating rapid development of domestic suppliers.
Policy Consistency: Investors need assurance of stable policies, with recent calls for continuing incentive schemes beyond the initial $10 billion allocation highlighting the need for long-term commitment.
Technology Transfer: Geopolitical restrictions, particularly US-China tensions, can hinder access to advanced technology, requiring strategic partnerships for knowledge transfer.
Opportunities:
Large Domestic Market: With a population of over 1.4 billion and growing digitization, demand for semiconductors in consumer electronics, automotive (especially EVs), telecommunications (5G rollout), and AI is rising rapidly. The market is projected to reach $103.4 billion by 2030, driven by mobile handsets, IT, and industrial applications contributing nearly 70% of revenue.
Government Support: The ISM, with its $10 billion outlay, and additional schemes like DLI and PLI, provide a competitive edge, attracting investments and fostering innovation. Recent approvals, like five major projects under ISM, signal transformative growth.
Geopolitical Advantages: Amidst global supply chain diversification, India is seen as a reliable alternative to China, with partnerships like iCET with the US and collaborations with Japan and Taiwan enhancing its position. This is particularly relevant given Trump’s reciprocal tariff policies, creating opportunities for India.
Skilled Talent Pool: India’s engineering talent, accounting for 20% of the world’s chip design activity, can be leveraged with proper training, as seen in Tata’s training programs and government initiatives.
Diversification of Supply Chains: Global companies, reacting to US-China tensions, are looking to diversify, with India attracting investments like Micron’s $2.75 billion facility, potentially producing up to one-quarter of Apple’s phones by 2025.
Innovation and Startups: A vibrant startup ecosystem, with companies like Numelo Technologies receiving grants for energy-efficient chips, drives innovation in niche areas, supported by academic collaborations like AMD-IIT Bombay.
Export Potential: Aiming for 10% global market share by 2030 offers significant export opportunities, with projections suggesting exports could reach $80 billion by 2030, leveraging India’s cost competitiveness and government incentives.
Future Outlook and Recommendations
India’s semiconductor sector is at an inflection point, with operational facilities like Micron’s ATMP plant and Tata-PSMC’s fab set to begin production by 2025, marking a crucial milestone. The evidence leans toward a promising future, with the sector poised to capitalize on global trends like generative AI and data center build-outs. However, achieving the aspirational target of 20-25% global market share by 2047 requires sustained efforts in policy consistency, infrastructure development, and talent nurturing.
Recommendations for Government and Industry Stakeholders:
Continue and Expand Incentive Schemes: Ensure the continuation of ISM and DLI schemes beyond the initial $10 billion allocation, and consider expanding incentives to cover emerging areas like quantum computing and advanced packaging, as suggested in recent IESA reports (India’s Semiconductor Market Growth).
Focus on Talent Development: Scale up training programs, targeting not just engineers but also technicians and managers, to meet industry demands. The government’s initiative to train 85,000 engineers by 2025 should be expanded, with regional centers in states like Madhya Pradesh to create ancillary industry opportunities.
Develop Infrastructure: Prioritize investments in power, water, and logistics infrastructure, particularly in key locations like Gujarat, Assam, and Uttar Pradesh. Address bottlenecks like water scarcity through public-private partnerships and incentivize renewable energy solutions for power supply.
Foster Research and Development: Encourage R&D in cutting-edge technologies like AI, 5G, IoT, and quantum computing, leveraging academic collaborations like AMD-IIT Bombay and modernizing facilities like SCL in Mohali with a $1 billion investment, as reported in recent updates (Semiconductor Industry Incentives).
Strengthen International Collaborations: Deepen ties with the US, Japan, Taiwan, and Malaysia for technology transfer and supply chain integration, building on initiatives like iCET and recent Malaysia-India discussions on March 18, 2025.
Address Supply Chain Gaps: Develop local suppliers for critical components and materials, setting targets for local value addition at 25% by 2025-26 and 40% by 2030, as outlined in IESA recommendations. This can reduce dependencies and enhance export competitiveness.
Ensure Policy Stability: Provide long-term policy certainty to build investor confidence, with consistent incentives and regulatory frameworks, addressing calls for policy predictability in recent industry assessments.
Encourage Domestic Consumption: Implement policies to boost electronics consumption, such as subsidies for EVs and smartphones, to increase demand for domestically produced semiconductors, aligning with projections of market growth to $109 billion by 2030.
Monitor and Adapt: Regularly assess progress and adapt strategies based on global market dynamics, technological advancements, and competition, ensuring agility in policy responses to maintain momentum.
These recommendations, if implemented effectively, can position India as a leading semiconductor hub, leveraging its demographic dividend, government support, and strategic partnerships to achieve its long-term goals.
Contextual Considerations
Given my current location of Indore, Madhya Pradesh, these national initiatives have implications for regional development, particularly in skill development and potential ancillary industries. The government’s focus on training 85,000 engineers by 2025 could create opportunities for Madhya Pradesh, with recent inaugurations like the state’s first IT campus, spanning 1 lakh square feet, enhancing electronics manufacturing capabilities. As of April 8, 2025, the landscape is actively evolving, with recent developments like land allocations in Noida and training programs in Assam reflecting ongoing momentum. These efforts, while national in scope, could trickle down to regions like Madhya Pradesh, fostering economic growth and technological advancement in the long run.
Conclusion
India’s journey to becoming a semiconductor hub is ambitious yet feasible, with strategic government initiatives, growing investments, and a focus on ecosystem development. By addressing challenges like high capital costs and infrastructure gaps, and capitalizing on opportunities like a large domestic market and geopolitical advantages, India can achieve its vision of technological self-reliance and global leadership in semiconductors. The first Made-in-India semiconductor chips, expected by 2025, mark a significant milestone, but sustained efforts in policy consistency, talent nurturing, and infrastructure development are essential to realize the long-term target of 20-25% global market share by 2047.
Key Citations
Disclaimer: Much of the information presented in this research article has been compiled with the assistance of artificial intelligence tools. While efforts have been made to ensure accuracy and reliability, the data and insights reflect the capabilities and limitations of these tools as of the publication date. Readers are encouraged to verify critical details from primary sources where necessary.