India’s Semiconductor Ambitions

Apr 09, 2025

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Key Points

Research suggests India has potential to become a global semiconductor hub, driven by government support and growing demand.
It seems likely that challenges like high costs and infrastructure gaps could slow progress, but strategic partnerships may help.
The evidence leans toward India focusing on design and niche manufacturing initially, with a possible significant role by 2035.

Introduction

India’s ambition to become a global semiconductor manufacturing hub is a complex journey, shaped by its current capabilities, global trends, and domestic policies. Semiconductors are critical for modern technology, and recent supply chain disruptions have highlighted their strategic importance. India, heavily reliant on imports, is now pushing to build a domestic ecosystem. This response explores whether India can achieve this goal, considering opportunities, challenges, and strategic pathways.

Current Landscape

India has strengths in semiconductor design, with 20% of the global design workforce, and is investing heavily through initiatives like the India Semiconductor Mission (ISM), offering up to 50% financial support for projects. Private investments, such as Micron’s $2.75 billion ATMP plant in Gujarat and Tata’s $11 billion fab with Taiwan’s PSMC, show progress. However, manufacturing infrastructure lags, with only the Semi-Conductor Laboratory (SCL) in Mohali currently operational, though modernizing with a $2 billion investment.

Global and Domestic Opportunities

Globally, U.S.-China tensions are pushing companies to diversify, benefiting India. Domestically, growing electronics demand (projected to reach $400 billion by 2025) and government incentives create opportunities. India’s cost competitiveness and talent pool are advantages, supported by partnerships like those with the U.S. and Japan.

Challenges Ahead

High capital costs (fabs can cost over $20 billion), infrastructure needs (e.g., ultra-pure water, power), and an immature supply chain pose significant hurdles. Competition from Taiwan, South Korea, and emerging markets like Vietnam adds pressure, alongside the need for skilled manufacturing talent.

Looking Forward

India could aim for a 5-10% global market share by 2035, focusing on design, ATMP, and niche areas. Success depends on policy stability, public-private collaboration, and overcoming execution risks. While the path is challenging, the potential economic and strategic benefits are substantial.

Comprehensive Analysis: India’s Semiconductor Ambitions

India’s pursuit to become a global semiconductor manufacturing hub is a multifaceted endeavor, driven by strategic imperatives and global industry dynamics. This analysis delves into the current status, global context, opportunities, challenges, case studies, and strategic recommendations, providing a detailed examination of whether India can achieve this goal by 2035.

Introduction: The Strategic Imperative of Semiconductors

Semiconductors are the backbone of modern electronics, powering devices from smartphones to automotive systems and AI technologies. The global semiconductor market, valued at approximately $650 billion in 2023, is projected to exceed $1 trillion by 2030, according to industry reports. Recent supply chain vulnerabilities, exacerbated by the COVID-19 pandemic, have underscored the need for diversified manufacturing bases. For instance, shortages in 2021-2022 led to price spikes and production delays, highlighting the risks of concentrated production in a few countries like Taiwan and China.

India, currently importing over 90% of its semiconductor needs, faces a significant import bill, estimated at $64 billion by 2026. To reduce this dependency and capitalize on global demand, India has launched ambitious initiatives under the “Make in India” and “Atmanirbhar Bharat” frameworks. The government aims to build a domestic ecosystem encompassing design, fabrication, and packaging, positioning India as a potential global hub.

Current Status of India’s Semiconductor Ecosystem

India’s semiconductor journey began with the establishment of the Semi-Conductor Laboratory (SCL) in Mohali in 1984, under the Ministry of Electronics & Information Technology (MeitY). SCL, India’s first and only operational fab, focuses on R&D for strategic sectors like space and defense, utilizing an 8" CMOS and 6" MEMS wafer fabrication line with 180 nm technology. Recent developments include a $2 billion modernization plan, as announced by Union Minister Rajeev Chandrasekhar in May 2023, to enhance production capacity and support chip design startups (SCL Official Website).

While India excels in design, hosting 20% of the world’s semiconductor design talent, manufacturing capabilities remain limited. However, recent government and private sector commitments signal progress:

Government Initiatives: The India Semiconductor Mission (ISM), launched in December 2021 with a $10 billion incentive package, provides up to 50% financial support for eligible projects, including fabs, design centers, and ATMP facilities. The Production-Linked Incentive (PLI) scheme further incentivizes domestic manufacturing, with a budget allocation of ₹69.03 billion (USD $825 million) in 2024 for the sector, as per Forbes India.
Private Sector Commitments: Micron Technology’s $2.75 billion ATMP plant in Sanand, Gujarat, is a landmark investment, expected to create 5,000 direct jobs and 15,000 indirect jobs, with operations starting by late 2024 (Hindustan Times). Tata Group, partnering with Taiwan’s PSMC, plans a $11 billion fab in Dholera, Gujarat, while Foxconn and HCL are investing in OSAT units, with Foxconn committing $37.2 million for a 40% equity stake (LiveMint).

Academic institutions like the Indian Institutes of Technology (IITs) provide a strong R&D foundation, but manufacturing gaps, particularly in advanced fabs, remain a challenge.

Global Context: Comparing India with Established Players

To gauge India’s potential, a comparison with established semiconductor hubs is essential:

Taiwan dominates with TSMC accounting for 54% of global foundry revenue in 2020, as per CSIS. South Korea excels in memory chips, while the U.S. focuses on design, with the CHIPS and Science Act aiming to reshore manufacturing. Emerging competitors like Vietnam and Malaysia are also attracting investments due to lower costs.

Geopolitical dynamics, particularly U.S.-China tensions, are reshaping supply chains. The “China+1” strategy encourages diversification, with India benefiting from partnerships like the U.S.-India Semiconductor Supply Chain and Innovation Partnership, signed in June 2023 (State Department).

Opportunities for India: Leveraging Strengths

India’s path to becoming a semiconductor hub is supported by several opportunities:

Growing Domestic Demand: The electronics market is projected to reach $400 billion by 2025, driven by smartphones, EVs, and AI, according to India-Briefing. This creates a strong case for local production.
Government Incentives: ISM and PLI schemes offer significant financial support, with examples like Tata Electronics receiving 50% support for its $10.44 billion Gujarat project, expected to create over 20,000 jobs (NDTV Profit).
Talent Pool: India’s 20% share of global design talent, supported by institutions like IITs, is a key asset. The country produces thousands of engineering graduates annually, as noted in ITIF.
Strategic Alliances: Collaborations with the U.S., Japan, and Taiwan are enhancing technology transfer. For instance, Singapore and India signed agreements in 2024 for semiconductor cluster development (Economic Times).
Cost Competitiveness: Lower labor costs compared to Taiwan and South Korea make India attractive for manufacturing, as highlighted in Jefferies Report.

Key Challenges: Navigating the Road Ahead

Despite these opportunities, India faces significant challenges:

Capital Expenditure: Semiconductor fabs require massive investments, with advanced facilities costing over $20 billion. For example, Tower Semiconductor and Adani Group’s $10 billion fab proposal is under review, as per Business Standard.
Infrastructure Needs: Manufacturing demands ultra-pure water, uninterrupted power, and advanced logistics. Developing this infrastructure is a long-term challenge, as noted in discussions with global firms like TSMC (Economic Times).
Supply Chain Development: India’s local supply chain is nascent, relying heavily on imports for raw materials and equipment, with a projected import bill of $64 billion by 2026 (Economic Times).
Talent Development: While design talent is strong, there is a shortage of skilled technicians for manufacturing. Programs like Assam’s training of 1,500 youths for leadership roles in its semiconductor unit are steps forward (MSN).
Regulatory Processes: Delays in approvals, as seen with Vedanta-Foxconn’s stalled project, can deter investors, according to India-Briefing.
Global Competition: India competes with established hubs like Taiwan (63.8% of global manufacturing) and emerging markets like Vietnam, as per Global Taiwan Institute.

Case Studies: Learning from Experience

SCL Mohali: India’s first fab unit, SCL has contributed to strategic missions like Chandrayaan-3, producing chips for space applications. Its modernization, with a $2 billion investment, aims to support startups, as per Financial Express.
Micron’s ATMP Plant: Micron’s $2.75 billion facility in Gujarat, operational by late 2024, will focus on packaging and testing, creating 20,000 jobs and serving as a catalyst for ecosystem development, according to Fortune India.
Global Examples: Taiwan’s success is rooted in early R&D investment and government support, while South Korea’s chaebol model (e.g., Samsung) integrated design and manufacturing. China’s state-driven approach faced challenges in technology transfer, as per CSIS.

Strategic Recommendations: Charting the Path Forward

To realize its ambition, India should:

Ensure Policy Stability: Maintain long-term incentives to build investor confidence, as suggested in ITIF.
Focus on Niches: Initially target chip design, ATMP, and compound semiconductors, leveraging existing strengths, as per Economic Times.
Strengthen Public-Private Partnerships: Foster collaboration for innovation and skill development, as seen in Micron’s engagement with Gujarat universities (Forbes India).
Invest in Infrastructure: Prioritize power, water, and logistics to support manufacturing, as highlighted in Deloitte Insights.
Launch Talent Programs: Develop targeted training for manufacturing roles, building on initiatives like Assam’s youth training program (Hindustan Times).

Conclusion: A Realistic Timeline and Potential

By 2035, India could aim for a 5-10% share of the global semiconductor market, focusing on design services, ATMP, and niche manufacturing like legacy nodes or compound semiconductors. This timeline aligns with industry projections, given the decadal nature of semiconductor ecosystem development, as noted by Minister Rajeev Chandrasekhar (LiveMint). Critical success factors include sustained policy support, robust partnerships, and overcoming execution risks like global market downturns. The potential benefits—economic growth, job creation, and strategic autonomy—are substantial, positioning India as a key player in the global supply chain.

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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.

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India’s Semiconductor Ambitions