A robotic machine manufactures a semiconductor chip at a stall to show investors during The Advantage Assam 2.0 Investment Summit in Guwahati, India, on Feb. 25, 2025.
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India wants to become a global chip major, but the odds are steep: competition is fierce, and India is a late entrant in the race to make the most advanced chips.
In 2022, when the U.S. restricted exports of its advanced AI chips to China to curb Beijing’s access to cutting-edge technology, a global race for semiconductor self-reliance began.
For India, it offered an opportunity: the country wants to reduce dependence on imports, secure chips for strategic sectors, and capture a bigger share of the global electronics market shifting away from China.
India is one of the world’s largest consumers of electronics, but it has no local chip industry and plays a minimal role in the global supply chain. New Delhi’s “Semiconductor Mission” aims to change that.
The ambition is bold. It wants to create a full supply chain — from design to fabrication, testing and packaging — on Indian soil.
As of this month, the country has approved 10 semiconductor projects with total investment of 1.6 trillion rupees ($18.2 billion). These include two semiconductor fabrication plants, and multiple testing and packing factories.
India also has a pool of engineering talent that is already employed by global chip design companies.
Yet progress so far has been uneven, and neither the investments nor talent pool is enough to make India’s chip ambitions a reality, say experts.
“India needs more than a few fabs or ATP facilities (i.e., more than a few “shiny objects.”) It needs a dynamic and deep and long-term ecosystem,” said Stephen Ezell, vice president for global innovation policy at the Information Technology and Innovation Foundation, a science and technology policy think tank.
Ezell says that leading semiconductor manufacturers consider “as many as 500 discrete factors” before they set up multi-billion-dollar fab investments. These include talent, tax, trade, technology policies, labor rates and laws and customs policies — all areas where India has work to do.
New Delhi’s policy push
In May, the Indian government added a new element to its chip ambition: a scheme to support electronic component manufacturing, addressing a critical bottleneck.
Until now, chipmakers had no local demand for their product as there are hardly any electronic component manufacturing companies, such as phone camera companies, in India.
Researchers inside the semiconductor fabrication lab at the Centre for Nano Science and Engineering, at the Indian Institute of Science, in Bangalore.
Manjunath Kiran | Afp | Getty Images
But the new policy offers financial support to companies producing active and passive electronic components, creating a potential domestic buyer-supplier base that chip manufacturers can plug into.
In 2022, the country also pivoted from its strategy of providing superior incentives to fabrication units making chips of 28nm or less. When it comes to chips, the smaller the size, the higher the performance with improved energy efficiency. These chips can be used in new technologies like advanced AI and quantum computing by packing more transistors into the same space.
But this approach wasn’t helping India develop its nascent semiconductor industry, so New Delhi now covers 50% of project costs of all fabrication units, regardless of chip size, and of chip testing and packing units.
Fab companies from Taiwan and the U.K., and semiconductor packaging companies from the U.S. and South Korea have all shown interest in aiding India’s semiconductor ambitions.
“The Indian government has doled out generous incentives to attract semiconductor manufacturers to India,” said Ezell, but he stressed that “those sorts of investments aren’t sustainable forever.”
The long road
The biggest chip project in India currently is the 910-billion-rupee ($11 billion) semiconductor fabrication plant being built in Prime Minister Narendra Modi’s home state of Gujarat by Tata Electronics, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp.
The unit will make chips for power management integrated circuits, display drivers, microcontrollers and high-performance computing logic, Tata Electronics said, which can be used in AI, automotive, computing and data storage industries.
The U.K.’s Clas-SiC Wafer Fab has also tied up with India’s SiCSem to set up the country’s first commercial compound fab in the eastern state of Odisha.
These compound semiconductors can be used in missiles, defence equipment, electric vehicles, consumer appliances and solar power inverters, according to a government press release.
“The coming 3-4 years is pivotal for advancing India’s semiconductor goals,” said Sujay Shetty, managing director of semiconductor at PwC India.
Establishing operational silicon fabrication facilities and overcoming technical and infrastructural hurdles that extend beyond incentives will be a key milestone, according to Shetty.
Opportunities beyond fab
Fabrication sites need to meet stringent requirements, such as being in areas free from floods and vibrations, with reliable road connectivity — which can present ongoing logistical considerations for some regions.
India also needs specialty chemical suppliers that meet “ultra-high purity standards essential for advanced semiconductor manufacturing,” Shetty added.
Beyond chip fabrication plants, many medium-sized companies in India have shown interest in setting up chip testing and packaging units. Several Indian groups are also entering the segment, attracted by its higher margins and lower capital intensity compared to fabs.
“Outsourced semiconductor assembly and testing (OSAT) represents a significant opportunity for India, though clarifying market access and demand channels will be important for sustained growth,” says Shetty.
Success in this area will see India enter the global chip industry, but New Delhi is still a long way from locally developing and manufacturing the cutting-edge of chip technology: 2nm semiconductors.
These 2nm chips offer better performance and power efficiency due to their smaller transistor size. Taiwan Semiconductor Manufacturing Corporation will start mass-producing cutting-edge 2nm chips later this year, according to an FT report.
NEW DELHI, INDIA – MAY 14: Union Minister of Railways, Information and Broadcasting, Electronics and Information Technology Ashwini Vaishnaw briefing the media on Cabinet decisions at National Media Centre on May 14, 2025 in New Delhi, India.
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Last week, Indian minister Ashwini Vaishnaw, who was in Bengaluru to inaugurate a new office of semiconductor design firm ARM, said the British company will design the “most advanced chips used in AI servers, drones, mobile phone chips of 2 nm” from the south Indian city.
But experts say the role of local talent is likely to be limited to non-core design testing and validation, as the core intellectual property for chip designs is often held in locations like the U.S. or Singapore, where established IP regimes support such activities.
“India has sufficient talent in design space, because unlike semiconductor manufacturing and testing that has come up in the last 2 years, design has been there since 1990s,” said Jayanth BR, a recruiter with over 15 years of experience in hiring for global semiconductor companies in India.
He said global companies usually outsource “block-level” design validation work to India.
Going beyond this is something India’s government will need to solve if it wants to fulfil its semiconductor ambitions.
“India may consider updating its IP laws to address new forms of IP, like digital content and software. Of course, improving enforcement mechanisms will go a long way in protecting IP rights,” says Sajai Singh, a partner at Mumbai-based JSA Advocates & Solicitors.
“Our competition is with countries like the U.S., Europe, and Taiwan, which not only have strong IP laws, but also a more established ecosystem for chip design.”