India aspires to become a global chip powerhouse, but this goal appears daunting given fierce competition. India is a latecomer to the race for advanced chips, lacks a domestic chip industry, and plays a limited role in the global supply chain.
But the country’s ambitious “Semiconductor Initiative” aims to change this. This ambitious plan aims to establish a complete supply chain in India—from design to manufacturing, testing, and packaging.
As of this month, India has approved 10 semiconductor projects with a total investment of 1.6 trillion rupees (approximately US$18.2 billion). The Latest News has learned that these projects include two semiconductor manufacturing plants and several testing and packaging facilities.
Building a Sustainable Ecosystem
Veteran experts point out that India’s progress on this initiative is uneven, and that neither the investment scale nor the talent pool is sufficient to make its chip development plan a reality.
Stephen Ezell, vice president of global innovation policy at the Information Technology and Innovation Foundation, a technology policy research organization, said, “India needs much more than a few fabs or automated test facilities. It needs a vibrant, deep, and long-term sustainable ecosystem.”
Ezell also noted, “Leading semiconductor manufacturers consider up to 500 different factors before making fab investment decisions. These factors include talent, taxation, trade, technology policy, labor costs, and legal and customary policies—areas where India still has significant room for improvement.”
New Delhi’s Policy Initiatives
In May, the Indian government added a new component to its chip development plan: a program to support electronic component manufacturing to address a key bottleneck in the entire industry.
Previously, chipmakers had no local market demand in India, as the country had few electronic component manufacturers, such as those that make mobile phone cameras.
But this new policy provides financial support to local companies producing active and passive electronic components, creating a potential pool of domestic buyers and suppliers with which chipmakers can connect.
“The Indian government has introduced many incentives to attract semiconductor manufacturers to India,” said Ezell, but he also emphasized that “this type of investment cannot continue forever.”
The Road Ahead is Long
Currently, India’s largest chip project is a 910 billion rupee (approximately $11 billion) semiconductor manufacturing facility being built by Tata Electronics in Gujarat in partnership with United Microelectronics Corporation.
Tata Electronics says the facility will produce power management integrated circuits, display drivers, microcontrollers, and high-performance computing logic chips for applications in industries such as artificial intelligence, automotive, computing, and data storage.
Furthermore, recent news indicates that the UK-based Clas-SiC Wafer Fab has partnered with India’s SiCSem Semiconductor to establish the country’s first commercial compound semiconductor plant in Odisha, eastern India.
According to an Indian government announcement, these compound semiconductors can be used in missiles, defense equipment, electric vehicles, home appliances, and solar inverters.
Sujay Shetty, semiconductor leader at PwC India, stated, “The next three to four years will be critical for advancing India’s semiconductor development goals.”
Shetty also noted that establishing silicon chip manufacturing plants and overcoming various technical and infrastructure challenges beyond the scope of incentives will be a significant milestone.
In addition to chip manufacturing plants, many mid-sized Indian companies have expressed interest in establishing chip testing and packaging operations. Some Indian conglomerates have also entered this sector, citing higher profit margins and lower capital investment requirements compared to chip manufacturing.
Shetty believes that “the outsourced semiconductor assembly and test (OSAT) sector represents a significant opportunity for India, but clarifying market entry criteria and demand channels will be crucial for sustained growth.”
Success in this area would position India for entry into the global chip industry, but the country still has a long way to go before it can domestically develop and manufacture cutting-edge chip technology, such as 2nm semiconductors.
