08 October 2022
India is investing heavily in semiconductor manufacturing and design, aiming to build a self-reliant chip ecosystem and capture a share of the global market.
The semiconductor shortage of 2020-2022 exposed the vulnerabilities of global chip supply chains. For India, heavily dependent on semiconductor imports, this was a wake-up call. The government has responded with an ambitious plan to build a domestic semiconductor ecosystem, offering incentives worth ₹76,000 crore to attract chip manufacturing and design to India.
India aims to establish semiconductor fabrication plants (fabs). While building leading-edge fabs is challenging and expensive, India is targeting mature process nodes (28nm and above) where demand remains strong. ISMC Digital, a consortium involving Tower Semiconductor, has announced plans for a $3 billion fab in Karnataka. Vedanta-Foxconn is planning another major facility.
India already has significant semiconductor design capabilities. Major global chip companies have design centers in India, employing thousands of engineers. The country produces a substantial portion of the world’s chip designers. The challenge is translating this design strength into domestic manufacturing.
While fabs get attention, assembly, testing, and packaging (ATMP) are also critical. These activities are less capital-intensive than fabs and can be established more quickly. Several companies are setting up ATMP facilities in India, creating a foundation for the broader ecosystem.
The government’s Production Linked Incentive (PLI) scheme for semiconductors offers substantial financial support. Beyond manufacturing incentives, policies support design, R&D, and skill development. States are competing to attract semiconductor investments with additional incentives and infrastructure support.
Building a semiconductor ecosystem is a long-term endeavor. Fabs take years to build and require massive capital investment. The technology is complex and rapidly evolving. Water and power requirements are substantial. And global competition for semiconductor investments is intense.
Semiconductors are strategic for multiple reasons. They are essential for electronics manufacturing, a priority sector for India. They are critical for defense and national security. And they represent high-value manufacturing that can create quality employment.
India’s semiconductor ambition is bold but necessary. While achieving self-sufficiency in semiconductors is a long-term goal, building significant domestic capabilities is achievable. The investments being made today will position India as a meaningful player in the global semiconductor industry over the coming decade.
