India’s $18 Billion Bet to Become a Semiconductor Powerhouse
India has embarked on an ambitious journey to establish itself as a major player in the global semiconductor industry by committing $18.2 billion (1.6 trillion rupees) towards building a full semiconductor supply chain. This includes chip design, fabrication, testing, and packaging, all conducted domestically to reduce reliance on imports and secure chips for critical strategic sectors. This initiative comes amid a global semiconductor race accelerated by geopolitical tensions, notably following U.S. restrictions on advanced AI chip exports to China in 2022, which spurred countries to seek semiconductor self-reliance.
Strategic Context and Market Dynamics
India, one of the world’s largest consumers of electronics, currently lacks a significant local chip manufacturing base and plays a minimal role in the global supply chain. New Delhi’s Semiconductor Mission aims to transform this scenario by creating an indigenous ecosystem spanning from chip design to manufacturing and packaging. As of September 2025, India has greenlit 10 semiconductor projects, including two fabrication plants and several testing and packaging facilities. The government is actively courting foreign partners from Taiwan, the U.K., the U.S., and South Korea to bolster these efforts.
Challenges and Expert Perspectives
Despite the scale of investment, experts caution that India’s semiconductor ambitions face significant challenges. Stephen Ezell, VP for global innovation policy at the Information Technology and Innovation Foundation, highlights that semiconductor manufacturers evaluate up to 500 factors before committing to fab investments, including talent availability, tax regimes, trade policies, labor laws, and customs procedures — areas where India must improve. “India needs more than a few fabs or ATP facilities; it requires a dynamic, deep, and long-term ecosystem,” Ezell noted, emphasizing that incentives alone will not guarantee sustainable industry growth.
Policy Evolution to Foster Semiconductor Growth
In May 2025, India expanded its semiconductor policy to include support for electronic component manufacturing, a critical step to build a domestic buyer-supplier ecosystem previously absent. This policy helps alleviate a key bottleneck by incentivizing companies producing active and passive components locally. Additionally, India shifted from focusing incentives solely on advanced fabs producing chips at 28nm or smaller to covering 50% of project costs across all fabrication sizes and chip testing and packaging units. This broader support aims to nurture the entire semiconductor ecosystem.
Flagship Projects and Regional Developments
The largest ongoing project is a $11 billion semiconductor fab in Gujarat, led by Tata Electronics in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp. This facility will produce chips for power management, display drivers, microcontrollers, and high-performance computing logic, targeting AI, automotive, and data storage sectors. Meanwhile, the U.K.-based Clas-SiC Wafer Fab has partnered with India’s SiCSem to establish the country’s first commercial compound semiconductor fab in Odisha, focusing on chips for defense, electric vehicles, consumer appliances, and solar inverters.
Infrastructure and Ecosystem Requirements
Successful chip fabrication demands stringent site conditions such as flood and vibration-free zones with reliable logistics. India must also develop specialty chemical suppliers that meet ultra-high purity standards essential for semiconductor manufacturing. In parallel, medium-sized Indian firms are increasingly interested in chip testing and packaging, a segment with higher margins and lower capital intensity than fabs. Outsourced semiconductor assembly and testing (OSAT) could become a significant opportunity for India if market access and demand channels are clarified.
Chip Design and Intellectual Property Challenges
India benefits from a strong pool of engineering talent in chip design, primarily focused on block-level design validation for global companies. However, core intellectual property creation remains concentrated in countries with mature IP regimes such as the U.S. and Singapore. Experts suggest India must strengthen its IP laws and enforcement mechanisms to protect digital and software-related intellectual property, a prerequisite to advancing beyond non-core design roles and realizing full semiconductor ambitions.
FinOracleAI — Market View
India’s $18 billion semiconductor initiative marks a strategic pivot towards self-reliance in a critical technology sector amid shifting global supply chains. While the scale of investment and government incentives are substantial, the country faces formidable challenges including infrastructure readiness, ecosystem depth, and intellectual property protection.
- Opportunities: Development of a full semiconductor supply chain, growth in chip testing and packaging sectors, leveraging engineering talent for design validation, and attracting foreign investment partnerships.
- Risks: Complex requirements for fab site selection, need for ultra-pure chemical suppliers, IP regime limitations, and competition from established semiconductor hubs like Taiwan, the U.S., and Europe.
Impact: India’s semiconductor push is a long-term strategic play that could significantly reshape its electronics manufacturing landscape. Success depends on building a robust ecosystem beyond incentives, including infrastructure, supply chains, and legal frameworks to support innovation and manufacturing excellence.
