Semiconductors are the backbone of modern technology, powering everything from smartphones and laptops to automobiles and advanced medical equipment. Recognizing their strategic importance, India has intensified efforts to establish a robust semiconductor manufacturing ecosystem. With increasing global demand, supply chain disruptions, and a growing dependence on imports, India is positioning itself as a key player in the semiconductor industry.
Why Semiconductors Matter for India
India is one of the world’s largest consumers of semiconductors, but it currently imports nearly 100% of its supply. The global semiconductor shortage, triggered by the COVID-19 pandemic and geopolitical tensions, exposed India’s vulnerability in this critical sector. Establishing domestic manufacturing will reduce dependency on foreign suppliers, strengthen national security, and create jobs while boosting the country’s technological self-reliance.
Government Initiatives to Boost Semiconductor Manufacturing
To accelerate semiconductor production, the Indian government launched the Semicon India Program in 2021 with a budget of ₹76,000 crore ($10 billion). This initiative aims to support chip fabrication (fabs), display manufacturing, and design innovation. Several key incentives have been introduced:
- Production-linked Incentive (Pli) Scheme
Under the PLI scheme, companies investing in semiconductor manufacturing receive financial support, tax benefits, and other incentives to make India a competitive hub for chip production.
- Strategic Partnerships with Global Players
India has been engaging with global semiconductor giants such as Intel, TSMC, and Foxconn to establish local production units. In 2023, Vedanta and Foxconn announced a $19.5 billion joint venture to set up a semiconductor plant in Gujarat, marking a significant milestone.
- Focus on Design and R&D
India already has a strong semiconductor design industry, with companies like Texas Instruments, Qualcomm, and AMD having R&D centers in the country. The government is now encouraging startups and domestic firms to develop indigenous chip designs through initiatives like the Design-Linked Incentive (DLI) Scheme.
- Skill Development and Workforce Training
Building a semiconductor industry requires a highly skilled workforce. Programs like the India Semiconductor Mission (ISM) are collaborating with universities to train engineers and technicians in chip design and fabrication.
Challenges in India’s Semiconductor Ambitions
Despite strong government support, several challenges remain:
High Capital Investment: Setting up semiconductor fabrication plants requires billions of dollars and advanced technology, making it a capital-intensive industry.
Infrastructure and Supply Chain Gaps: Semiconductor fabs need uninterrupted power, ultra-pure water, and a stable logistics network, which India is still developing.
Global Competition: Countries like Taiwan, South Korea, and China already dominate the semiconductor industry. Competing with these well-established players will take time.
Technology Transfer and Expertise: India lacks deep expertise in chip fabrication, which requires close partnerships with global leaders to transfer knowledge and technology.
The Road Ahead
Despite the challenges, Indias push for semiconductor manufacturing is gaining momentum. With government incentives, global partnerships, and investments in R&D, the country is laying the foundation for a thriving semiconductor ecosystem.
Over the next decade, India could become a key player in semiconductor manufacturing, reducing its dependence on imports and strengthening its position in the global technology supply chain. If successful, this initiative will not only boost the economy but also reinforce India’s role as a global tech powerhouse. India’s semiconductor ambitions are also fueling a rise in semiconductor-focused startups. Companies like Saankhya Labs and Signalchip are developing indigenous chipsets, reducing reliance on foreign technology. The government is encouraging such innovation through funding schemes and incubation programs.
Additionally, India is exploring emerging technologies like compound semiconductors and gallium nitride (GaN) chips, which have applications in defense, electric vehicles, and 5G networks. Strengthening collaborations between academia, industry, and government will be crucial in fostering innovation. If India continues on this trajectory, it has the potential to become a global hub for next-generation semiconductor technology.
