India Is Building Its Semiconductor Future. Here's How

The goal was to turn a country that imports nearly all its chips into a hub for design, manufacturing, and packaging.

Almost four years on, the foundation is visible. India's first mega semiconductor fabrication foundry is being built by Tata Electronics in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC) in Dholera, Gujarat.  

At the fourth SEMICON conference last week, 12 MoUs were inked across the board, from product design, to skill development and service capability expansion. An attempt to flesh out the much-awaited indigenous semiconductor ecosystem. 

Yet, industry leaders agree that there’s a lot more to be done to push India into the big leagues. 

The Price Of Being A Fab

Fabrication plants or ‘fabs’, as they are often referred to, are among the most expensive and complex factories built. A single large fab costs between US$ 10-25 billion, requires four to five years to construct, and can consume as much water and electricity as a small city. 

This brings up “Moore’s Second Law”, the observation that while chips get cheaper per transistor (check out the first law), the fabs that make them double in cost every four years or with each generation of technology. 

To put that in perspective, the price tag of a leading-edge fab today is over twice the ISM's incentive pool of about US$ 10 billion. But, India isn’t jumping straight to build those top-of-the-line fabs yet. 

The current push is towards smaller fabs and other vital pieces of the chain that build the ecosystem. Beyond capital, fabs need a supply of speciality gases, precision machinery and thousands of trained engineers working in dust-free clean rooms.

That’s why semiconductors are not just about innovation in science, but also policy and financing. At the same time, not all segments of semiconductor manufacturing add the same value. 

What matters as much as cost and capacity of a fab is the process node — the size of features that can be etched onto a chip. It is measured in nanometres (nm). For reference, the human hair is 80,000 nm wide. The smaller the node, the more transistors can fit on a chip, which tends to make them faster and more efficient.

Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract manufacturer of chips, is already producing 3 nm chips. India’s proposed fabs are currently in the 28-65 nm range. These larger nodes, while not cutting-edge, are widely used in automotives, power management, and defence where reliability is the priority. 

It is this complexity that makes countries like Taiwan and South Korea indispensable in the global supply chain.

For India, the choice has been to start where barriers to entry are lower like the semiconductor assembly, test, and packaging (ATP) segment, while slowly laying the groundwork for fabs.

The Big Push

The Union Cabinet recently approved four new semiconductor manufacturing projects under the India Semiconductor Mission (ISM). Two facilities in Odisha, one with SiCSem, and one with 3D Glass Solutions Inc, another in Punjab with Continental Device India (CDIL), and the last in Andhra Pradesh with Advanced System in Package (ASIP) Technologies.

Alongside ISM, the Design Linked Incentive (DLI) programme is providing financial support to about 30 chip design start-ups. Over 70 companies have been given free access to Electronic Design Automation (EDA) tools for chip design, working on designs for consumer electronics, automotive applications and telecom equipment. 

While modest in comparison to the US CHIPS (Creating Helpful Incentives to Produce Semiconductors) Act with a promised investment of US$ 52.7 billion or the European Chips Act, with a pledged investment of US$ 46 billion, India’s subsidies are significant in the domestic context. 

“These subsidies are designed to attract first-movers and signal long-term intent in the short term, and make India technologically self-reliant as well as a global hub for semiconductors in the long run,” a government official told The Secretariat on condition of anonymity. 

What Stakeholders Want From ISM 2.0

Industry executives say the next phase of policy must go beyond fabs and OSATs. “Semiconductors is not a five-year project. It takes decades. What is important is continuity in policy and support,” Mani Prasad Athayil, GM, Orbit & Skyline Semiconductor told. 

“The first phase has given confidence, but the next phase must give clarity on timelines, land, power, water, materials, the basic things industry looks for,” he said. 

The gaps are visible to the stakeholders. India has few suppliers of speciality gases or photolithography equipment, and universities still lack programmes dedicated to semiconductor process engineering. 

"A national strategy to develop this base, perhaps on the model of renewable energy manufacturing clusters, is high on the industry’s wish list," an engineer from the EDA industry told The Secretariat. 

"ISM 2.0 should widen its scope beyond large fabs and include more design incentives, supplier networks, and long-term R&D support. Without parallel investment in chemicals, gases and verification capacity, India risks building isolated plants rather than a resilient supply chain," they said. 

Why It Matters

India’s semiconductor market is large, valued at US$ 38 billion in 2023, between US$ 45-50 billion now, and expected to reach US$ 63 billion by 2026 according to the Ministry of Electronics and Information Technology.

Local manufacturing could reduce dependence on foreign suppliers, cut the trade deficit and create high-skilled jobs. A single fab typically generates 5,000 direct jobs and tens of thousands indirectly.

But the importance goes beyond economics. Chips power digital payments, defence systems, telecom networks and electric vehicles. 

The government insists the momentum is real, pointing to ISM’s initial approvals and partnerships with US universities for training. 

Industry voices agree, but also stress policy depth. Building fabs, suppliers and talent pipelines will take not years but decades.

ISM 2.0 is expected soon but will have to outlast budgets, elections and conferences and push the industry to the next level. Only then can India claim a real place in the global chip supply chain.