India has long been recognized for its prowess in IT and software services, but when it comes to
semiconductors—the tiny chips that power everything from smartphones to cars—India has
been late to the game. However, with rising geopolitical tensions, supply chain disruptions, and
increasing global demand for semiconductors, India has finally stepped up.
The country is now on a mission to establish itself as a global semiconductor manufacturing hub, and the government, industry players, and academia are all aligning to make this happen.
In this article, we’ll explore India’s semiconductor ambitions, the steps taken by the government,
ongoing partnerships, the challenges—especially the skills gap—and the opportunities for
investors.
1. Semiconductor Sector Overview: Why Now?
The global semiconductor industry is worth over $500 billion and is expected to grow
significantly due to the increased demand for AI, 5G, IoT, electric vehicles, and data centers.
Semiconductors are the backbone of modern technology, and disruptions in supply can lead to
massive bottlenecks, as seen during the global chip shortage in 2020-2021.
India, as a tech-driven economy, consumes a large number of chips but imports most of its
semiconductors. This dependency on imports became a vulnerability during the pandemic,
exposing the urgent need for domestic semiconductor production. Recognizing this, India has
launched its Semiconductor Mission to reduce its reliance on imports and become a global
player in chip manufacturing.
2. Government Policies and Schemes: The Semiconductor Mission
To build a robust semiconductor ecosystem, the Indian government has rolled out several
incentives and policies under its Semiconductor Mission, with a dedicated budget of $10
billion for investments in semiconductor and display manufacturing. Key aspects of the
government’s approach include:
● PLI (Production Linked Incentive) Scheme: The government offers a 50% incentive
on capital expenditure for semiconductor fab units. This scheme aims to attract global
and domestic semiconductor manufacturers to set up fabrication plants in India.
● Design Linked Incentive (DLI): This scheme provides up to 30% of eligible capital
expenditures and incentives for companies involved in semiconductor design, including
start-ups and MSMEs. India wants to position itself as a global hub for chip design, given
its strong talent pool in IT and software.
● Infrastructure Support: The government is promoting the development of
Semiconductor Manufacturing Clusters (SMCs) with world-class infrastructure,
logistics, and power backup. Several states, including Karnataka, Tamil Nadu, and
Gujarat, are vying to become semiconductor hubs.
● Strategic Partnerships and Foreign Investments: The Indian government has
facilitated partnerships between Indian companies and global semiconductor giants. The
aim is to bring in the necessary expertise and technology required for setting up fab
plants.
3. Current Progress and Timelines: Where Does India Stand?
While India’s semiconductor mission is ambitious, it is still in its early stages. Here’s a snapshot
of the progress so far:
● Micron Technology: One of the major recent developments is the partnership between
Micron Technology (USA) and India. In July 2023, Micron announced a $2.75 billion
investment to set up a semiconductor assembly and testing facility in Gujarat. The
Indian government is providing financial support to this venture, covering up to 50% of
the project costs.
● Vedanta-Foxconn Partnership: In September 2022, Indian conglomerate Vedanta
announced a partnership with Foxconn (Taiwan) to invest $19.5 billion in setting up a
semiconductor fab in Gujarat. This is one of the largest investments in India’s
semiconductor space, targeting both chip manufacturing and display fabrication.
● ISMC Analog Fab: The ISMC consortium—a joint venture between Abu Dhabi-based
Next Orbit Ventures and Israel's Tower Semiconductor—has announced plans to set
up a $3 billion semiconductor fab in Karnataka. This project will focus on analog
chips, which are essential for automotive and industrial applications.
● STMicroelectronics: Discussions are ongoing with STMicroelectronics, one of
Europe’s leading semiconductor companies, to explore investment opportunities in India.
The timeline for full-scale semiconductor production in India is projected to be 2025-2027, as
these projects typically take 2-3 years to become operational after construction begins.
However, the government and industry leaders are working tirelessly to expedite this process.
4. Challenges: The Talent Gap and How India Plans to Address It
One of the biggest challenges India faces is the lack of skilled manpower in semiconductor
manufacturing. While India has a large pool of engineers, most of them are skilled in software
and IT but lack expertise in semiconductor fabrication, testing, and packaging.
To address this gap, the government is collaborating with educational institutions and industry
leaders to develop a comprehensive workforce development strategy:
● Skilling Programs: The government has launched Semiconductor Workforce
Development Programs that focus on imparting skills in areas like semiconductor
design, VLSI (Very-Large-Scale Integration) design, and fab processes.
● University Partnerships: Collaborations between IITs (Indian Institutes of Technology)
and global semiconductor giants are underway to create specialized R&D centers
focused on semiconductor technology.
● International Training: The government is also considering sending Indian students and
professionals abroad for training in countries like Taiwan, South Korea, and the United
States—which are global leaders in semiconductor manufacturing.
● Industry-Academia Collaboration: Semiconductor companies are being encouraged to
collaborate with Indian universities for curriculum development and internships, ensuring
that graduates are job-ready when fab plants become operational.
5. Opportunities for Investors: Sectors and Companies Poised for Growth
As India builds its semiconductor ecosystem, several sectors and companies are likely to
benefit. Here’s a look at where investors should focus:
a. Semiconductor Manufacturing and Fabrication
● Vedanta: Partnering with Foxconn, Vedanta is investing heavily in chip manufacturing.
As one of India’s biggest conglomerates, it is positioned to be a leader in semiconductor
fabs.
● Micron Technology: Micron’s assembly and testing facility in India offers indirect
exposure to the semiconductor sector. While Micron is a global company, its investment
in India signifies the importance of India’s market.
b. Ancillary Sectors
● L&T (Larsen & Toubro): L&T, India’s leading infrastructure company, will play a
significant role in building the physical infrastructure—factories, power, and water
supply—needed for semiconductor fabs.
● Tata Chemicals: A crucial player in providing high-purity chemicals required for chip
fabrication. The Tata Group has expressed interest in entering the semiconductor
space, and Tata Chemicals could become a major supplier.
● Gujarat Gas: With fab plants requiring a continuous and stable supply of gases (like
nitrogen, hydrogen, etc.), companies like Gujarat Gas are expected to play a key role in
supporting the industry.
c. Semiconductor Design and Testing
● Sasken Technologies and Tata Elxsi: These companies specialize in semiconductor
design and R&D, offering investors opportunities to tap into India’s growing chip design
capabilities.
Conclusion: The Semiconductor Opportunity in India
India may have joined the semiconductor race late, but it is now running full throttle. With billions
of dollars in investment, government support, and growing industry partnerships, India is well on
its way to becoming a significant player in the global semiconductor ecosystem. While
challenges like the talent gap remain, the steps being taken to address these issues offer hope
for a thriving domestic semiconductor industry.
For investors, this is an exciting time to explore opportunities in companies that are at the
forefront of this transformation—whether in semiconductor fabrication, infrastructure, or ancillary
services. As India builds its semiconductor ecosystem, these companies are poised to benefit,
offering long-term growth potential.
The race has begun, and India is on track to become a hub for semiconductor innovation,
manufacturing, and global supply.
India's Semiconductor Mission: The Race to Becoming a Chip Manufacturing Hub