India’s semiconductor industry is emerging as a thriving centre of technological prowess and entrepreneurial energy. The semiconductor industry is poised for a revolutionary journey, driven by persistent innovation and strategic investments. India is not a passive onlooker in the unfolding global geopolitics of semiconductor production. As both one of the largest markets for electronics and a major source of technical talent, India has the advantage of being a predominant player in the global technology drive.

Recognizing the economic potential and geostrategic implications of the technology in the coming decades, India has embarked on a drive to establish a viable semiconductor ecosystem. Drawing lessons from the disruption in the global semiconductor value chain during the COVID-19 pandemic, India is expanding into the entire ecosystem – research and development, fabless chipmaking, design, and fabrication, as well as equipment supply, in addition to incubating a talent pool – rather than focusing solely on one aspect of the industry.

Since 2021, with the unveiling of the India Semiconductor Mission (ISM) along with the provision of unprecedented subsidies and a conducive business environment to the major industrial players, the Indian semiconductor era seems to have dawned. India is likely to establish itself as a reliable supply chain hub, taking advantage of geopolitical turbulence between major powers.

Semiconductor manufacturers are pushing the boundaries of miniaturization and efficiency with advanced manufacturing processes. Techniques like extreme ultraviolet lithography (EUV) are increasingly adopted to produce chips with smaller transistor sizes, enhancing performance and energy efficiency.

The rollout of 5G networks continues to drive demand for semiconductor components, particularly those related to wireless communication infrastructure, IoT devices, and smartphones. Research and development efforts focus on next-generation wireless standards beyond 5G, such as 6G.

The demand for specialized semiconductor chips optimized for artificial intelligence (AI) and machine learning (ML) applications continues to rise. Companies are developing neural processing units (NPUs) and other accelerators to meet the computational requirements of AI workloads.

Semiconductor Push in India

The push for semiconductor manufacturing in India is gaining momentum as the country aims to reduce its dependence on imports and establish a self-reliant semiconductor ecosystem. Here are some key initiatives and factors driving the semiconductor push in India:

  1. Government Initiatives: The Indian government has launched several initiatives to promote semiconductor manufacturing in the country. This includes the “Make in India” program, which aims to boost domestic manufacturing across various sectors, including electronics and semiconductors. Additionally, the government has introduced schemes such as the Production Linked Incentive (PLI) scheme for electronics manufacturing, offering financial incentives to semiconductor companies to set up manufacturing facilities in India.
  2. National Semiconductor Wafer Fabrication Policy: The Indian government unveiled the National Semiconductor Wafer Fabrication Policy with the goal of attracting investments in semiconductor fabs. The policy includes incentives such as tax breaks, subsidies, and access to low-cost land and utilities to encourage semiconductor companies to establish fabs in India.
  3. Strategic Importance: Semiconductors are considered strategically important for India’s economic growth and national security. Reducing dependency on imported semiconductor chips is seen as crucial for India’s long-term economic and technological independence.
  4. Rising Demand: With the proliferation of electronic devices, IoT applications, and emerging technologies such as 5G, AI, and IoT, the demand for semiconductor chips is on the rise globally. India’s growing market for electronics and semiconductor products presents an opportunity for domestic semiconductor manufacturing.
  5. Investment and Partnerships: Indian companies and international semiconductor firms are investing in semiconductor manufacturing and research facilities in India. Several partnerships and collaborations have been formed between Indian and foreign companies to facilitate technology transfer, knowledge exchange, and investment in semiconductor manufacturing.
  6. Skilled Workforce: India has a large pool of skilled engineers and technicians, which can be leveraged for semiconductor manufacturing. Efforts are underway to enhance the skill set of the Indian workforce in semiconductor fabrication, design, testing, and R&D through training programs and skill development initiatives.
  7. Geopolitical Factors: Recent geopolitical tensions and supply chain disruptions have highlighted the importance of domestic semiconductor manufacturing for ensuring supply chain resilience and reducing reliance on imports from other countries.
  8. Environmental Sustainability: Semiconductor manufacturing can have significant environmental impacts. India is emphasizing environmentally sustainable practices in semiconductor manufacturing, including energy-efficient processes, recycling initiatives, and reducing carbon emissions.

Semiconductor in Indian Industrial use

  1. Automotive Electronics: Semiconductors are extensively used in automotive electronics for vehicle control systems, safety features, infotainment systems, and electric vehicle (EV) components. This includes microcontrollers, sensors, power management ICs, and communication modules used in engine control units (ECUs), advanced driver-assistance systems (ADAS), and in-vehicle entertainment systems.
  2.  Industrial Automation: Semiconductors are essential for industrial automation and control systems used in manufacturing plants, process industries, and logistics facilities. Programmable logic controllers (PLCs), industrial PCs, sensors, actuators, and communication devices rely on semiconductor components for real-time monitoring, control, and optimization of industrial processes.
  3. Power Electronics: Power semiconductor devices such as diodes, transistors, and thyristors are used in power electronics applications for converting, controlling, and distributing electrical power. In India, power semiconductor devices are used in power supplies, motor drives, renewable energy systems, electric grid infrastructure, and traction systems for railways.
  4. Telecommunications: Semiconductors are fundamental to telecommunications infrastructure, supporting wireless communication networks, broadband internet, and telephony services. RF transceivers, baseband processors, signal processing ICs, and optical networking components enable the transmission, reception, and processing of data and voice signals in telecom networks.
  5. Smart Grids and Energy Management: In the energy sector, semiconductors play a crucial role in smart grid systems and energy management solutions. Smart meters, grid monitoring devices, energy storage systems, and power quality analyzers rely on semiconductor technology for real-time data acquisition, analysis, and control of electrical grids and distribution networks.
  6. Healthcare Electronics: Semiconductors are increasingly used in healthcare electronics for medical imaging, diagnostics, monitoring, and treatment applications. Medical devices such as MRI machines, CT scanners, ultrasound systems, patient monitors, and wearable health trackers incorporate semiconductor components for signal processing, data storage, and wireless connectivity.
  7. Security and Surveillance: Semiconductor-based security and surveillance systems are used in industrial facilities, commercial establishments, public spaces, and critical infrastructure sites for monitoring, access control, and intrusion detection. Surveillance cameras, access control systems, alarm systems, and biometric identification devices rely on semiconductor technology for image processing, data encryption, and network connectivity.

Challenges for Semiconductor in India

  1. Lack of Infrastructure– Building semiconductor fabrication facilities (fabs) requires substantial investment in infrastructure, including cleanroom facilities, utilities, transportation networks, and skilled workforce training centers. India lacks the infrastructure necessary to support large-scale semiconductor manufacturing.
  2. High Capital Investment- Semiconductor manufacturing is capital-intensive, requiring significant upfront investment in equipment, technology, and research and development. Securing funding for semiconductor fabs is a major challenge, especially given the long payback period and high risk associated with semiconductor investments.
  3. Skilled Workforce Shortage– Developing a skilled workforce with expertise in semiconductor fabrication, design, testing, and research is essential for the success of semiconductor manufacturing in India. However, there is a shortage of skilled engineers and technicians with specialized knowledge in semiconductor technologies.
  4. Technology Gap – India lags behind leading semiconductor manufacturing countries such as the United States, Taiwan, and South Korea in terms of technology and expertise. Acquiring advanced semiconductor manufacturing technologies and know-how is a challenge for Indian semiconductor companies.
  5. Regulatory Hurdles– Complex regulatory processes, bureaucratic red tape, and delays in obtaining permits and approvals pose challenges for semiconductor manufacturing in India. Streamlining regulatory procedures and providing a conducive regulatory environment are essential for attracting investment in semiconductor fabs.
  6. Supply Chain Dependencies- Semiconductor manufacturing relies on a complex global supply chain for raw materials, equipment, and components. India’s dependency on imported semiconductor materials and equipment makes it vulnerable to supply chain disruptions, geopolitical tensions, and trade restrictions.
  7. Market Demand- The domestic market for semiconductors in India is relatively small compared to other countries. Stimulating domestic demand for semiconductor products and creating a market for domestically manufactured chips is a challenge for Indian semiconductor companies.
  8. Intellectual Property Rights (IPR)– Protecting intellectual property rights (IPR) is crucial for semiconductor companies to safeguard their technology and innovations. India’s legal framework for IPR protection and enforcement needs improvement to encourage investment in semiconductor R&D and innovation.


Semiconductor Beneficiary Industries

  • Consumer Electronics

The consumer electronics industry is one of the most significant beneficiaries of semiconductor technology. Smartphones, computers, TVs, gaming consoles, wearables, and home appliances all rely heavily on semiconductor chips for processing power, memory, connectivity, and sensors. Advancements in semiconductor technology drive innovation in consumer electronics, leading to faster, more efficient, and feature-rich products.

  • Automotive

The automotive industry is increasingly reliant on semiconductor technology for vehicle electronics, safety systems, infotainment, connectivity, and electric vehicle (EV) components. Semiconductor chips enable advancements in autonomous driving, vehicle electrification, telematics, and in-car entertainment systems. Investments in semiconductor technology can enhance vehicle performance, efficiency, and safety, driving innovation in the automotive sector.

  • Telecommunications

Telecommunications infrastructure, including network equipment, base stations, routers, switches, and mobile devices, relies on semiconductor chips for data processing, signal transmission, and connectivity. Advancements in semiconductor technology enable faster data speeds, lower latency, and greater network capacity, supporting the rollout of 5G networks and the expansion of broadband services.

  • Water Treatment Systems

Semiconductor technology is integrated into water treatment systems for purification, desalination, and filtration processes. Semiconductor-based ultraviolet (UV) disinfection systems are used to sterilize water by emitting UV light to deactivate microorganisms and pathogens, ensuring safe and potable water supply.

  • Industrial Automation

Industrial automation and manufacturing benefit from semiconductor technology for control systems, sensors, actuators, programmable logic controllers (PLCs), and human-machine interfaces (HMIs). Semiconductors enable automation, robotics, process optimization, and data analytics in industrial settings, leading to increased productivity, efficiency, and quality.

  • Healthcare

The healthcare industry benefits from semiconductor technology in medical imaging equipment (such as MRI, CT, and ultrasound machines), patient monitoring systems, diagnostic devices, laboratory equipment, and wearable health trackers. Semiconductor chips enable precise measurements, data processing, and connectivity in healthcare applications, leading to improved diagnostics, treatment, and patient care.

  • Renewable Energy

The renewable energy sector utilizes semiconductor technology in solar photovoltaic (PV) panels, inverters, wind turbines, and energy storage systems. Semiconductor devices enable the conversion of solar and wind energy into electricity, control power flow, and manage energy storage, supporting the transition to clean energy and sustainability initiatives.

  • Data Centers and Cloud Computing

Data centers rely on semiconductor-based processors, memory chips, storage devices, and networking equipment to store, process, and transmit vast amounts of data. Semiconductor technology enables scalable and efficient data processing, storage, and networking infrastructure, supporting cloud computing services, big data analytics, and digital transformation initiatives.

  • Defense and Aerospace

Aerospace and defense systems depend on semiconductor technology for avionics, radar systems, electronic warfare (EW) systems, communications systems, navigation equipment, and satellite technology. Semiconductors play a critical role in military and civilian aerospace applications, supporting national security, surveillance, and communication missions.

Major Investments in India

Three new semiconductor units received approval from the Union Cabinet on February 29th2024 under the initiative “Development of Semiconductors and Display Manufacturing Ecosystems in India”. They were virtually inaugurated by Prime Minister Narendra Modi on March 13, 2024.

  • Tata Electronics Private Limited (TEPL) will collaborate with Powerchip Semiconductor Manufacturing Corp (PSMC), Taiwan, to establish a semiconductor fab in Dholera, Gujarat, with an investment of INR 9100 billion (US$109.71 billion). The fab’scapacity will be 50,000 wafer starts per month (wfsm), covering segments such as high-performance computer chips with 28 nm technology and power management chips for electric vehicles (EV), telecom, defense, automotive, consumer electronics, display, power electronics, etc.
  • Tata Semiconductor Assembly and Test Pvt Ltd (TSAT) will set up a semiconductor unit in Morigaon, Assam, with an investment of INR 2700 million (US$325.99 million). The unit’s capacity will be 48 million per day, catering to segments such as automotive, electric vehicles, consumer electronics, telecom, mobile phones, etc.
  • CG Power, in partnership with Renesas Electronics Corporation, Japan, and Stars Microelectronics, Thailand, will establish a semiconductor unit in Sanand, Gujarat, with an investment of INR 760 million (US$91.63 million). The CG power semiconductor unit will manufacture chips for consumer, industrial, automotive, and power applications, with a capacity of 15 million per day.

Few Major Upcoming Investments in India

  1. Saankhya Labs, a subsidiary of Tejas Network, and Sensesemi Technologies are latest beneficiaries approved under the Design-Linked Incentive (DLI) Scheme. Sensesemi will develop the Systems on Chip for Internet of Medical Things and IoT devices, integrating MCU and wireless IP with an ultra-low power analog front end featuring AI inferencing IP.
  2. Israeli chipmaker Tower Semiconductor is on the verge of securing an US$8 billion fabrication plant in India.
  3. The government has received 9 bids for the overhaul of its Semiconductor Laboratory (SCL) in Mohali, with companies such as the Tata Group, Tower Semiconductor, and Texas Instruments among the bidders. US$1 billion has been earmarked by the government for the modernization of the 48-year old state-owned facility, which is India’s only chip manufacturing unit producing semiconductors for strategic and defense purposes.
  4. HCL is pursuing a Joint Venture with Taiwanese electronics manufacturing services giant Foxconn to set up a semiconductor Outsourced Assembly and Testing (OSAT) unit in India; Foxconn will have 40 percent equity for US$37.2 million.
  5. Micron Technology announced an investment of $825 million in June 2023 to set up a new assembly and test facility in Gujarat and is expected to roll out its first chip in the country by December 2024.

Government Support

India has approved allocating up to $15.2 billion (1.26 trillion Indian rupees) to build three new semiconductor plants, including its first semiconductor fab facility — part of the country’s big bid to take on China, Taiwan and other countries in the chip race.

Significantly, although AI chips are very much the talk of the industry right now, none of the three plants focus on that area of the market, aiming instead for more traction in general-purpose applications.

A comprehensive program for the development of semiconductors and display manufacturing ecosystem in India was approved by Government of India with an outlay of 76,000 crore (>10 billion USD). Further, recently, the government has allocated Rs 6,903 crore in the interim budget 2023–24 to develop the semiconductor and display manufacturing ecosystem in India.

Semiconductor Fabs and Display Fabs : Fiscal support of 50% of project cost on to applicants who are found eligible and have the technology as well as capacity to execute such highly capital and resource intensive projects.

Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs/ Discrete Semiconductor Fabs and Semiconductor ATMP / OSAT Units: Fiscal support of 50% of capital expenditure to applicants who are found eligible and have the technology to execute such projects. At least 20 such units of Compound Semiconductors and Semiconductor Packaging are expected to be established with Government support under this scheme.

Semiconductor Design Companies: The Design Linked Incentive Scheme shall extend product design linked incentive of up to 50% of eligible expenditure and product deployment linked incentive of 4-6% on net sales for 5 years. Support will be provided to 100 domestic companies of semiconductor design for Integrated Circuits, Chipsets, System on Chips, Systems & IP Cores and semiconductor linked design and facilitating the growth of not less than 20 such companies which can achieve turnover of more than Rs.1500 crore in the coming 5 years