India’s journey in the semiconductor industry has been marked by a mix of challenges and opportunities, reflecting the nation’s broader economic and technological evolution.
Early Beginnings: Foundation of an Industry
In the 1960s and 1970s, India recognized the strategic importance of developing its electronics and semiconductor capabilities. State-owned entities like Bharat Electronics Limited (BEL) and the Semiconductor Complex Limited (SCL) were established to drive innovation and reduce dependency on imports. However, progress was hindered by limited access to advanced technology, inadequate infrastructure, and insufficient funding. These challenges prevented India from establishing itself as a global player in the semiconductor space during its formative years.
The Liberalization Era: Opening New Doors
The economic liberalization of the 1990s marked a turning point for India’s technology sector. Reforms aimed at deregulation, privatization, and attracting foreign investment led to the emergence of a robust IT and software services industry. Companies such as Infosys, Wipro, and TCS became global leaders, positioning India as a hub for software development and IT-enabled services. However, while the software and IT industries flourished, semiconductor manufacturing continued to face significant hurdles, including the capital-intensive nature of the industry, a lack of specialized talent, and technological limitations.
India on the Brink of a Semiconductor Revolution
Today, India is poised to play a significant role in the global semiconductor value chain. Major players like Vedanta, Tata Group, and international semiconductor giants have shown interest in setting up manufacturing and R&D facilities in the country. Initiatives like “Make in India” and “Digital India” further complement the government’s push for self-reliance and technological sovereignty. While challenges such as infrastructure gaps, power supply reliability, and global competition remain, India’s large domestic market, policy support, and increasing focus on innovation provide a strong foundation for growth. If successful, India’s semiconductor journey could redefine its position in the global tech landscape, enabling the country to emerge as a hub for high-tech manufacturing and innovation.
Semiconductor Market Overview : Demand Drivers in India
The semiconductor market in India is experiencing rapid growth, fueled by various demand drivers across diverse industries. As technological advancements reshape consumer behavior and industrial processes, the role of semiconductors has become central to innovation and economic growth. Here are the key sectors driving demand :
1.Consumer Electronics: A Thriving Market for Advanced Semiconductors
India is one of the largest and fastest-growing markets for consumer electronics globally. The widespread adoption of smartphones, tablets, wearables, and smart TVs underscores the surging demand for advanced semiconductor components such as processors, memory chips, and sensors.
Key trends in this sector include:
- Smartphones: With India being the second-largest smartphone market in the world, the demand for high-performance application processors, 5G modems, and advanced graphics chips is surging.
- Wearables: Devices like smartwatches, fitness bands, and earbuds require low-power and compact semiconductor solutions, driving innovation in miniaturized chip design.
- Home Automation: Smart home devices, including voice assistants, smart lighting, and connected appliances, are becoming increasingly popular, further fueling semiconductor demand.
2. Automotive Electronics: Accelerating Growth with EVs and Smart Vehicles
The Indian automotive industry is undergoing a transformation, driven by the electrification of vehicles and the integration of advanced driver-assistance systems (ADAS). This shift is creating a robust demand for semiconductors in areas such as power management, sensing, and connectivity.
Key drivers include:
- Electric Vehicles (EVs): With government incentives and a growing push for green mobility, the adoption of EVs is increasing. These vehicles rely heavily on power semiconductors for battery management systems, inverters, and charging solutions.
- Autonomous Driving Technologies: While fully autonomous vehicles are still emerging in India, features like adaptive cruise control, lane-keeping assistance, and parking aids are becoming more common, necessitating advanced sensors and AI-powered chips.
- Infotainment and Connectivity: Modern vehicles are equipped with sophisticated infotainment systems, GPS navigation, and in-car Wi-Fi, requiring high-performance semiconductors for seamless functionality.
3. Industrial Automation and IoT: Building the Factory of the Future
The rise of Industry 4.0 is driving the adoption of smart devices and connected systems in manufacturing, logistics, and other industrial applications. IoT-enabled semiconductors are at the heart of this transformation, supporting applications such as:
- Smart Manufacturing: Factories are increasingly deploying robotics, automated assembly lines, and predictive maintenance systems, all of which rely on real-time data processing and edge computing capabilities provided by advanced chips.
- Connected Logistics: IoT sensors and GPS chips enable efficient supply chain management, tracking inventory, and optimizing delivery routes.
- Smart Utilities: Applications such as smart meters and grid management systems in energy distribution are creating new demand for semiconductors that enable connectivity and data analysis.
Key Developments in India’s Semiconductor Sector (2024-2025)
India’s semiconductor industry has made remarkable strides between 2024 and 2025, with transformative developments aimed at strengthening its role in the global semiconductor ecosystem. The government’s strategic initiatives, industry partnerships, and international collaborations have collectively positioned India as a growing hub for semiconductor innovation and manufacturing.
- Subsidies and Infrastructure: Accelerating Capacity Building
The Indian government’s proactive measures under the India Semiconductor Mission (ISM) have been instrumental in fostering the semiconductor industry.
- ₹3,501 Crore Subsidy: In 2024, the government announced a substantial financial package to support the establishment of semiconductor assembly, testing, marking, and packaging (ATMP) facilities. These subsidies are aimed at reducing the financial burden on companies setting up operations in India, encouraging investments in state-of-the-art infrastructure.
- Focus on Ecosystem Development: The funding also includes support for creating high-tech industrial parks and special economic zones (SEZs) tailored for semiconductor manufacturing, ensuring access to reliable utilities and advanced logistics.
- Joint Ventures: Strengthening Domestic Manufacturing
Collaborations with global and regional players have been a game-changer for India’s semiconductor ambitions.CG SEMI Private Limited: A landmark joint venture between CG Power and Industrial Solutions, Renesas Electronics Corporation (Japan), and Stars Microelectronics (Thailand) was established in Gujarat. This OSAT (outsourced semiconductor assembly and test) facility is expected to:
- Enhance India’s backend processing capabilities, such as wafer dicing, packaging, and testing.
- Reduce dependency on international supply chains for semiconductor packaging and assembly.
- Create a ripple effect, encouraging ancillary industries and job creation in the region.
- CG Power and Industrial Solutions advanced 2.64% to Rs 644.10 after the company informed about the grant of subsidy of Rs 3,501 crore from the Government of India for setting up semiconductor assembly facility.
- Policy Revisions: Strengthening Incentives for Growth
The Indian government has updated and enhanced its policies to ensure a conducive environment for semiconductor R&D and manufacturing.
- Expanded Production Linked Incentive (PLI) Scheme: In 2025, the PLI scheme was revised to provide:
- Increased fiscal support for R&D activities, including chip design and prototyping.
- Greater incentives for establishing fabrication units, particularly for advanced nodes and compound semiconductors.
- Additional support for startups and MSMEs in the semiconductor sector.
- Skill Development Initiatives: Complementing the PLI scheme, the government introduced programs to upskill engineers and technicians, ensuring a steady supply of talent for the growing industry.
4. International Collaborations: Strengthening Global Integration
India has actively engaged with leading semiconductor nations to secure its position in the global supply chain.
- MOUs with Taiwan and Japan:
-
- Taiwan: A Memorandum of Understanding was signed to facilitate technology transfer and expertise sharing, particularly in advanced semiconductor nodes and chip fabrication processes.
-
- Japan: Collaborations focus on securing critical raw materials, such as rare earth metals, and accessing advanced packaging technologies.
- Technology Partnerships: India has sought partnerships with international players to establish Centers of Excellence (CoEs) for semiconductor innovation, focusing on areas like 5G chipsets, AI accelerators, and automotive-grade semiconductors.
Major Investments Driving India’s Semiconductor Revolution
India is experiencing a significant influx of investments in the semiconductor sector, driven by both domestic conglomerates and international corporations. Below is a comprehensive overview of announced and anticipated investments:
- Tata Electronics
Location: Jagiroad, Morigaon District, Assam
Investment: ₹27,000 crore (approximately $3.6 billion)
Project Details: Tata Electronics is establishing India’s first indigenous semiconductor assembly and test facility. The project commenced with a groundbreaking ceremony on August 3, 2024, and is expected to be operational by mid-2025.
2. Tower Semiconductor and Adani Group Joint Venture
Location: Maharashtra
Investment: $10 billion
Project Details: Israel’s Tower Semiconductor and India’s Adani Group have partnered to establish a semiconductor manufacturing facility. The plant aims to produce 40,000 wafers initially, contributing significantly to India’s semiconductor production capabilities.
3. Larsen & Toubro (L&T)
Investment: $300 million
Project Details: L&T plans to invest in integrated circuit (IC) design projects over the next three years, contributing to the development of India’s semiconductor design capabilities.
4. NXP Semiconductors
Investment: Over $1 billion
Project Details: NXP plans to double its research and development efforts in India, focusing on the automotive and industrial sectors. The company currently operates four design centers in India, employing around 3,000 professionals.
- Micron Technology
Location: Gujarat
Investment: $2.7 billion
Project Details: Micron is setting up a semiconductor assembly and test facility in Gujarat, marking a significant step in enhancing India’s semiconductor manufacturing landscape.
- Analog Devices and Tata Group Collaboration
Project Details: Analog Devices (ADI) and Tata Group have signed an agreement to explore manufacturing semiconductor products in India. Tata Electronics is set to invest $11 billion to establish India’s first semiconductor fabrication facility in Gujarat and a chip-assembly and testing facility in Assam.
- Kaynes Technology India Ltd
Location: Gujarat
Investment: ₹3,307 crore (approximately $395 million)
Project Details: The Indian government has approved Kaynes Semicon’s proposal to establish a semiconductor facility in Gujarat, further strengthening the country’s semiconductor infrastructure.
Challenges in the Semiconductor Sector in India
- Infrastructure: A Critical Gap
One of the most pressing challenges in India’s semiconductor industry is the lack of advanced infrastructure, which is essential for manufacturing and processing high-tech semiconductors.
- Absence of Fabrication Facilities: India currently lacks operational semiconductor fabrication (fab) plants capable of producing advanced nodes required for cutting-edge technologies. Establishing fabs requires not only substantial investment but also a robust ecosystem to support operations.
- High-Purity Silicon Wafer Production: The absence of facilities for producing high-purity silicon wafers, a critical raw material for semiconductors, hampers India’s ability to develop an independent supply chain.
- Utility Systems: Semiconductor fabs require uninterrupted power supply, advanced water purification systems, and efficient waste management facilities. India’s existing utility infrastructure in industrial hubs often falls short of these stringent requirements, creating additional hurdles for potential investors.
2. Skilled Workforce: Bridging the Talent Gap
While India is home to a vast pool of skilled engineers, particularly in IT and software development, there is a notable shortage of professionals with specialized expertise in semiconductor design, manufacturing, and fabrication.
- Design Expertise: Although India has a strong presence in chip design and embedded systems, the availability of engineers proficient in advanced semiconductor design tools and techniques remains limited.
- Manufacturing Know-How: Operating semiconductor fabs requires highly specialized knowledge in materials science, process engineering, and cleanroom operations. The current workforce lacks sufficient hands-on experience in these areas.
- Upskilling Needs: The rapid evolution of semiconductor technologies necessitates ongoing training and education to keep the workforce updated, an area where India is still catching up.
3. High Investment Costs: A Barrier to Entry
Semiconductor manufacturing is one of the most capital-intensive industries, with the cost of setting up a state-of-the-art fabrication plant exceeding $10 billion.
- Risk-Reward Tradeoff: The high initial investment, combined with long gestation periods and uncertain returns, makes it challenging for domestic companies to enter this space.
- Limited Private Investment: Most Indian companies lack the financial resources or risk appetite required to invest in large-scale semiconductor manufacturing, relying heavily on government support and foreign collaborations.
- R&D Costs: Developing indigenous semiconductor technologies and processes requires substantial investment in research and development, which many firms find prohibitive.
Dependence on Imports : Vulnerability to Supply Chain Disruptions
India imports over 90% of its semiconductor requirements, leaving it highly exposed to global supply chain vulnerabilities.
- Geopolitical Risks
Dependence on imports from countries like Taiwan, China, and South Korea makes India susceptible to geopolitical tensions and trade restrictions, which can disrupt supply chains.
2. Supply Chain Bottlenecks
The global semiconductor shortage during the COVID-19 pandemic highlighted the risks of relying heavily on external suppliers for critical components.
3. Strategic Gaps
India lacks a comprehensive domestic supply chain for semiconductors, including upstream activities like raw material production and downstream processes like advanced packaging.
Opportunities and Growth Potential
- Government Initiatives: Creating a Conducive Ecosystem
The Indian government has launched several policies and initiatives aimed at fostering a robust domestic semiconductor ecosystem.
- Production Linked Incentive (PLI) Scheme:
The PLI scheme offers financial incentives to semiconductor manufacturers and assembly units, encouraging domestic production. By reducing dependence on imports, the scheme aims to:
-
- Boost local manufacturing capabilities.
-
- Create a competitive environment for attracting global players.
-
- Foster job creation across the semiconductor value chain.
- Special Economic Zones (SEZs):
SEZs provide tax benefits, simplified regulations, and access to high-quality infrastructure to attract investments in semiconductor manufacturing. These zones are designed to lower operational costs for companies and facilitate export-oriented growth.
- India Semiconductor Mission (ISM):
The ISM focuses on developing the semiconductor ecosystem through subsidies, grants, and partnerships. It aims to position India as a global hub for semiconductors, targeting activities such as chip design, assembly, testing, and packaging.
- Strategic Partnerships: Access to Global Expertise
India is forging strategic alliances with global semiconductor leaders to accelerate its journey toward self-reliance and technological leadership.
- Collaborations with the USA:
Partnerships with American companies and research institutions are helping India gain access to cutting-edge semiconductor design and manufacturing technologies. The U.S.-India Initiative on Critical and Emerging Technologies (iCET) is a step toward deeper collaboration in areas like 5G, AI, and quantum computing.
- Engagement with Taiwan:
Taiwan, home to global semiconductor giants like TSMC, is a crucial partner for India. Memorandums of Understanding (MOUs) have been signed to facilitate technology transfer, capacity building, and access to advanced fabrication technologies.
- Ties with South Korea:
South Korea’s expertise in memory chips and semiconductor manufacturing provides an opportunity for India to strengthen its technical capabilities and establish collaborative manufacturing ventures.
Global Inspiration for India’s Semiconductor Sector
- United States
Key Features of the US Model:
- Academia-Industry Collaboration: Leading universities like MIT, Stanford, and UC Berkeley work closely with semiconductor companies on cutting-edge R&D.
- Government Support: Initiatives like the CHIPS and Science Act provide substantial funding for semiconductor manufacturing and research to boost domestic capabilities.
- Innovation Hubs: Silicon Valley serves as a global epicenter for semiconductor innovation, fostering startups and groundbreaking technologies.
Lessons for India:
- Foster partnerships between academic institutions, government agencies, and industry players to enhance R&D and innovation.
- Increase investment in research grants, tech incubators, and innovation clusters to create a thriving semiconductor ecosystem.
- Establish centers of excellence focused on emerging technologies like AI and quantum computing.
2.Germany
Key Features of the German Model:
- Quality Manufacturing: Emphasis on precision engineering and world-class production processes.
- Vocational Training: Germany’s dual-education system integrates classroom learning with hands-on industry experience, ensuring a highly skilled workforce.
- SME Strength: Small and medium-sized enterprises excel in niche markets, contributing to a resilient industrial base.
Lessons for India:
- Encourage vocational training programs focused on semiconductor manufacturing and process engineering to bridge the skills gap.
- Support small and medium enterprises (SMEs) in the semiconductor value chain, such as packaging, testing, and equipment manufacturing.
- Prioritize quality and precision in manufacturing to establish a reputation for reliability in global markets.
3. South Korea
Key Features of the South Korean Model:
- Education Excellence: A strong emphasis on STEM education has produced a highly skilled workforce, essential for semiconductor R&D and manufacturing.
- Government-Backed R&D: Substantial investments in research and development have enabled companies like Samsung and SK Hynix to dominate memory chip markets.
- Integrated Supply Chains: South Korea’s vertically integrated semiconductor industry reduces reliance on imports and streamlines production.
Lessons for India:
- Invest heavily in STEM education at all levels and promote semiconductor-specific courses in universities.
- Establish government-backed R&D programs to support innovation in advanced chip technologies.
- Develop vertically integrated supply chains to reduce import dependency and enhance self-reliance.
4.Singapore
Key Features of the Singaporean Model:
- Ease of Doing Business: Simplified regulations, tax incentives, and efficient infrastructure make Singapore a preferred destination for semiconductor investments.
- Public-Private Partnerships (PPPs): Collaboration between the government and private sector has enabled the development of semiconductor parks and innovation hubs.
- Focus on Advanced Manufacturing: Singapore excels in advanced packaging and testing services, as well as high-value manufacturing.
Lessons for India:
- Simplify regulatory frameworks and offer attractive tax incentives to attract global semiconductor companies.
- Encourage public-private partnerships to fund and develop semiconductor infrastructure and innovation hubs.
- Focus on high-value segments like packaging, testing, and design to quickly establish a foothold in the global value chain.
Key Pillars of Vision 2030
- Establishing Semiconductor Fabrication Facilities (Fabs)
Goal: Build multiple state-of-the-art fabs to produce advanced and mature semiconductor nodes.
Strategy:
- Leverage government incentives under the India Semiconductor Mission (ISM) to attract domestic and international investments.
- Collaborate with global semiconductor giants such as TSMC, Samsung, and Intel for technology transfer.
- Create semiconductor clusters in key regions like Gujarat, Karnataka, and Tamil Nadu, equipped with utilities, logistics, and supply chain infrastructure.
Impact:
- Significantly reduce reliance on imports and boost India’s role in the global semiconductor market.
- Enable the development of indigenous chips for applications in critical sectors such as defense, automotive, and telecommunications.
2. Developing a Skilled Workforce
Goal: Train 100,000 engineers and professionals in semiconductor technologies by 2030.
Strategy:
- Launch semiconductor-focused programs in premier institutions such as IITs, NITs, and private universities.
- Establish Centers of Excellence (CoEs) for hands-on training in areas like chip design, cleanroom operations, and semiconductor manufacturing.
- Partner with global educational institutions and companies for knowledge transfer and exchange programs.
Impact:
- Ensure the availability of a skilled workforce to support India’s semiconductor manufacturing and R&D ambitions.
- Position India as a global talent hub for semiconductor design and manufacturing.
3. Investing in R&D for Emerging Technologies
Goal: Foster innovation in AI, 5G, quantum computing, and IoT through increased R&D funding.
Strategy:
- Encourage academia-industry collaboration to develop indigenous semiconductor technologies.
- Establish semiconductor research parks and innovation hubs to support startups and entrepreneurs.
- Increase government funding for R&D under programs like the PLI Scheme and Startup India Initiative.
Impact:
- Drive India’s leadership in cutting-edge technologies with high global demand.
- Develop export-ready chip designs and establish a reputation for technological innovation.
4.Promoting Sustainability in Manufacturing
Goal: Make India’s semiconductor manufacturing eco-friendly by adopting sustainable practices.
Strategy:
- Mandate energy-efficient and water-saving practices in semiconductor fabs.
- Provide incentives for facilities using renewable energy and advanced waste recycling methods.
- Collaborate with global leaders in green manufacturing to implement best practices.
Impact:
- Establish India as a global benchmark for sustainable semiconductor manufacturing.
- Attract environmentally conscious investors and strengthen India’s global competitiveness.
Expected Milestones by 2030
- Self-Reliance in Semiconductors: Achieve a significant reduction in semiconductor imports and establish indigenous production capabilities.
- Global Manufacturing Hub: Position India as a leading destination for semiconductor manufacturing and export.
- Technological Leadership: Become a global leader in niche technologies like AI, quantum computing, and 5G chipsets.
- Job Creation: Generate millions of jobs across the semiconductor value chain, contributing to economic growth.
- Sustainability Leadership: Lead the way in eco-friendly manufacturing practices, setting a global example for green technologies.