Eyeing the big pie

India’s ambitious semiconductor push comes amid resource-related challenges.

For many nations, it is a race against time to equip themselves with dynamic, nuanced technology, and sophisticated weaponry. It is against this backdrop that chips, one of the most consumed commodities in the world, are finding a strong Indian context.

With the India Semiconductor Mission (ISM), chips – better understood as semiconductors – are set to play a crucial role in making India a global superpower and taking its GDP beyond the pursued $5 trillion mark. Is it too good to be true? Is there a catch? Will India’s effort in this direction also set a standard for the other major economies? No one can say for sure, but there is hopeful excitement around the possibilities.

India is aiming to start by setting up fabrication units to manufacture wafers – an Assembly, Testing, Marking, and Packaging (ATMP) unit, and a compound semiconductor unit, to accommodate chips of 28 nanometres in size, whereas Taiwan is already manufacturing chips from 7 nanometres to 4 nanometres. But a lot of hope is riding on India’s Semi-Conductor Laboratory (SCL), a pioneer at its inception in 1984 when it started production, three years before TSMC, the now-largest semiconductor manufacturer in Taiwan.

Recognising the sector’s pivotal role, the government has initiated ISM, a strategic effort backed with Rs 76,000 crore under the Semicon India programme. This mission aims to build a robust semiconductor and display manufacturing ecosystem to strengthen India’s electronics manufacturing and innovation sectors.

In September 2022, the United States, Japan, South Korea, and Taiwan formed a consultative entity called the Fab 4 alliance (also known as Chip 4), aimed at cooperation among the governments and chipmakers from the four participating members in the whole cycle of the semiconductor supply chain.

India has stable relations with all these nations; this global stance can greatly support its ambitions and enable it to gain access to cutting-edge technology and expertise. India has also initiated agreements in Singapore and strengthened partnerships with South Korea and Taiwan, reinforcing its commitment to global semiconductor alliances.

Tata Electronics, for instance, is expanding with two new semiconductor fabrication plants in Dholera, Gujarat. In collaboration with Taiwan’s PSMC, the first of these plants is expected to begin production in 2026, focusing on sectors like automotive, AI, and wireless communication, and capable of producing up to 50,000 wafers per month.

Companies such as L&T, Vedanta, and the Adani Group are also investing in semiconductor plants, while the government is providing financial assistance to 12 startups under the Design Linked Incentive (DLI) Scheme. This support extends beyond fabrication plants to developing an end-to-end semiconductor supply chain, including chip design, assembly, and testing.

Geopolitical tensions, especially between the US and China, are prompting countries to diversify their supply chains. With its stable political environment and strong international relationships, India is increasingly seen as a reliable alternative. The country’s vast consumer electronics market and rising demand for automotive, telecom, and IT products further support domestic semiconductor production. India’s large, relatively affordable, and competitive workforce, if properly trained, could be a critical asset to the growth of this industry.

Challenge is opportunity too

Challenges, however, persist. India currently lacks key raw materials, such as silicon wafers, rare earth elements, and specialised chemicals, which are primarily imported from China, Taiwan, and Japan. India often faces backlash for its poorer supply of electricity and water in a lot of major cities. Setting up semiconductor plants would require a significantly improved supply of these basic resources. This also presents a rare opportunity for India to elevate some of its poorer regions.

As India’s digital economy expands, accounting for approximately 10 per cent of the nation’s GDP in 2024 and expected to reach 20 per cent by 2026, the demand for locally produced advanced semiconductors will continue to rise. This increasing digitalisation underscores the importance of ISM as a foundation for expanding the country’s digital capabilities.

The Indian government’s ambitious target of growing the electronics sector from $155 billion to $500 billion by 2030 also highlights India’s aspirations to be at par with the global projections but no target is big enough. India’s investments and efforts in this sector will shape not only its future but also contribute to a more diversified and resilient global supply chain. The country is not merely chasing economic gains but laying the groundwork to become a key global player – one that can influence the very direction of the future.

(Prasu is an Assistant Director at the Price Statistics Division; Prakhar is a Communication Assistant with CEED, Gokhale Institute of Politics and Economics, Pune)