How India's Semiconductor Policy Works
India has identified semiconductor manufacturing and design as a strategic national priority, motivated by the supply chain disruptions of the COVID-19 era (which exposed India's complete dependence on foreign chips for automobiles, electronics, medical devices, and telecommunications equipment) and by the growing consensus that semiconductor supply chains will be a geopolitical flashpoint in the coming decades.
The India Semiconductor Mission (ISM) — launched under the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in 2021 with an initial outlay of ₹76,000 crore ($9.2 billion) — provides fiscal incentives of up to 50% of project cost for semiconductor fabrication and display manufacturing.
 |
| Representational Image: How India's Semiconductor Policy Works |
India's semiconductor ambition is primarily in semiconductor
design (where India already has significant expertise — thousands of Indian
engineers work in global semiconductor design teams at Qualcomm, Intel, AMD,
Arm, Texas Instruments, and others) and in advanced packaging and testing
(ATMP) — the downstream steps that follow wafer fabrication. Entering
leading-edge chip fabrication (5nm, 3nm processes) would require investments in
the hundreds of billions of dollars and technology access that is currently
restricted by US export controls; India's realistic near-term ambition is
legacy node fabrication (28nm and above), advanced packaging, and continued
growth in design.
What You Need to Know
- India
Semiconductor Mission: ₹76,000 crore ($9.2 billion) outlay announced; 50%
fiscal support for semiconductor fab projects; ISM under Ministry of
Electronics and Information Technology (MeitY); attracted commitments from
Tata/PSMC (first semiconductor fab) and Micron (ATMP facility).
- Tata/PSMC
fab (Dholera, Gujarat): India's first semiconductor fabrication facility;
28nm mature node technology; ₹91,000 crore investment (Tata + government
support); expected to produce chips by 2026–27; will primarily serve
automotive, industrial, and consumer electronics demand that does not
require cutting-edge nodes.
- Micron
ATMP (Sanand, Gujarat): approximately ₹22,500 crore investment; ATMP =
Assembly, Testing, Marking, Packaging; takes completed wafers from
foundries and packages them into chips; expected to be operational
2024–25; represents the packaging step of the semiconductor supply chain,
not wafer fabrication; employment: approximately 5,000 direct and 15,000
indirect.
- Chip
design strength: India has approximately 20,000+ semiconductor design
engineers; Bengaluru, Hyderabad, Pune, and Noida host major chip design
centres for Qualcomm, Intel, AMD, Arm, NVIDIA, Broadcom, and others; India
designed significant portions of major chip architectures; the design
talent exists; translating to domestic design companies requires venture
capital and IP framework development.
- India
Semiconductor Mission and Chip4 Alliance: India's semiconductor strategy
aligns with US-India strategic technology cooperation under the iCET
(Initiative on Critical and Emerging Technologies) framework; the US is
sharing some (restricted) semiconductor technology with India; India is a
peripheral member of the US-Japan-South Korea-Taiwan "Chip4"
supply chain alignment.
How It Works in Practice
1. Why 28nm rather than leading-edge: TSMC's 3nm
facility cost $20+ billion; requires access to ASML's EUV lithography machines
(restricted under US/Netherlands export controls); requires deep lithography
expertise that India does not have. 28nm technology is commercially mature;
equipment is more widely available; the technology gap with cutting edge is 10+
years but the investment gap is 10x smaller. Most consumer electronics,
automotive chips, and industrial sensors use 28nm or older nodes; India can compete
in this segment.
2. The design-to-manufacturing strategy: India's
realistic near-term semiconductor strategy is: lead with design talent (already
present), build ATMP capacity (Micron), develop domestic fabless chip design
companies (using India's design talent), and gradually develop domestic
fabrication capability starting from 28nm. This is the "climb the value
chain from design" strategy rather than the Taiwan/South Korea "start
with fabrication and build backward" strategy.
3. VLSI engineer training: The India Semiconductor
Mission includes a ₹30,000 crore package for semiconductor design and VLSI
(Very Large Scale Integration) training, aiming to produce 85,000 trained VLSI
professionals; NIT/IIT semiconductor design courses; a dedicated semiconductor
design training ecosystem. This talent pipeline investment acknowledges that
design talent is India's differentiator.
4. Industry associations and ecosystem: The India
Electronics & Semiconductor Association (IESA) and the Indian Semiconductor
Association (ISA) represent the sector; they advocate for improved IP
protection, EDA (Electronic Design Automation) software access, power
infrastructure, and clean room standards; the ecosystem requires not just fabs
but chemical suppliers, equipment maintenance, and specialised infrastructure
that is absent in India.
5. The supply chain geopolitics dimension: India's
semiconductor policy is partly a geopolitical choice — reducing dependence on
Taiwan (80% of advanced chip supply, across the Taiwan Strait from China) and
aligning with US-led semiconductor supply chain restructuring (CHIPS Act, US
FDI requirements). The strategic dimension means government support exceeds
what commercial investment alone would justify; semiconductor policy is defence
and supply chain policy as much as industrial policy.
What People Often Misunderstand
- India
is not building cutting-edge chip fabs: The Tata/PSMC 28nm fab is
significant for India but is 2–3 technology generations behind TSMC's
leading-edge offering; India's chips will serve mid-tier markets, not AI
accelerators, mobile phone SoCs, or next-generation computing.
- ATMP
is not the same as fabrication: Micron's Sanand facility is an ATMP —
packaging completed wafers into chips — not a wafer fabrication facility;
this is a downstream step, not the primary semiconductor manufacturing
process; India does not yet have a wafer fab in operation.
- The
₹76,000 crore headline understates total required investment: ISM's
fiscal support covers 50% of project cost up to defined limits; the total
investment mobilised (including Tata's own capital, Micron's investment,
state government support) is significantly larger than the central ISM
outlay.
- Semiconductor
manufacturing is extraordinarily capital and expertise intensive:
Taiwan's TSMC took 30+ years to reach its current leading position;
Intel's manufacturing leadership took 40+ years; India's 2021 entry should
be assessed on a decade-scale timeline, not annual achievements.
- Design
talent does not automatically translate to semiconductor companies:
India has excellent employed VLSI designers at multinational GCCs; it has
relatively few domestic semiconductor design startups and even fewer
domestic chip companies with market presence; converting employee talent
into entrepreneurial chip design companies requires IP protections, risk
capital, and customer relationships that India's ecosystem is still
developing.
What Changes Over Time
The Tata/PSMC fab's planned production start (2026–27) will be the most significant semiconductor policy milestone of the near term; if successful, it will demonstrate India's ability to operate a semiconductor fabrication facility and attract additional investment.
The iCET framework's
semiconductor technology cooperation with the US — potentially including export
licence facilitation for more advanced tooling — will depend on India's
strategic alignment remaining consistent with US technology policy.
Sources and Further Reading
- Drishti
IAS — Digital India: https://www.drishtiias.com/daily-updates/daily-news-analysis/10-years-of-digital-india
- IBEF
— Digital India: https://www.ibef.org/government-schemes/digital-india
- ORF
— Decade of Digital India: https://www.orfonline.org/research/a-decade-of-digital-india-mission-achievements-gaps-and-the-way-forward
- Insightsonindia
— Digital India: https://www.insightsonindia.com/2025/07/02/10-years-of-the-digital-india-initiative/
- PSA
— AI Mission: https://www.psa.gov.in/ai-mission-initiatives