India’s Semiconductor Sector And The Road To Technological Self-Reliance

Semiconductors are foundational to the modern economy because they enable computing, communications, artificial intelligence, automobiles, power systems, industrial automation, space and defence technologies. Their production is also among the most technologically complex and geographically concentrated industrial activities in the world. For India, developing semiconductor capabilities is therefore not simply an electronics-manufacturing objective. It is linked to higher domestic value addition, technological capability, resilient supply chains, economic security and strategic autonomy. India’s policy has consequently evolved from attracting individual fabrication and packaging plants towards building capabilities across the entire semiconductor ecosystem.

Understanding Semiconductors

• Basic meaning: A semiconductor is a material whose electrical conductivity can be controlled. Its behaviour lies between that of a conductor, which readily carries current, and an insulator, which strongly resists current flow.
• Role of transistors: The controllability of semiconductor materials makes it possible to construct transistors, which function as microscopic electronic switches or amplifiers. Modern integrated circuits may contain billions of transistors.
• Integrated circuits: An integrated circuit or IC combines transistors and other circuit components on a semiconductor substrate. A semiconductor chip is therefore not necessarily a processor; chips perform many different functions.
• Major chip categories: Semiconductor products include logic chips such as CPUs, GPUs and microcontrollers; memory chips such as DRAM and NAND; analog and mixed-signal chips; power semiconductors; sensors; MEMS; radio-frequency devices; display drivers; and discrete devices such as diodes, MOSFETs and IGBTs.

Intrinsic And Doped Semiconductors

• Intrinsic semiconductor: A relatively pure semiconductor is called an intrinsic semiconductor.
• Doping: Conductivity can be modified by deliberately introducing very small quantities of impurities into the semiconductor material. This process is known as doping.
• N-type semiconductor: Doping can create material in which electrons are the predominant mobile charge carriers.
• P-type semiconductor: It can also create material in which positively behaving vacancies called holes are the predominant carriers.
• P–n junction: Joining p-type and n-type regions produces a p–n junction, which forms the basis of many semiconductor devices.

Silicon And Compound Semiconductors

• Silicon: Silicon remains the dominant material for conventional integrated circuits because of its useful electrical properties and mature manufacturing ecosystem.
• Silicon carbide: Silicon carbide or SiC is a wide-band-gap semiconductor particularly useful in high-voltage and high-temperature power electronics.
• Gallium nitride: Gallium nitride or GaN is another important wide-band-gap semiconductor with applications in power electronics, radio-frequency devices and specialised display technologies.
• Important distinction: Semiconductor technology is therefore broader than silicon-based processor manufacturing. India’s emerging ecosystem includes silicon, silicon carbide, gallium nitride, power devices and specialised packaging technologies.

The Semiconductor Value Chain

Semiconductor production involves a sequence of highly specialised activities rather than a single manufacturing process.

Chip Design

• Architecture and circuit design: Engineers determine what a chip should do and design its electronic architecture, circuits and physical layout.
• Electronic Design Automation: EDA software is used to design, simulate, verify and prepare highly complex chips for fabrication.
• Semiconductor IP: Companies may develop or license reusable intellectual-property blocks that can be integrated into larger chip designs.
• Tape-out: Tape-out is the stage at which the final design data are sent for fabrication. It signifies completion of the design stage, not commercial production or even successful silicon.

Wafer Fabrication

• Wafer preparation: Extremely pure semiconductor material is formed into ingots, sliced into wafers and polished.
• Front-end processing: A fabrication plant or fab repeatedly uses processes such as deposition, photolithography, etching and ion implantation to create microscopic devices and interconnections on the wafer.
• Photolithography: Circuit patterns are transferred onto the wafer using light-sensitive materials and patterned masks or related advanced technologies.
• High precision: Fabrication demands extremely clean environments, highly reliable utilities, specialised machinery, ultrapure water, chemicals and gases.

Packaging And Testing

• Die separation: Completed wafers are divided into individual semiconductor dies.
• Packaging: Dies are electrically connected and protected within packages suitable for integration into electronic systems.
• Testing: Devices are tested for functionality, performance and reliability before deployment.
• Growing technological importance: Advanced packaging increasingly combines multiple dies, memory, interconnects and substrates into complex systems. Packaging is therefore becoming a major source of technological value rather than merely a final protective step.

Business Models In The Chip Industry

• Fabless company: A fabless firm designs semiconductor products but contracts their physical fabrication to another company.
• Foundry: A semiconductor foundry manufactures chips designed by other firms.
• Integrated Device Manufacturer: An IDM integrates significant portions of chip design and manufacturing within the same enterprise.
• OSAT: Outsourced Semiconductor Assembly and Test firms specialise primarily in packaging, assembly and testing services.
• ATMP: Assembly, Testing, Marking and Packaging refers to the downstream processing of fabricated semiconductor dies.
• Crucial distinction: An ATMP or OSAT plant is not a wafer fabrication plant. A country can have significant semiconductor packaging capacity without possessing commercial front-end wafer fabrication at the same scale.

Process Nodes, Yield And Capacity

• Process node: Expressions such as 180 nm, 28 nm, 7 nm or 3 nm identify generations of semiconductor manufacturing technology. In modern fabrication, the number should not be interpreted as one universal physical transistor dimension.
• Advanced nodes: Smaller-node technologies are particularly important for high-performance computing, smartphones and advanced AI processors.
• Mature nodes: Larger or mature nodes remain indispensable for automobiles, industrial equipment, telecommunications, power electronics, sensors and consumer products. Mature does not mean obsolete.
• Yield: Yield refers to the proportion of fabricated dies that meet required specifications. A plant with large nominal capacity but poor yields may remain commercially uncompetitive.
• Wafer starts per month: WSPM measures the number of wafers entering the fabrication process each month. It cannot be directly compared with figures such as packaged chips produced per day.

Why Semiconductors Have Become Strategic

• General-purpose input: Semiconductors are embedded in almost every advanced industrial and digital technology, including AI, telecommunications, EVs, renewable-energy systems, data centres, aerospace and defence.
• Concentrated production: Important parts of semiconductor design, manufacturing equipment, fabrication and materials remain concentrated in a relatively small number of economies and firms.
• High entry barriers: A modern semiconductor fab can require investment running into several billions of dollars, together with accumulated technological know-how and continuing R&D.
• Supply-chain vulnerability: Disruptions during the global semiconductor shortage demonstrated how shortages in a small number of chip categories could constrain automobile and electronics production worldwide.
• National-security dimension: Modern radars, missiles, satellites, communications systems, drones, cryptographic systems, data centres and critical infrastructure all depend on semiconductors.
• Technology geopolitics: Export controls, investment screening, industrial subsidies and efforts to build trusted supply chains increasingly influence access to advanced chips and semiconductor-manufacturing equipment.

India’s Semiconductor Foundations

India did not enter the present semiconductor push without any domestic capability. Its historical strengths, however, were considerably stronger in design and strategic applications than in large-scale commercial fabrication.

Semi-Conductor Laboratory

• Location and administration: The Semi-Conductor Laboratory is located at Mohali in Punjab and functions under the Ministry of Electronics and Information Technology.
• Fabrication capability: SCL operates an 8-inch CMOS wafer-fabrication line and a 6-inch MEMS line at 180-nm technology.
• Strategic orientation: Its importance lies especially in specialised and strategic applications rather than high-volume commercial foundry production.
• Space applications: Semiconductor devices produced through India’s domestic strategic ecosystem have supported missions and systems including Chandrayaan-3, launch-vehicle processors and radiation-hardened components.
• Correct interpretation: India therefore had limited indigenous fabrication capability before the present semiconductor mission, but lacked a globally competitive, large-scale commercial semiconductor-manufacturing ecosystem.

Electronics Manufacturing As The Wider Base

The semiconductor strategy is linked closely with India’s wider expansion in electronics manufacturing.

• National Policy on Electronics: The National Policy on Electronics, 2019 sought to deepen Electronics System Design and Manufacturing in India.
• Manufacturing incentives: Subsequent measures included the Production Linked Incentive Scheme for Large Scale Electronics Manufacturing, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors and Electronics Manufacturing Clusters 2.0.
• IT hardware: PLI support for IT hardware broadened the electronics-manufacturing base beyond mobile phones.
• Components: The Electronics Components Manufacturing Scheme seeks to increase domestic production of components that feed into finished electronics.
• Mobile-phone expansion: Mobile-phone production increased from around ₹18,000 crore in FY2015 to about ₹5.45 lakh crore in FY2025, while India developed more than 300 mobile-manufacturing units.
• Export momentum: Electronics became India’s third-largest export category by FY2025, while electronics exports reached about US$22.2 billion in the first half of FY2026.

This expanding downstream industry is important because semiconductor plants require reliable demand. A large electronics, automobile, telecom and industrial base can help create anchor markets for domestically designed and manufactured chips.

Semicon India Programme And Semicon 1.0

The major policy shift occurred with the approval of the Semicon India Programme in December 2021 with an outlay of ₹76,000 crore.

Manufacturing Support

• Semiconductor fabs: The programme provided incentives for establishing wafer-fabrication facilities.
• Display fabs: Separate support was designed for display manufacturing.
• Specialised semiconductors: Support extended to compound semiconductors, silicon photonics, sensors and related technologies.
• Packaging: ATMP and OSAT facilities became a major component of the programme.
• Fiscal assistance: Under the modified framework, fiscal support of around 50% of eligible project cost or capital expenditure became central to several semiconductor-manufacturing schemes.

Semicon 1.0 primarily sought to create the physical foundations of a domestic semiconductor industry and overcome the coordination problem in which fabs, suppliers, skills and customers are reluctant to invest unless the rest of the ecosystem develops simultaneously.

Design Linked Incentive And Chip Development

India’s semiconductor-design strength created an opportunity distinct from manufacturing.

• Design-services advantage: India already hosts a large pool of engineers involved in semiconductor design, but engineering services performed for global companies do not automatically generate Indian-owned semiconductor products or IP.
• DLI objective: The Design Linked Incentive Scheme seeks to support indigenous chip and system-on-chip design, prototyping, fabrication and commercialisation.
• Supported projects: By September 2026, 24 semiconductor design projects had been approved with a combined value of around ₹900 crore.
• Application areas: Supported designs span satellite communications, drones, surveillance systems, smart metering, broadband, IoT, telecom equipment and other commercial and strategic applications.
• Design infrastructure: More than one lakh engineers from around 500 organisations, including academic institutions and start-ups, had been provided access to advanced chip-design tools by September 2026.
• Design output: More than 300 chip designs had been developed across participating organisations.

The distinction between training, design, tape-out, successful fabrication, qualification and mass commercialisation remains important. A large number of designs does not automatically mean an equally large number of commercially successful chips.

Semicon 2.0 And The Shift To A Complete Ecosystem

Union Budget 2026–27 announced India Semiconductor Mission 2.0 and provided ₹1,000 crore for FY2026–27. The Union Cabinet subsequently approved Semicon 2.0 on 15 July 2026 with a total programme outlay of ₹1,27,500 crore.

This distinction is important: the ₹1,000 crore figure represents the FY2026–27 Budget provision, whereas ₹1,27,500 crore is the subsequently approved overall outlay for Semicon 2.0.

Six Pillars Of Semicon 2.0

• Design: The programme seeks deeper Indian ownership of chip designs, semiconductor IP and complete systems rather than dependence solely on design-services work.
• Machines and materials: Incentives are intended for semiconductor equipment, specialty materials, chemicals and gases needed by the manufacturing ecosystem.
• More fabs: Support is intended to expand silicon, compound-semiconductor, discrete-device and display fabrication capacity.
• Advanced packaging: India plans to deepen ATMP and OSAT capabilities and attract technologically advanced packaging processes.
• Research and development: The programme seeks progression from the present focus on mature-node technologies towards more advanced processes and specialised technologies through collaboration with domestic and international research centres.
• Talent development: Training is being expanded beyond VLSI design to include clean-room operations, fabrication, fab construction, equipment, packaging and ecosystem skills.

The significance of Semicon 2.0 therefore lies not merely in a higher financial allocation. It represents a change from a factory-centred approach to an ecosystem-centred strategy.

India’s Emerging Semiconductor Geography

As of September 2026, 12 semiconductor manufacturing projects had been approved across Gujarat, Assam, Uttar Pradesh, Odisha, Punjab and Andhra Pradesh, with committed investments exceeding ₹1.64 lakh crore. The approved portfolio included one silicon fab, one silicon-carbide fab, an integrated GaN Micro-LED display fab and nine packaging units.

By 17 September 2026, five commercial semiconductor units were operational. However, these should not be interpreted as five operational front-end wafer fabs. The first commercial fab under the programme is scheduled for commissioning in 2028.

Gujarat

• Tata Electronics fab: Tata Electronics is establishing a silicon fabrication facility in Gujarat in technology partnership with Taiwan’s PSMC. The approved investment is about ₹91,526 crore, with planned capacity of around 50,000 wafer starts per month.
• Micron: Micron’s Gujarat facility, involving investment of about ₹22,516 crore, undertakes assembly and testing of DRAM and NAND products. It is not a memory-wafer fabrication plant.
• CG Power: The CG Power project, involving Renesas and STARS Microelectronic, expands India’s semiconductor assembly and testing capacity.
• Kaynes: The Kaynes facility adds wire-bond and substrate-based semiconductor packaging capabilities.

Gujarat’s concentration of several major projects illustrates the emergence of semiconductor cluster economics, in which suppliers, skilled labour, logistics and specialist service providers can develop around anchor investments.

Assam

• Tata packaging facility: Tata Electronics is developing a major semiconductor assembly and packaging facility in Assam with an approved investment of about ₹27,120 crore.
• Regional significance: The project widens India’s semiconductor geography beyond established western and southern electronics clusters and gives the Northeast a role in advanced manufacturing.

Uttar Pradesh

HCL–Foxconn-linked project: The Uttar Pradesh project is intended for downstream processing associated with display-driver ICs, including gold-bump technology, chip probing and die-processing services.

Odisha

• Advanced substrates and packaging: One approved project focuses on glass-panel substrates and advanced heterogeneous packaging technologies.
• Silicon carbide: The SiCSem project combines silicon-carbide fabrication with semiconductor packaging, giving Odisha an important position in wide-band-gap semiconductor manufacturing.

Punjab

• Discrete power devices: Continental Device India is expanding production of devices including MOSFETs, IGBTs, Schottky diodes and other power semiconductors.
• Existing capability: Punjab also hosts SCL at Mohali, linking legacy strategic semiconductor capacity with newer commercial activity.

Andhra Pradesh

System-in-package capability: The approved project in Andhra Pradesh focuses on advanced semiconductor packaging with overseas technology collaboration.

Approved Capacity And Operational Capacity

• Approval is not production: Project approval indicates government clearance and investment commitment. Construction, equipment installation, process qualification and commercial production follow later.
• Packaging is not fabrication: A facility packaging imported or externally fabricated wafers is participating in semiconductor manufacturing, but it does not represent domestic wafer fabrication.
• Production status changes rapidly: The number of producing facilities increased during 2026 as approved units moved through implementation stages.
• First commercial fab: The Government stated in July 2026 that the first fab under the programme is scheduled for commissioning in 2028.

This distinction is particularly important because headline statements about the number of semiconductor plants can otherwise exaggerate India’s present front-end fabrication capability.

Economic Significance For India

Moving Beyond Electronics Assembly

• Higher domestic value addition: India has achieved rapid scale in electronics assembly, but semiconductor chips, displays, components and IP account for a substantial share of technological value.
• Industrial upgrading: Domestic semiconductor capabilities can help India progress from final assembly towards components, packaging, fabrication, design and proprietary technology.
• Supplier development: Fabs and packaging units generate demand for specialty chemicals, precision components, substrates, engineering services, gases, equipment servicing and industrial infrastructure.

Domestic Demand

• Large electronics market: Smartphones, IT hardware, automobiles, telecommunications equipment and appliances generate substantial chip demand.
• Emerging technologies: EVs, AI, data centres, IoT, 5G and 6G, industrial automation and renewable-energy systems are likely to increase semiconductor intensity.
• Official projections: Government-cited estimates place India’s semiconductor demand at around US$110 billion by FY2030 and more than US$200 billion by FY2035.

These are projections rather than guaranteed outcomes, but they illustrate the scale of the potential domestic market.

Employment And Productivity

• Knowledge-intensive jobs: Semiconductor manufacturing generates high-productivity employment for engineers, scientists, equipment specialists and technicians.
• Indirect employment: Employment effects extend into construction, chemicals, precision engineering, logistics, electronics manufacturing and supplier industries.
• Capital intensity: Fabs are not labour-intensive in the same way as textiles or food processing. Their economic value must therefore also be assessed through technological spillovers, productivity, supply-chain resilience and knowledge creation.

Strategic And National-Security Significance

• Defence systems: Modern weapons, radar, communications, electronic warfare, navigation systems and drones depend on sophisticated semiconductor devices.
• Space: Satellites and launch vehicles require reliable and, in certain applications, radiation-tolerant semiconductor components.
• Telecommunications: Networks ranging from mobile communications to future 6G infrastructure depend on processors, radio-frequency chips and power devices.
• Critical infrastructure: Electricity grids, financial systems, data centres and industrial networks increasingly depend on semiconductor-based control systems.
• Supply-chain resilience: Domestic capabilities can reduce exposure to geopolitical disruption or technology denial in selected critical segments.
• Strategic autonomy: Semiconductor capability strengthens India’s ability to pursue independent economic, digital and security objectives without attempting to sever international technological interdependence.

Self-Reliance Does Not Mean Semiconductor Autarky

The semiconductor industry is one of the most internationally fragmented value chains in the world. Different countries and firms specialise in design software, manufacturing equipment, chip architecture, foundry production, memory, materials or packaging.

• Self-sufficiency: Attempting to produce every machine, material, chip and design domestically would be economically unrealistic.
• Strategic self-reliance: India can instead develop domestic capability in areas of high strategic importance or comparative advantage while diversifying unavoidable external dependencies.
• Trusted partnerships: Multiple international sources for equipment, technology, materials and markets can provide resilience without withdrawing from global supply chains.

India’s semiconductor strategy is therefore better understood as selective capability-building within an internationally integrated industry.

International Semiconductor Partnerships

• United States: Semiconductor cooperation forms part of the wider technology and strategic partnership between India and the United States.
• Japan: Cooperation with Japan is relevant particularly because of Japan’s capabilities in semiconductor materials, equipment and manufacturing.
• European Union: Semiconductor cooperation with the EU supports technology collaboration and resilient supply chains.
• Singapore: Singapore is an important semiconductor-manufacturing and packaging hub and has emerged as a partner in India’s semiconductor engagement.
• Netherlands: Cooperation is significant because the Netherlands occupies an important position in semiconductor-manufacturing equipment.
• Germany: An India–Germany Semiconductor Ecosystem Partnership was formalised through a Joint Declaration of Intent during the German Chancellor’s January 2026 visit.
• Pax Silica: India joined Pax Silica during the India AI Impact Summit in February 2026.

These partnerships reflect the structure of the global industry: no single economy controls every critical stage of the value chain.

Semiconductor Geopolitics

• Export controls: Advanced chips and specialised manufacturing equipment have become subjects of strategic export restrictions.
• Industrial subsidies: Major economies are providing large incentives for domestic semiconductor fabrication and supply-chain localisation.
• Friend-shoring: Countries increasingly seek semiconductor supply from strategically trusted partners.
• East Asian concentration: Geographic concentration of major manufacturing capacities creates concerns about disruption from geopolitical or natural hazards.
• AI competition: Rapid growth in AI has increased demand for advanced processors, memory and high-performance computing infrastructure.

For India, semiconductor policy is consequently inseparable from trade policy, technology diplomacy, national security and relations with major technology powers.

India’s Design Advantage

India begins with a comparatively stronger position in semiconductor design than in fabrication.

• Engineering workforce: Government-cited estimates indicate that India employs nearly one-fifth of the global semiconductor chip-design workforce.
• Global Capability Centres: India hosts semiconductor R&D and engineering operations of many global technology companies.
• Limitation: Indian engineers working for multinational firms do not necessarily create Indian-owned semiconductor IP.
• Strategic objective: The longer-term challenge is to convert design talent into Indian-defined products, proprietary IP, successful tape-outs and commercially scalable semiconductor firms.

Research And Development Constraints

• Low national R&D intensity: India’s gross expenditure on R&D remains around 0.64% of GDP, considerably below several technology-intensive economies.
• Business-sector gap: Private-sector participation in national R&D remains relatively limited.
• Semiconductor requirement: Chip design and process development require sustained, expensive and long-duration research rather than one-time capital expenditure.
• Shared infrastructure: Universities and start-ups need access to EDA tools, prototyping facilities, fabrication opportunities and advanced testing infrastructure.

Semicon 2.0’s R&D pillar is therefore necessary if India is to move from importing established technologies towards developing new ones.

Intellectual Property Framework

India has a specialised legal framework for semiconductor layout designs.

• Principal legislation: The Semiconductor Integrated Circuits Layout-Design Act, 2000 provides protection for the layout designs of semiconductor integrated circuits.
• Rules: The Semiconductor Integrated Circuits Layout-Design Rules, 2001 supplement the Act.
• Nature of right: The law protects the physical layout or topology of circuit elements and their interconnections rather than treating every chip layout simply as an ordinary copyright or patent.
• Registration requirements: Originality and distinctiveness are important conditions, while excessive prior commercial exploitation may prevent registration.
• Two-year qualification: The Act allows a limited qualification where commercial exploitation has not exceeded the statutory two-year period before application.
• Term of protection: Protection operates for ten years under the statutory framework.
• Registry: The specialised registry became operational in 2011 and is headquartered in New Delhi.

Layout-design rights are only one component of semiconductor IP. Semiconductor firms may also depend on patents, software copyright, trademarks, trade secrets, technology licences and reusable design IP.

The Growing Importance Of Advanced Packaging

Advanced packaging is changing the traditional assumption that most technological value lies only in wafer fabrication.

• Heterogeneous integration: Different processors, memory dies, sensors and specialised components can be combined within a package.
• System-in-package: Multiple functional elements can be integrated into compact, high-performance packaged systems.
• Substrates and interposers: Advanced materials and interconnect structures increasingly determine package performance.
• Indian opportunity: India’s early expansion in ATMP and OSAT can become an entry point into increasingly complex semiconductor-manufacturing processes.

However, packaging should form part of a progressive upgrading strategy rather than substitute permanently for acquiring fabrication, materials and process capabilities.

Infrastructure And Resource Requirements

Semiconductor fabs are unusually demanding industrial facilities.

• Reliable electricity: Production must operate with extremely high power quality and continuity because interruptions can destroy work in progress and disrupt precision processes.
• Ultrapure water: Wafer processing requires substantial quantities of highly purified water.
• Specialty gases and chemicals: Fabrication depends on high-purity materials supplied to precise specifications.
• Clean rooms: Microscopic contamination can damage semiconductor structures, requiring rigorously controlled manufacturing environments.
• Logistics: High-value equipment, chemicals and semiconductor products require dependable transport and specialised supply chains.
• Cluster infrastructure: Concentrating suppliers and fabs in viable industrial clusters can reduce costs and improve knowledge and service networks.

Environmental And Sustainability Concerns

• Water demand: Semiconductor fabrication can add pressure in water-stressed regions unless recycling and recovery systems are integrated into plant design.
• Energy demand: Continuous fabrication requires large and reliable power supplies.
• Chemical management: Semiconductor processes involve specialised chemicals and gases that require strict environmental and occupational safeguards.
• Waste management: Effluent treatment and hazardous-waste handling need high regulatory and technological standards.
• Climate resilience: Sites must be chosen with attention to long-term water availability, extreme weather, energy reliability and infrastructure resilience.

The environmental issue is not simply a choice between semiconductor manufacturing and sustainability. Semiconductor devices themselves support renewable energy, electric mobility, efficient computing and smart grids. The objective should be a resource-efficient semiconductor industry with high standards of water recycling, clean energy and chemical management.

Major Challenges Before India

High Capital Requirements

• Very large investment: A modern fabrication plant may cost close to US$10 billion, creating significant entry barriers.
• Public-finance implications: Large fiscal incentives carry an opportunity cost and require careful evaluation against technological and economic outcomes.

Long Gestation And Commercial Risk

• Implementation period: Fabs take several years from approval to commercial production.
• Demand cycles: Semiconductor markets experience cyclical expansions and downturns.
• Technology risk: Process technologies may evolve while a plant is still under construction.

Dependence On Imported Equipment

• Specialised machinery: Lithography, deposition, etching, metrology and related equipment remain concentrated among a small number of global suppliers.
• Strategic vulnerability: Export restrictions can therefore affect even a domestically located fab.

Materials And Input Dependence

• Critical inputs: Semiconductor-grade wafers, photoresists, specialty chemicals, substrates and gases often require globally specialised suppliers.
• Ecosystem gap: Domestic manufacturing of these inputs is still at an early stage.

Technology And Tacit Know-How

• Beyond physical equipment: Semiconductor manufacturing depends heavily on accumulated process knowledge that cannot simply be purchased as machinery.
• Foreign partnerships: Technology collaborations can accelerate learning but must eventually build domestic engineering capabilities.

Specialised Skills

• Broader than chip design: India requires process engineers, equipment technicians, materials scientists, packaging specialists, reliability engineers and clean-room professionals.
• Manufacturing gap: Software and design strengths cannot automatically substitute for fabrication expertise.

R&D Intensity

• Persistent investment: Advanced semiconductor capability requires continuous research rather than a single technology transfer.
• Commercialisation gap: Start-ups need patient capital, prototyping support and anchor customers in addition to EDA access.

Water And Power

• Utility quality: Mere availability of electricity and water is insufficient; fabs require extraordinary reliability and purity.
• Site-selection challenge: Poorly chosen projects can impose high economic or environmental costs.

State-Level Subsidy Competition

• Competitive federalism: State incentives can attract investment and accelerate industrial development.
• Risk of bidding wars: Excessive competition in subsidies, land or electricity can raise public costs without increasing national capability proportionately.

Domestic Supplier Depth

• Imported ecosystem: A plant that imports most equipment, materials and technology may generate less domestic value addition than headline investment figures suggest.
• Local multiplier: Supplier localisation is therefore essential to maximise technological spillovers.

Evaluating Semiconductor Policy Beyond Investment Announcements

The success of India’s semiconductor strategy should not be measured only through the number or rupee value of approved projects.

• Commissioning: Projects must move from announcement and approval to operational production.
• Production yield: High and stable yields are critical to commercial competitiveness.
• Domestic value addition: The share of locally supplied materials, equipment, engineering and services matters.
• Indian IP: Growth in commercially valuable Indian semiconductor designs is a key indicator of technological capability.
• Exports: International competitiveness requires serving global customers, not merely a protected domestic market.
• Supplier localisation: Domestic chemicals, gases, substrates, equipment components and precision-engineering firms can magnify economic benefits.
• Workforce development: Sustainable capability requires a growing pool of design, manufacturing and research talent.
• R&D capability: Long-term success depends on developing and improving technologies rather than continuously importing established processes.

A Balanced Way Forward

• Use milestone-linked incentives: Public support should increasingly follow construction, qualification, production, yield and domestic-value-addition milestones rather than investment announcements alone.
• Build complete clusters: Fabs should be supported by utilities, packaging facilities, suppliers, research institutions, logistics and specialised workforce development.
• Prioritise critical localisation: India need not manufacture every input domestically, but should identify and reduce dependence on strategically vulnerable single-source inputs.
• Strengthen supplier development: Anchor projects should be used to create Indian firms in precision machinery, semiconductor-grade chemicals, gases, substrates, equipment components and testing.
• Convert design talent into products: DLI, EDA access and prototyping support should be complemented by patient capital, commercialisation mechanisms and anchor customers.
• Deepen industry-led R&D: Shared research facilities and industry–university programmes can reduce the cost of advanced experimentation.
• Develop multiple skill layers: Universities, polytechnics and technical institutions should build capability from chip design and materials research to clean-room operations and equipment servicing.
• Aggregate strategic demand: Defence, space, telecommunications, automotive and industrial buyers can provide credible demand signals for qualified domestic semiconductor products.
• Avoid node-centric policy: Success should not be judged only by the smallest nanometre figure. Mature-node microcontrollers, power semiconductors, secure processors and specialised devices can have major economic and strategic value.
• Maintain international integration: India should combine indigenous capability with diversified partnerships in design, equipment, materials, fabrication and packaging.
• Build sustainably: Water recycling, low-carbon reliable energy, chemical management and environmental compliance should become integral features of semiconductor clusters.
• Target global competitiveness: Atmanirbharta in semiconductors should ultimately mean stronger participation in global value chains, not permanent reliance on import substitution or protected domestic demand.

Conclusion

India’s semiconductor programme has moved beyond the question of whether the country should manufacture chips to the more difficult question of how it can build a durable technological ecosystem. Semicon 1.0 created an initial manufacturing and packaging base, while Semicon 2.0 broadens the effort towards design IP, materials, equipment, research, advanced packaging and skills. India’s large domestic market and design workforce provide important advantages, but success will depend on execution, yields, R&D, supplier localisation, sustainable infrastructure and global competitiveness. Strategic autonomy in semiconductors will ultimately come not from isolation, but from combining deeper indigenous capabilities with resilient international partnerships.