The modern digital economy is built on semiconductors. Smartphones, electric cars, industrial automation, telecommunications networks, artificial intelligence (AI) apps, military technologies, and cloud computing infrastructure are powered by semiconductors. With geopolitical tensions on top of the already stiff competition in the global semiconductor industry, supply chain disruptions and increasing technology competition, nations around the world are interested in increasing domestic chip-making capacity.
India is coming out to be a significant contributor to this change. The nation is striving to achieve a grand vision: establishing an integrated semiconductor ecosystem of fabrication, assembly, testing, packaging, design and research through a combination of policy modifications, financial stimulus, and infrastructure development and strategic partnerships with foreign technology companies.
India is becoming a strong contender as a foreign investment destination where foreign investors have a chance in the global semiconductor market. The initiatives undertaken in global supply chain diversification, the expansion of the domestic market, the massive labour force, in the field of engineering, and government based programmes are driving the sector.
Why Semiconductors Matter in the Global Economy
Semiconductors are often described as the “new oil” of the digital age since they are the basic building blocks of the electronic systems today. Semiconductor chips are needed in virtually all advanced technologies, such as:
- Consumer electronics
- Cloud infrastructure and data centers.
- Artificial intelligence applications
- Electronic automotive and electric cars.
- Industrial automation systems
- Telecommunications networks
- Aerospace and military technologies.
- Medical devices
The shortage of semiconductors worldwide in the COVID-19 pandemic brought the strategic value of chip manufacturing to the fore. Stresses were experienced in industries all over the world, leading to delays in production, escalation of costs and more anxiety about supply chain resilience.
This experience increased the pace of governments and corporations trying to diversify manufacturing outside of the traditional semiconductor manufacturing centers, which were concentrated in East Asia. India is one of the beneficiaries of this plan of strategic alignment.
India’s Vision to Become a Semiconductor Manufacturing Hub
The semiconductor ambitions of India are intertwined with its manufacturing and technology ambitions in general. The government has a goal of establishing a self-sufficient electronics ecosystem and to draw in huge foreign direct investment (FDI) in high-tech manufacturing industries.
The nation is now one of the fastest growing electronics markets in the world with the help of:
- Rapid digitalization
- Expanding smartphone adoption
- Expansion of electric mobility.
- Demand in consumer electronics is on the rise.
- Large-scale infrastructure modernization
- Increasing use of AI and data technology.
Since the strategic value of semiconductors is evident, policy makers have come up with a detailed blueprint to make India a global hub in terms of manufacturing and semiconductor supply-chain activities.
India Semiconductor Mission (ISM): The Central Pillar of India’s Semiconductor Strategy
The India Semiconductor Mission (ISM), a dedicated Indian government program, is at the heart of the semiconductor strategy in India and developed to spearhead the development of semiconductor ecosystems in the long term.
The Programme for Development of Semiconductors and Display Manufacturing Ecosystem was launched with a total outlay of approximately ₹76,000 crore (US$10 billion), with the India Semiconductor Mission serving as the nodal agency for implementation and coordination.
The mission is the main coordinating body and in charge of:
- Adopting semiconductor incentives.
- Facilitating investment approvals
- Supporting technology partnerships
- Encouraging domestic manufacturing
- Promoting research and innovation
- Building semiconductor infrastructure
The vision is to establish a semiconductor ecosystem that is globally competitive and capable of attracting larger multinational entities, as well as the newer technology manufacturers.
Offering policy predictability and a centralized system, ISM aims at easing the entry of investors in the semiconductor industry in India.
Semiconductor Incentive Schemes and Government Support
One of the most attractive aspects for foreign investors is India’s extensive network of financial incentives and policy support.
The Indian government has proposed incentive schemes to cut capital expenditure requirements and enhance viability of projects in various sections of the semiconductor value chain.
In addition to the India Semiconductor Mission, other schemes that investors can enjoy are the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS). Other alternative policy mechanisms have also facilitated other projects like the packaging plant of Sahasra Semiconductors in Bhiwadi, Rajasthan which proves that investors can take advantage of various regulatory avenues outside the India Semiconductor core Mission framework.
Support for Semiconductor Fabrication Facilities
Fabrication plants or fabs are one of the highest capital-intensive industrial projects in the world.
India provides significant fiscal support to the fabrication projects which are eligible in order to attract investments in this region. There can be government incentives that will greatly subsidize the cost of project development, which would make India more competitive as compared to the already established manufacturing destinations. Eligible semiconductor fabs, display fabs, and ATMP/OSAT projects can receive fiscal support of up to 50% of project costs or capital expenditure under various government schemes.
The following incentives are aimed at supporting:
- Silicon semiconductor fabs
- Compound semiconductor manufacturing
- State-of-the-art node and mature node technologies.
- Special semiconductor manufacturing plants.
Incentives for ATMP and OSAT Facilities
The semiconductor policy of India goes beyond the wafer production.
The government is also favouring:
- Assembly
- Testing
- Marking
- Packaging (ATMP)
and
- Outsourced Semiconductor Assembly and Test (OSAT)
facilities.
These are still regarded as critical parts of the semiconductor supply chain, and tend to be a gateway to countries that want to develop a more comprehensive chip manufacturing infrastructure.
The investment in ATMP and OSAT operations is less than advanced fabrication plants and generates considerable employment opportunities and value in the supply chain.
Design-Linked Incentives
India already enjoys a worldwide reputation of semiconductor design skills. The country is home to many leading chip companies in the world with their research and design centers.
In order to utilize this advantage, the semiconductor design firms are also aided by the incentive programs in terms of financial support, as well as incentive programs that are directed towards innovation.
This will enhance the position of India in terms of both manufacturing and chip design.
State Governments Are Competing for Semiconductor Investments
Moreover, the Indian states have come up with their own semiconductor investment policies in addition to the central government support.
States are also competing fiercely to have semiconductor projects by providing:
- Land subsidies
- Capital incentives
- Stamp duty exemptions
- Tax benefits
- Infrastructure support
- Utility concessions
- Workforce training assistance
Some of the states that are making vigorous efforts to invest in semiconductors are:
- Gujarat
- Tamil Nadu
- Karnataka
- Telangana
- Uttar Pradesh
- Maharashtra
These incentives at the state level tend to supplement federal incentives, forming potentially enticing packages of investment to foreign manufacturers.
Infrastructure Requirements for Semiconductor Manufacturing
It takes a lot more than money to construct semiconductor plants. There are various infrastructure variables that investors need to consider and which have a direct impact on efficiency.
Land Availability
Semiconductor fabs need big industrial locations that can be effective in supporting:
- Manufacturing operations
- Utility infrastructure
- Future expansion
- Logistics facilities
- Supplier ecosystems
India has a range of Indian states that have created dedicated industrial parks, semiconductor-oriented zones to simplify site selection.
Reliable Power Supply
The manufacturing of semiconductors requires constant flow of electricity.
Even brief power disruptions can severely impact production yields and cause substantial financial losses. As a result, the availability of stable and good-quality power infrastructures has been a key factor to consider by investors.
Government officials are in the process of developing industrial power infrastructure within developing semiconductor clusters.
Water Requirements
Semiconductor manufacturing is highly water-intensive.
Manufacturing processes require large quantities of ultra-pure water. The investors need to consider:
- Water availability
- Treatment infrastructure
- Recycling capabilities
- Long-term sustainability
Advanced water management systems are being integrated in industrial areas that are being focused on with investments in semiconductors.
Logistics and Connectivity
Effective logistic systems are important to semiconductor production.
The facilities need to have smooth access to:
- Airports
- Ports
- Road infrastructure
- Cargo facilities
- Global supply chains
The current investments in transportation infrastructure and modernization of the logistics in India are aimed to enhance the competitiveness in the sphere.
Regulatory Framework and Investment Approval Processes
India has gone further to carry out wider reforms that are meant to enhance ease of doing business and foreign investment.
India also permits 100 percent foreign direct investment (FDI) under the automatic route in most electronics manufacturing segments, providing foreign semiconductor investors with a relatively straightforward entry pathway.
The foreign investors interested in semiconductor projects have to manoeuvre through various regulatory domains, which include:
- Corporate establishment procedures
- Environmental approvals
- Land acquisition processes
- Construction permits
- Industrial licenses
- Imports and exports.
- Labor compliance requirements
Government departments have frequently adopted one-stop clearance systems aimed at streamlining project approvals and accelerating implementation timelines.
The India Semiconductor Mission is also another major area of contact with the semiconductor investors interested in guidance and support in terms of coordination.
Building a Semiconductor Workforce
The semiconductor industry needs technical talent that is highly skilled in order to be sustainable.
India has one of the world’s largest engineering talent pools and has traditionally been a world leader in semiconductor design services.
To facilitate the growth of manufacturing, the government, higher education institutions and industry stakeholders are working on workforce development efforts that share the following:
- Semiconductor engineering
- Fabrication technologies
- Process engineering
- Packaging and testing
- Advanced electronics manufacturing
- Research and development
It is hoped that universities, technical institutes and specialized training programs will become all the more important in providing future talent needs.
Major Semiconductor Projects Announced in India
The ambitions of India as far as semiconductors are concerned are no longer restricted to policy announcements. A number of high profile projects have been announced or approved which is an indication of increasing industry confidence.
Several major semiconductor projects have already been approved or announced under India’s semiconductor strategy. These include Tata Electronics’ semiconductor fabrication facility in Dholera, Gujarat; Micron Technology’s ATMP facility in Gujarat; the CG Power semiconductor project; Kaynes Semicon’s OSAT facility, supported through a partnership with Japan’s AOI Electronics; and the HCL-Foxconn OSAT project in Uttar Pradesh. Together, these investments represent some of the first large-scale semiconductor manufacturing and packaging initiatives aimed at establishing a domestic semiconductor ecosystem in India.
International collaborations are also gaining momentum. For example, Kaynes Semicon’s ₹3,307 crore OSAT facility, developed in partnership with Japan’s AOI Electronics, highlights the growing confidence of global semiconductor companies in India’s emerging manufacturing ecosystem.
In addition to technology support from AOI Electronics, Kaynes Semicon has also established partnerships aimed at strengthening semiconductor material and supply-chain capabilities, including collaboration with Japan’s Mitsui & Co. Such partnerships are expected to support the development of a more resilient semiconductor ecosystem in India.
Recent government approvals have further expanded India’s semiconductor pipeline, reflecting continued momentum in attracting both domestic and international investments across fabrication, packaging, and testing segments.
Semiconductor Fabrication Investments
India has witnessed the emergence of several major semiconductor fabrication projects involving both domestic and international partners.
These initiatives should build a base of manufacturing capacities and assist in developing wider supplier networks.
A notable milestone came in May 2026 when Tata Electronics signed an agreement with ASML, the Netherlands-based semiconductor equipment leader, to supply advanced lithography technology and equipment for its proposed US$11 billion semiconductor fabrication facility in Dholera, Gujarat. The partnership represents a significant vote of confidence from global technology leaders in India’s semiconductor manufacturing ambitions.
ATMP and Packaging Facilities
A number of firms have declared their investments in testing and packaging of semiconductors.
These facilities are expected to strengthen India’s position in global semiconductor supply chains and create opportunities for future ecosystem expansion.
Growing Industry Participation
Technology companies, electronics companies, semiconductor companies and engineering companies around the world are increasingly considering India as a source of long-term diversification.
Policy support together with market potential has created increased interest in the industry by the world players.
Why Global Semiconductor Companies Are Looking at India
The semiconductor industry in India is experiencing an upsurge of interest by foreign investors due to a number of reasons.
Supply Chain Diversification
The semiconductor industry is also on a move to geographic diversification.
Firms are turning to new destinations other than the traditional manufacturing destinations to minimize supply-chain concentration risks and enhance resilience.
India provides a different place with well-established governmental support and developing industrial capacities.
Large Domestic Market
The growing markets of electronics and technology in India are offering manufacturers with a large pool of customers.
Rising demand for:
- Smartphones
- Consumer electronics
- Electric vehicles
- Industrial electronics
- Telecommunications equipment
establishes market opportunities in the long run.
Strong Talent Base
The reputation of India in semiconductor design, software engineering and in the high technology service is a significant competitive edge.
Manufacturers have an opportunity of leveraging on the technical expertise that they already have as local production is established.
Government Commitment
In contrast to the short-term industrial projects, the strategy of semiconductor in India has the support of a long-term policy commitment with a significant financial input and institutional back up.
This commitment provides investors with greater confidence in the long-term development of India’s semiconductor ecosystem.
Challenges Facing India’s Semiconductor Ambitions
Although there have been massive strides, India continues to experience a number of problems in developing a semiconductor industry that is globally competitive.
High Capital Requirements
The production of semiconductors is still one of the costliest industries.
Fabrication plants may need billions of dollars to be built, and, therefore, financing and implementation of the project are very important factors to be considered.
Technology Complexity
The manufacturing of chips is a highly complex process, equipment and intellectual property.
It takes time to build the capabilities needed to develop advanced capabilities; this would be through government, industry and technology partnerships.
Supply Chain Development
The entire ecosystem of semiconductors goes a lot further than fabrication plants.
India needs to keep on enhancing the supporting industries such as:
- Chemicals
- Specialty gases
- Equipment maintenance
- Materials supply
- Precision manufacturing
- Logistics services
Global Competition
India competes with: other forms of semiconductor manufacturing that already exist in the world like:
- Taiwan
- South Korea
- China
- Japan
- Singapore
- The United States
It will be necessary to maintain the consistency of policies and the further development of an ecosystem to compete effectively.
The Road Ahead
India’s semiconductor industry is still in its early stages, but momentum is clearly building.
The stimulus provided by the government, infrastructure investments, strategic alliances and increased involvement of the private-sector are all establishing the basis of a new manufacturing industry that has a huge long-term potential.
It will require proper project implementation, staff training, localization of supply-chain, and further policy reinforcement to be successful. Nonetheless, the trend is distinctly going in the right direction: India is not merely becoming a destination of semiconductor designs only, but is expanding into a wider semiconductor manufacturing and packaging location.
Policymakers have also expressed optimism about India’s future role in memory chip manufacturing, a segment that could further strengthen the country’s position within the global semiconductor value chain.
This opportunity is being supported by rapid growth in India’s digital infrastructure sector, including large-scale data center investments projected to exceed US$200 billion over the coming years. Growing demand for artificial intelligence workloads, cloud computing, and data storage is expected to increase domestic demand for memory and high-bandwidth memory (HBM) chips.
Policymakers are also preparing the next phase of India’s semiconductor strategy through a proposed ISM 2.0 framework, which is expected to place greater emphasis on indigenous chip design, semiconductor materials, specialty chemicals and gases, and domestic equipment manufacturing capabilities.
With its ability to scale the market, talent pool, policy-friendly environment, and strategic aspiration, India is emerging as one of the most monitored emerging destinations in the global semiconductor market.
Conclusion
The semiconductor strategy of India is one of the most ambitious industrial transformation plans of India in recent decades. The country is working to establish an integrated semiconductor ecosystem through fabrication, packaging, testing, designing and innovation through the India Semiconductor Mission, massive financial incentives, the development of infrastructure and the collaboration with the world leaders in the technology sector.
The opportunity does not just end at individual manufacturing facilities to foreign investors. India is the place that provides the presence of a fast growing technology market, a huge engineering talent base, the powerful governmental support, and the growingly friendly investment climate. Although infrastructure, supply-chain development, and technological complexity issues still persist, the long-term dedication of the country to semiconductor manufacturing is becoming more and more evident.
With the growing diversification of production networks by global semiconductor companies and the increasing emphasis by governments on supply-chain resilience, India is already becoming a potential destination in future semiconductor investment. With the existing initiatives producing the desired outcomes, the nation might find itself being a key participant of the global semiconductor value chain in the next one decade.
