India’s semiconductor industry has entered a critical phase of development. Since the India Semiconductor Mission was launched in 2021 with a budget of ₹76,000 crore, the sector has shown remarkable progress. In four years, the government approved ten projects worth ₹1.6 lakh crore across six states. Five manufacturing units are under construction, and one pilot production line is operational. Recently, India revealed its first domestically produced semiconductor chip, a major achievement in the country’s technological ambitions.
India Semiconductor Mission and Funding
The India Semiconductor Mission aims to build a full semiconductor ecosystem. It received strong financial backing from the government. The initial allocation was ₹76,000 crore. Now, projects totalling ₹1.6 lakh crore are underway. This funding supports chip fabrication, design, and packaging units. State governments have also offered incentives and streamlined approvals to attract investments.
Domestic Manufacturing and Fab Facilities
India’s move into wafer fabrication marks shift. Traditionally, India focused on chip design and packaging services. Now, it is building fabrication plants or fabs, where silicon wafers are processed into integrated circuits. A notable partnership is between Tata and Taiwan’s PSMC to set up a fab in Dholera, Gujarat. This facility will produce chips domestically, reducing dependence on imports.
Competitive Advantage and Market Potential
The government claims Indian chips will be 15–30% cheaper than global counterparts. This cost advantage could boost both domestic use and exports. A homegrown semiconductor industry can support India’s electronics manufacturing, digital infrastructure, and defence sectors. It also aligns with the goal of becoming a global technology hub.
Challenges and Global Competition
Despite progress, India faces stiff competition. The US has committed over $50 billion in semiconductor incentives, triggering $500 billion in private investments. East Asian countries dominate the industry with advanced technology and scale. India’s semiconductor base is still small and developing. To compete, India must move beyond subsidies and construction to innovation and value creation.
Future Directions and Innovation Needs
India’s long-term success depends on creating homegrown intellectual property. Developing electronic design automation tools and producing advanced semiconductor devices are critical. The first made-in-India chip is a milestone but only the start. The industry must scale up production, invest in research, and build resilience to global supply chain shifts.
Government Role and Policy Support
Policy clarity and coordination between central and state governments have been vital. Financial incentives, fast-track approvals, and semiconductor-specific policies have attracted global and domestic investors. Continued government support will be essential to sustain momentum and encourage innovation.
Questions for UPSC:
- Discuss the role of government policy in promoting indigenous semiconductor manufacturing in India. How does this compare with global semiconductor initiatives?
- Critically examine the challenges faced by emerging economies in establishing semiconductor fabrication units. What strategies can they adopt to overcome these obstacles?
- Explain the significance of semiconductor technology for national security and economic development. With suitable examples, discuss how countries balance innovation and supply chain security.
- Comment on the impact of global semiconductor supply chain disruptions on India’s electronics industry. Discuss measures India can take to enhance supply chain resilience.
