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India is rapidly strengthening its semiconductor manufacturing ecosystem with major investments, government incentives, and growing global interest in supply-chain diversification.
From semiconductor packaging plants to future fabrication facilities, the country is building capabilities across manufacturing, talent development, infrastructure, and technology partnerships.
Experts believe India could become one of the world’s important semiconductor manufacturing destinations over the next decade as global demand for AI chips and electronics continues rising.
Semiconductors have become foundational blocks of the modern economy, powering applications across automobiles, defence, space, communication networks, consumer electronics and, increasingly, artificial intelligence (AI). Their strategic importance is reflected in the fact that some of the world’s most valuable companies today are semiconductor design and manufacturing organisations.
However, semiconductor manufacturing is among the most complex and capital-intensive industries globally, requiring decades of technological know-how, highly reliable supply of utilities and a skilled engineering workforce. Countries such as Taiwan, South Korea and China have built strong semiconductor ecosystems over several decades through sustained investments in infrastructure, talent and supply chains.
India, while still at a nascent stage in semiconductor manufacturing, is gradually building capabilities across the value chain leveraging the core strengths such as one of the world’s largest engineering talent pools, major manufacturing base for electronics and automobiles, increasingly reliable and advanced power generation and transmission infrastructure etc.
Recognising the strategic importance of the sector, the Indian government introduced the India Semiconductor Mission (ISM), under which central and state governments together offer incentives covering nearly 70%–75% of project capital expenditure. The first phase of the scheme has already attracted 12 investments worth approximately Rs. 1.64 lakh crore through a mix of direct foreign investments and joint ventures involving technology licensing arrangements.
So far, India has witnessed stronger traction in back-end manufacturing i.e. Outsourced Semiconductor Assembly & Test (OSAT) or Assembly, Testing, Marking and Packaging (ATMP), where 11 projects with ~INR 73,000 Cr have already been approved. The investments are concentrated in mature packaging technologies such as wire bonding and flip-chip packaging, while advanced packaging technologies linked to AI and high-performance computing are still at an early stage. The ISM has also approved a major front-end manufacturing (semiconductor fab) with an investment of ~INR 91,000 Cr.
India’s semiconductor ambitions are also being supported by the ongoing global push toward supply-chain diversification. Semiconductor manufacturing today remains heavily concentrated in East Asia and rising geopolitical tensions have increased the need for alternative manufacturing destinations. This creates an opportunity for India, which already possess large domestic markets for electronics and automobiles, to emerge as credible semiconductor manufacturing destinations.
Across the value chain, from a technological perspective, India has so far been relatively successful in attracting investments in mature semiconductor technologies, providing an appropriate starting point for entering the global semiconductor ecosystem. The next stage of growth will involve transitioning toward advanced manufacturing capabilities and development of a comprehensive end to end semiconductor ecosystem. To achieve this, India will require planned and coordinated investments across the semiconductor value chain covering R&D, input materials and equipment manufacturing along with a stronger collaboration between industry and academia for sustained development of a highly specialised talent ecosystem.
With ongoing investments, India is projected to account for nearly 3% of global semiconductor backend manufacturing capacity in the near term, with the potential to increase its share to 7–10% by 2035. This expanding manufacturing base, combined with the relatively fragmented and competitive nature of the backend equipment market, is expected to create a strong opportunity for global equipment manufacturers to establish operations in India. Additionally, anticipated policy support under the ISM 2.0 scheme is likely to further strengthen the business case.
In contrast, opportunities in front-end semiconductor equipment manufacturing are likely to remain relatively limited, given that critical process equipment manufacturing is highly concentrated and dominated by global monopolies or duopolies, particularly across specialised process steps led by companies based in the Netherlands, Japan, and the United States.
In any industry, the successful localisation of the value chain fundamentally depends on the development of a strong supplier ecosystem to support manufacturing operations. Currently, most of the raw materials and critical inputs required for both front-end and backend semiconductor manufacturing are imported from countries such as Japan, China, South Korea, and Taiwan.
While certain strategic materials such as rare earth elements may continue to remain import-dependent in the near term, India is expected to prioritise the development of a localised supplier ecosystem for semiconductor materials, chemicals, gases, consumables, and precision components.
Additionally, talent development represents the final and most critical pillar of a sustainable semiconductor ecosystem. India’s emerging semiconductor manufacturing facilities provide the foundation to develop semiconductor manufacturing know-how and build a skilled talent ecosystem, which can serve as a springboard for future investments. Many of the current facilities are established in partnership with global manufacturers which would enable gaining manufacturing know-how, training skilled manpower, and obtaining project management expertise required to build complex semiconductor facilities. The establishment of new manufacturing units will also likely attract more engineering activity in the sector with suppliers likely to set up hubs for on-ground engineering and maintenance support to the manufacturing operations
In parallel, India is gradually moving toward a cluster-based semiconductor ecosystem model, similar to globally successful hubs such as Taiwan’s Hsinchu Science Park and the Arizona Semiconductor Corridor in the United States. The concentration of investments within specific geographies is expected to create integrated ecosystems comprising manufacturing facilities, suppliers, logistics infrastructure, R&D centres, and talent institutions. The major clusters are likely to develop around Dholera and Sanand in Gujarat, Noida in Uttar Pradesh, and also in Odisha, Tamil Nadu and Karnataka.
Over the next five years, India is expected to evolve into a major semiconductor manufacturing hub, with both domestic and global players establishing manufacturing operations in the country and annual investments reaching multi-billion-dollar levels across fabrication, packaging, materials, equipment, and supporting infrastructure.
