Policy to Progress: India’s Semiconductor Ecosystem Taking Shape
Semiconductors have evolved into the essential ‘brains’ and ‘hearts’ of contemporary technology, serving as a fundamental and invisible force that propels almost every facet of life in the 21st century, much like water or electricity. They have transitioned from merely being parts of computers to becoming integral to everyday products, ranging from home appliances and vehicles to healthcare, allowing these items to be more compact, quicker, and efficient.
The growing emphasis on Internet of Things (IoT), artificial intelligence (AI) integration, data processing, and wireless communication has led to a surge in the worldwide demand for semiconductors, with the market projected to surpass $1 trillion by 2030 on a global scale. India is strategically positioning itself to emerge as a significant force in the semiconductor industry by implementing ambitious strategies and incentive initiatives aimed at attracting investment for semiconductor production within the country.
Nurturing a Local Semiconductor Ecosystem
India plans to offer financial assistance to semiconductor firms in establishing chip factories, advancing technologies, and enhancing the domestic supply chain. This initiative aligns with the government's overarching plan to establish India as a key center for technology manufacturing.
Prime Minister Narendra Modi has emphasized the significance of nurturing a local semiconductor ecosystem to bolster industrial and digital progress. Union Minister for Electronics and Information Technology Ashwini Vaishnaw has reaffirmed the objective of transforming India into a prominent semiconductor hub by 2030.
If we look back, T\the $11 billion initiative is poised to build upon India's previous $10 billion semiconductor incentive program launched in 2021, which provided financial assistance covering up to half of the costs for semiconductor manufacturing projects. This initiative garnered commitments from major corporations such as Micron Technology and Foxconn.
Furthermore, the Tata Group has revealed intentions to establish a semiconductor manufacturing facility in Gujarat, underscoring the interest from the private sector in the government-led drive to foster the domestic chip industry. The proposed fund is a component of a broader initiative aimed at ensuring India's competitiveness in the global semiconductor market, attracting investments, and decreasing reliance on imported chips, thus bolstering both economic expansion and technological self-sufficiency.
As outlined in several reports, the semiconductor market in India is anticipated to undergo significant growth in the coming years, with projections indicating a potential increase to $120 billion by the year 2030 and potentially reaching $300 billion by 2035. These forecasts are based on the increasing utilization of artificial intelligence (AI), expanding automotive sector, and growing data center infrastructure, as highlighted in a report by Deloitte. India, which presently relies on imports for more than 90percent of its semiconductor requirements, is on track for a significant transformation as local manufacturing is expected to satisfy over 60percent of domestic demand by the conclusion of 2035.
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More about Government Initiatives
In the Union Budget 2026-27, the central government unveiled ISM 2.0 as the next phase of an initiative aimed at enhancing semiconductor equipment and materials manufacturing. This comprehensive plan includes the expansion of full-stack design capabilities, the promotion of indigenous intellectual property, and the enhancement of supply chain resilience.
The India Semiconductor Mission (ISM) is a groundbreaking effort launched by the Government of India with the purpose of positioning the country as a key player in semiconductor and display manufacturing on a global scale. With a significant financial commitment of Rs.76,000 crore (approximately $10 billion), the mission seeks to decrease India's dependence on imported semiconductor chips and establish a strong, self-sufficient electronics manufacturing ecosystem domestically.
One of the primary objectives of the mission is to promote the establishment of semiconductor fabrication plants, such as the proposed $10 billion project in Maharashtra. This facility is projected to manufacture 80,000 wafers per month and generate numerous employment opportunities in the semiconductor industry.
Furthermore, the initiative aims to drive innovation by encouraging substantial investments in research and development activities related to semiconductors. For instance, companies like NXP Semiconductors are allocating more than $1 billion for investments in India, with a focus on areas such as automotive electronics and telecommunications.
Initiatives by State Governments
Both Gujarat and Karnataka have adopted focused semiconductor strategies to enhance their competitiveness in the industry. Gujarat's policy from 2022 to 2027 includes incentives such as a capital subsidy of up to 40 percent in addition to central incentives, full reimbursement of stamp duty and registration fees, discounted rates for power and water, and land subsidies of up to 75 percent for the initial 200 acres in Dholera's "Semicon City", along with expedited clearances and existing infrastructure.
Meanwhile, Karnataka's Electronic System Design and Manufacturing (ESDM) Policy provides capital subsidies of up to 10 percent, R&D grants, reimbursements for patents, marketing assistance, and support for prototyping costs, along with exemptions for stamp duty, registration, and land conversion fees, power tariff discounts, and interest subsidies to stimulate growth in manufacturing, design, and exports.
On the other hand, Tamil Nadu and Uttar Pradesh have introduced ambitious semiconductor policies aimed at attracting significant investments. Tamil Nadu's policy extends a state capital subsidy of up to 50 percent of the central incentive for approved projects by the government of India, along with benefits such as concessional land, full exemptions for stamp duty and electricity tax, interest subsidies, support for intellectual property and quality certifications, and one year of training assistance.
Uttar Pradesh offers an additional 50 percent capital subsidy on top of the government of India's backing, as well as a range of tax and duty exemptions, land rebates, subsidies for dual power grids, and targeted assistance for R&D facilities, Centers of Excellence, training programs, and worker accommodations.
Andhra Pradesh and Odisha are in the process of developing their semiconductor industries by offering specific state incentives. In relation to this endeavor, Andhra Pradesh has introduced a policy spanning from 2024 to 2029 that provides ISM-approved projects with a capital subsidy equivalent to 60 percent of the central incentive, along with training subsidies. Additionally, the state offers power and custom incentives to attract large non-ISM investments.
These initiatives bring together different strengths to enhance India's capabilities in fabrication, assembly, and advanced packaging. Many of these initiatives are in line with bilateral frameworks like the Technology for Resilient, Trustworthy, and Sustainable Supply Chains (TRUST) network, aiming to incorporate private-sector partnerships into secure, standards-based, and geopolitically-aligned supply chains.
Advancing Indigenous Microprocessors and Core Semiconductor Technologies
Microprocessors serve as the foundational bedrock of contemporary digital infrastructure, fueling the operations of various devices and systems within sectors including telecommunications, mobility, healthcare, industry, defense, and space. India has recognized their critical importance and has made targeted investments to establish autonomous capabilities in advanced processor design as a fundamental component of semiconductor self-sufficiency.
A significant milestone in this endeavor is the introduction of DHRUV64, a fully homegrown 64-bit microprocessor engineered by C-DAC through the Microprocessor Development Program (MDP). Leveraging cutting-edge architectural principles, DHRUV64 offers enhanced efficiency, multitasking prowess, and dependability, enabling its integration in diverse fields such as 5G infrastructure, automotive electronics, industrial automation, consumer goods, and the Internet of Things (IoT). Its creation furnishes India with a secure, domestically-produced processor platform, lessening the country's reliance on imported chips in the long term—a particularly pertinent aspect considering India's substantial consumption of nearly 20 percent of the global microprocessor yield.
DHRUV64 is part of a growing collection of homegrown processors, such as SHAKTI, AJIT, VIKRAM, and THEJAS, which collectively establish the basis of an indigenous processor ecosystem in India. Created under the Digital India RISC-V (DIR-V) Program, these processors utilize the open-source RISC-V architecture, removing the need for licensing fees and fostering collaborative innovation among academia, startups, and industry. The introduction of DHRUV64, along with the continuous advancement of the DHANUSH and DHANUSH+ System on Chips variants, enhances India's research and development environment, expedites product prototyping, and broadens opportunities for local design talent. These endeavors portray microprocessors not simply as components, but as strategic facilitators of India's digital sovereignty, promoting creativity, safeguarding vital infrastructure, and solidifying the nation's long-term aspirations in the global semiconductor industry.
Enhancing Global Competitiveness through Policy Push
In order to position India as a leading global hub for semiconductor design and manufacturing, the Government of India has initiated the ‘Programfor Development of Semiconductors and Display Manufacturing Ecosystem in India,’ commonly referred to as the ‘Semicon India Program.’ The execution of this program is overseen by the Indian Semiconductor Mission, an entity under the purview of the Ministry of Electronics and Information Technology.
India's aspirations in the semiconductor industry are now at a critical juncture. With substantial financial support from the India Semiconductor Mission amounting to Rs.76,000 crore ($9.1 billion) and an expanding array of state-level incentive schemes, the country is striving to accelerate the growth of its ecosystem within a condensed timeframe. Clusters, where economies of scale, supplier networks, and advanced research and development activities intersect, have the potential to transform isolated investments into sustainable industrial capabilities with global competitiveness.
Upon receiving approval from the Cabinet, the government is anticipated to proactively collaborate with both domestic and international semiconductor companies. This collaboration will entail inviting investment proposals and optimizing regulatory processes to expedite project implementation. The ISM offers a significant financial boost of up to 50 percent for qualifying fabrication, outsourced semiconductor assembly and test (OSAT), and compound semiconductor initiatives, with individual states supplementing with their own incentives and infrastructure investments. Concurrently, the Design Linked Incentive Scheme fosters chip design and intellectual property (IP) development through research and development (R&D) assistance, prototyping services, and support for commercialization, including provisions for access to essential tools and fabrication services in explanatory data analysis (EDA).
The parallel evolution between the United States and India sets the stage for collaboration, as both countries aim to diversify supply chains, expand their skilled workforce, and strengthen their competitive positions in an increasingly competitive global marketplace. For the United States, closer ties with India provide access to a reliable production base outside of East Asia, enhanced access to engineering talent, and increased resilience in a sector where security considerations are now as important as cost in strategic decision-making. Meanwhile, for New Delhi, tapping into U.S. expertise in developing integrated manufacturing clusters and advancing research and development presents a proven pathway for transitioning from design expertise to full spectrum competitiveness, encompassing both manufacturing leadership and sustained design innovation.
In accordance with the policy, qualified semiconductor producers will receive a mix of financial and operational benefits, such as interest subsidies for project funding and reimbursement for specific employee expenses.
Furthermore, a complete waiver of net State Goods and Services Tax (SGST) will be provided for a period of up to 10 years. These incentives are designed to mitigate initial and ongoing expenses, tackle the high capital requirements of semiconductor endeavors, and enhance their sustainability in the long run.
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Key Elements shaping India’s Semiconductor Clusters
India's electronics manufacturing sector is currently experiencing rapid expansion on a global scale. This growth is primarily focused in select states such as Tamil Nadu, Uttar Pradesh, Karnataka, Andhra Pradesh, and Gujarat, which serve as hubs for prominent multinational and domestic companies like Samsung, Foxconn, Flex, Dixon, and Tata Electronics. Various factors contribute to the momentum of this industry, including:
Talent Pool: India’s semiconductor clusters benefit greatly from the concentration of talent, which is supported by esteemed educational institutions like Indian Institutes of Technology (IITs), Indian Institutes of Information Technology, as well as state engineering universities. These institutions produce engineers who are skilled in VLSI design, embedded systems, and semiconductor materials science. Government initiatives, such as the SEMICON India program, Chips to Startup, SMART Labs, and the updated All India Council for Technical Education VLSI curriculum, actively contribute to the improvement of India’s talent pool. The lower labor costs in India, especially in the field of engineering, enable companies to efficiently expand their design teams and R&D operations without compromising on quality.
Industry Presence: India's semiconductor design ecosystem is strongly supported by the long-standing multinational operations in Bengaluru, Hyderabad, and Pune. Major multinational companies established their presence early on in these locations to leverage the engineering talent and cost advantages of India. For example, Texas Instruments set up its India R&D center in 1985, Intel followed suit in 1988, establishing one of its largest design facilities outside the United States, and Nvidia initiated its first research center in Bengaluru in 2005, paving the way for broader manufacturing and packaging aspirations. The presence of these industry giants has also led to the development of industrial parks, ESDM clusters, and local supply chains that facilitate entry for new players.
Global-Local Collaborations: Collaborations between global and domestic firms are a key element of the strategic framework in the industry, enabling the transfer of cutting-edge technology. Multinational corporations bring in specialized expertise in processes, strong R&D capabilities, and global market access, while their Indian counterparts offer manufacturing infrastructure, skilled workforce, and integration into the national electronics supply chain.
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India’s Goal toward Training 85,000 Semiconductor Engineers
The Indian government has taken a proactive approach towards nurturing talent by implementing training, upskilling, and workforce development programs as part of the chips to startups (C2S) initiative initiated by the India Semiconductor Mission (ISM). According to Union Minister for Electronics and IT, Ashwini Vaishnaw, India has made remarkable advancements in the past four years towards achieving its goal of training 85,000 engineers in semiconductor design within a ten-year timeframe.
Vaishnaw stated that top-tier electronic design automation (EDA) tools from companies such as Synopsys, Cadence, Siemens, Renesas, Ansys, and AMD are now accessible in 315 educational institutions nationwide. Using these tools, students are gaining valuable hands-on experience in the process of designing semiconductor chips. The chips are then manufactured and tested at the Semiconductor Laboratory in Mohali, providing students with practical experience from start to finish in the areas of design, fabrication, packaging, and testing. "This program has expanded to become the largest open-access Electronic Design Automation (EDA) initiative in the world, with more than 1.85 crore hours of EDA tool usage documented for chip design training to date, and this number is steadily increasing.
Additionally, he emphasized that students from various educational institutions throughout the country, spanning from Assam to Gujarat and from Kashmir to Kanyakumari, are enthusiastically participating in semiconductor design. This development represents a notable achievement in India's technological prowess and self-sufficiency.
Vaishnaw emphasized the need to address global industry standards, stating that with the semiconductor industry expected to expand from its current size of $800-900 billion to $2 trillion, there will be a call for approximately 2 million competent individuals. This development signals a significant increase in employment prospects for the younger generation in India.
As part of India Semiconductor Mission 2.0, the initiative will be extended from 315 to 500 academic institutions. This will facilitate the development of a robust and sustainable workforce skilled in semiconductor design, fabrication, packaging, and testing, spanning all regions of the nation. The government’s aim is to fostering a robust and independent semiconductor industry ecosystem. By focusing on skills development, infrastructure enhancement, and strategic partnerships within the framework of India Semiconductor Mission 2.0, India seeks to position itself as a leading global semiconductor hub.