India’s semiconductor industry is experiencing unprecedented momentum, with government initiatives catalyzing both domestic and international investments across the manufacturing ecosystem. As the country positions itself to become a significant player in the global semiconductor supply chain, understanding the landscape of this technical yet strategically vital sector becomes essential.
India – Understanding Semiconductor Terminology
Before diving into India’s semiconductor journey, let’s demystify some industry terminology:
Fab (Fabrication Facility): A highly specialized manufacturing plant where semiconductor wafers are produced through complex processes involving hundreds of precise steps. These facilities typically cost billions of dollars to build due to the advanced equipment and cleanroom environments required.
ATMP (Assembly, Testing, Marking, and Packaging): The final manufacturing stages where processed semiconductor wafers are cut into individual chips, tested for functionality, marked with identifying information, and packaged into usable components for electronic devices.
OSAT (Outsourced Semiconductor Assembly and Test): Facilities that specialize in the back-end processes of semiconductor manufacturing, handling the assembly, testing, and packaging of chips designed and fabricated elsewhere.
Wafer: A thin slice of semiconductor material (typically silicon) upon which multiple integrated circuits are fabricated simultaneously. Wafer size (measured in millimeters or inches) and monthly production capacity are key metrics for semiconductor plants.
India – Government Support Driving Industry Growth
The India Semiconductor Mission (ISM) represents the government’s strategic approach to developing a comprehensive ecosystem. Key elements include:
Financial Incentives: The government provides up to 50% fiscal support for eligible project costs, significantly reducing the capital burden for new manufacturing facilities.
Design-Linked Incentive (DLI) Scheme: This program specifically supports semiconductor design startups and companies developing intellectual property in India, creating a pipeline of innovation to support manufacturing.
Infrastructure Development: Special Investment Regions (SIRs) like Dholera in Gujarat offer purpose-built industrial zones with the reliable power, water, and logistics infrastructure essential for semiconductor manufacturing.
The domestic semiconductor market is projected to triple from US$38 billion in 2023 to US$109 billion by 2030, creating a robust local demand base while simultaneously targeting export opportunities.
Key Players Shaping India’s Semiconductor Landscape
The semiconductor ecosystem in India is being built through strategic partnerships between Indian conglomerates and global technology leaders:
Tata Electronics and PSMC Partnership – India
In a landmark development, Tata Electronics has partnered with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) to establish India’s first major semiconductor fabrication plant in Dholera, Gujarat. The project represents:
- Total investment: Approximately INR 910 billion (US$10.44 billion)
- Production capacity: 50,000 wafers per month
- Technology focus: Power management ICs, display drivers, microcontrollers, and high-performance computing logic
- Job creation: An estimated 20,000 direct and indirect skilled positions
- Government support: 50% financial backing through the ISM
The technology transfer agreement between Tata and PSMC includes licensing of manufacturing technologies and engineering support, ensuring that India not only hosts manufacturing but also builds domestic technological capabilities.
Foxconn-HCL Joint Venture – India
Another significant development is the partnership between global manufacturing giant Foxconn and Indian technology pioneer HCL:
- Project focus: OSAT facility for semiconductor assembly and testing
- Location: 48-acre land parcel in Noida Sector 28, Uttar Pradesh
- Investment: INR 37.06 billion (US$425 million) from joint venture Vama Sundari Investments
- Ownership structure: Foxconn holds a 40% stake with investments totaling approximately INR 4.24 billion
- Employment potential: Around 4,000 jobs
This collaboration brings together Foxconn’s manufacturing expertise with HCL’s technological capabilities, creating a significant entry point for India into the semiconductor assembly and testing segment.
International Collaboration and Ecosystem Development
Beyond the major manufacturing projects, India is cultivating international relationships to strengthen its semiconductor ecosystem:
Malaysia Collaboration: Malaysia has expressed interest in participating in India’s semiconductor journey, particularly in equipment assembly and testing. This potential partnership leverages Malaysia’s established semiconductor industry and creates opportunities for trilateral business relationships.
Startup Innovation: The DLI Scheme has approved 12 Indian startups for financial assistance, with 21 more applications under review. These companies are developing the intellectual property foundation needed for a sustainable semiconductor industry.
Education and Talent Development: While not detailed in the content, talent development remains a critical factor for the industry’s success. India’s engineering education system is adapting to meet the specialized needs of semiconductor manufacturing and design.
The Strategic Importance of India’s Semiconductor Push
India’s ambitious semiconductor initiative serves multiple strategic objectives:
Supply Chain Resilience: The COVID-19 pandemic exposed vulnerabilities in global semiconductor supply chains. By developing domestic manufacturing capabilities, India reduces dependency on imports for critical components.
Economic Development: The semiconductor industry creates high-value jobs across the skill spectrum, from advanced manufacturing to research and development.
Technological Sovereignty: As digital technologies become increasingly central to national security and economic competitiveness, controlling key elements of semiconductor production provides strategic advantages.
Export Opportunities: India’s semiconductor facilities are targeting both domestic demand and global markets, particularly in sectors like automotive, computing, communications, and artificial intelligence.
Challenges and Future Outlook
While progress has been impressive, semiconductor manufacturing presents significant challenges:
Infrastructure Requirements: Semiconductor manufacturing requires extraordinarily reliable utilities, including uninterrupted power, ultra-pure water, and specialized waste management.
Technology Transfer: Developing domestic expertise requires not just equipment but knowledge transfer, making partnerships with established players essential.
Global Competition: India enters a competitive field with established players in East Asia, Europe, and North America who have decades of experience and massive economies of scale.
Despite these challenges, India’s semiconductor ambitions appear well-structured and supported by both government policy and private investment. The collaborative approach of partnering with global technology leaders while simultaneously developing domestic capabilities creates a balanced strategy for sustainable growth.
As these major projects move from agreements to construction and eventually production, India’s position in the global semiconductor landscape will continue to evolve, potentially transforming the country from primarily a consumer of semiconductor technology to a significant producer and innovator in this critical industry.
