India has approved a cluster of semiconductor projects totaling roughly ₹1.6 lakh crore (about $18.2 billion), an unprecedented burst of public and private investment aimed at transforming the country from a chip consumer into a maker. The program — part industrial policy, part geopolitical hedge — bundles generous incentives, land and power commitments, design grants and targeted support for assembly, testing and packaging. For New Delhi, the rationale is simple and stark: secure supplies for critical industries, capture higher value in global electronics supply chains shifting away from China, and create thousands of high-skilled jobs across manufacturing hubs.
The scale of the announced projects is large by Indian standards and includes marquee proposals such as a multi-billion-dollar fabrication plant led by a major Indian conglomerate in partnership with a Taiwanese foundry, and approvals for the country’s first commercial compound-semiconductor (SiC) wafer fab. But success will hinge on much more than headline checks: the country must simultaneously build a deep supplier base, train a workforce for ultra-clean manufacturing, and deliver stable, low-cost power and transport infrastructure — all while competing for capital and talent with entrenched leaders in Taiwan, Korea, the United States and Europe.
A Strategic Leap: Why India is All-In on Chips
The push to spend the equivalent of roughly $18 billion on semiconductor projects is driven by economic, security and strategic calculations. India imports the vast majority of the chips that power its phones, cars, industrial equipment and defence systems; that dependence became politically and commercially untenable as global supply-chain politics intensified and export controls sharpened. By accepting the high upfront costs of building fabs and ancillary units, New Delhi is betting it can reduce exposure, ensure local sourcing for critical sectors and keep more of the value chain onshore.
Geopolitics amplifies the urgency. As advanced economies restrict flows of cutting-edge processing gear and companies seek geographic diversity in production, India positions itself as a large market that can offer scale, a rule-of-law environment for IP, and states willing to provide subsidies. The government’s semiconductor programme also dovetails with broader industrial initiatives — from electric vehicles to renewable energy — that will consume growing volumes of custom power-management, SiC and analog chips. In short, chips are not just a commercial play; they’re infrastructure for the next decade of India’s industrialization.
There is also an explicitly developmental intent. Policymakers argue that a domestic semiconductor industry can catalyse high-value engineering jobs, create local supplier ecosystems and anchor research and design centers. India already has a strong base in chip design and software: engineering teams in Bangalore, Hyderabad and elsewhere work on block-level design and verification for global companies. The capital being mobilized is meant to convert that human capital advantage into onshore manufacturing capacity — a leap from design services to product creation.
How New Delhi Is Layering Policy, Cash and Partnerships
The government has layered multiple policy instruments to make the investment case attractive. A central India Semiconductor Mission provides a large fiscal outlay and per-project support; states have sweetened the offer with land, tax concessions and subsidized utilities. Recent approvals include both traditional CMOS fabs and the first commercial attempts at compound semiconductor manufacturing, reflecting a strategy to pursue both commodity chips and niche high-power devices used in EVs and defence.
Public-private partnerships are central. Big industrial houses have signed technology transfer pacts with established foreign foundries and equipment suppliers; these tieups bring process know-how, training pipelines and capital-goods procurement plans that are essential for complex wafer fabs. Meanwhile, smaller companies are being incentivized to set up assembly, testing and packaging (OSAT) plants that can capture higher margins with lower capital intensity than full fabs — an important intermediate step for supply-chain depth.
The government has also targeted t”e mi’sing pieces of the ecosystem: specialty chemicals and ultra-high purity materials, equipment vendors, and skilled technicians. Programs for up-skilling and chip-design promotion aim to funnel graduates into both design houses and factory floors. In parallel, India has adjusted incentives to cover a wider range of fabrication nodes, acknowledging that producing a mix of legacy and specialty chips alongside advanced nodes will be a pragmatic path to scale.
The Industrial and Supply-Chain Blueprint
Building a fab is only the most visible part of a far larger industrial puzzle. Modern semiconductor fabs demand vibration-free plots, uninterrupted power, water management and sophisticated waste-treatment systems; they also require local suppliers for packaging substrates, die-bonding and test sockets. India’s plan therefore ties chip approvals to infrastructural commitments — ports, roads, and power procurement deals — and encourages states to compete by offering clustered ecosystems for input suppliers and logistics services.
Another pillar is the growth of testing and packaging, where India already has an advantage in manpower costs and manufacturing skills. OSAT units can scale faster than fabs and serve as an immediate domestic market for wafers while local demand for components such as camera modules, power ICs and microcontrollers grows. Success in packaging and testing could position India as a regional OSAT hub, plugging into global supply chains even as leading-edge wafer production remains concentrated elsewhere.
Industrial policy also accounts for niche bets. The approval of SiC wafer fabs, for example, targets high-growth areas like electric vehicles and renewable inverters where demand for rugged, high-efficiency semiconductors is rising. This targeted approach allows India to chase segments with higher margins and strategic value instead of trying to leapfrog immediately to the bleeding edge of process technology — a pragmatic trade-off given the high capital intensity and know-how required to produce the most advanced nodes.
Outcomes: Economic Payoffs, Risks and Global Realignment
If India executes well, the $18 billion package could produce tangible dividends: secure domestic supply for strategic industries, hundreds of thousands of new skilled jobs, and a growing export base in mature-node chips and OSAT services. A successful semiconductor cluster would also attract ancillary investments in chemicals, equipment servicing and logistics, multiplying the economic impact across states that win the projects. Politically, it would be a strong demonstration of industrial policy converting market size into manufacturing capability.
But the risks are real and complex. Producing at scale requires more than incentives: it demands consistent policy implementation, stringent IP protection, rapid supply-chain development, and time-tested operational excellence. Global competition remains intense; incumbents in East Asia and the U.S. enjoy decades of accumulated expertise, supplier ecosystems and capital equipment networks that cannot be replicated overnight. There is also the danger of stranded assets if demand shifts or if the projects cannot attract sufficient downstream customers.
Finally, the move will reshape regional competition. Multinational firms now have more strategic options when diversifying production away from single geographies, and India could capture a slice of that re-routing. Whether the country becomes a niche supplier of specialty chips and packaging services, or progressively climbs the ladder to more advanced fabrication, will depend on execution in the coming three to five years — a window in which policy clarity, industrial partnerships and supply-chain depth will determine whether the $18 billion bet becomes a lasting semiconductor legacy or a costly learning curve.
(Source:www.cnbc.com)
The scale of the announced projects is large by Indian standards and includes marquee proposals such as a multi-billion-dollar fabrication plant led by a major Indian conglomerate in partnership with a Taiwanese foundry, and approvals for the country’s first commercial compound-semiconductor (SiC) wafer fab. But success will hinge on much more than headline checks: the country must simultaneously build a deep supplier base, train a workforce for ultra-clean manufacturing, and deliver stable, low-cost power and transport infrastructure — all while competing for capital and talent with entrenched leaders in Taiwan, Korea, the United States and Europe.
A Strategic Leap: Why India is All-In on Chips
The push to spend the equivalent of roughly $18 billion on semiconductor projects is driven by economic, security and strategic calculations. India imports the vast majority of the chips that power its phones, cars, industrial equipment and defence systems; that dependence became politically and commercially untenable as global supply-chain politics intensified and export controls sharpened. By accepting the high upfront costs of building fabs and ancillary units, New Delhi is betting it can reduce exposure, ensure local sourcing for critical sectors and keep more of the value chain onshore.
Geopolitics amplifies the urgency. As advanced economies restrict flows of cutting-edge processing gear and companies seek geographic diversity in production, India positions itself as a large market that can offer scale, a rule-of-law environment for IP, and states willing to provide subsidies. The government’s semiconductor programme also dovetails with broader industrial initiatives — from electric vehicles to renewable energy — that will consume growing volumes of custom power-management, SiC and analog chips. In short, chips are not just a commercial play; they’re infrastructure for the next decade of India’s industrialization.
There is also an explicitly developmental intent. Policymakers argue that a domestic semiconductor industry can catalyse high-value engineering jobs, create local supplier ecosystems and anchor research and design centers. India already has a strong base in chip design and software: engineering teams in Bangalore, Hyderabad and elsewhere work on block-level design and verification for global companies. The capital being mobilized is meant to convert that human capital advantage into onshore manufacturing capacity — a leap from design services to product creation.
How New Delhi Is Layering Policy, Cash and Partnerships
The government has layered multiple policy instruments to make the investment case attractive. A central India Semiconductor Mission provides a large fiscal outlay and per-project support; states have sweetened the offer with land, tax concessions and subsidized utilities. Recent approvals include both traditional CMOS fabs and the first commercial attempts at compound semiconductor manufacturing, reflecting a strategy to pursue both commodity chips and niche high-power devices used in EVs and defence.
Public-private partnerships are central. Big industrial houses have signed technology transfer pacts with established foreign foundries and equipment suppliers; these tieups bring process know-how, training pipelines and capital-goods procurement plans that are essential for complex wafer fabs. Meanwhile, smaller companies are being incentivized to set up assembly, testing and packaging (OSAT) plants that can capture higher margins with lower capital intensity than full fabs — an important intermediate step for supply-chain depth.
The government has also targeted t”e mi’sing pieces of the ecosystem: specialty chemicals and ultra-high purity materials, equipment vendors, and skilled technicians. Programs for up-skilling and chip-design promotion aim to funnel graduates into both design houses and factory floors. In parallel, India has adjusted incentives to cover a wider range of fabrication nodes, acknowledging that producing a mix of legacy and specialty chips alongside advanced nodes will be a pragmatic path to scale.
The Industrial and Supply-Chain Blueprint
Building a fab is only the most visible part of a far larger industrial puzzle. Modern semiconductor fabs demand vibration-free plots, uninterrupted power, water management and sophisticated waste-treatment systems; they also require local suppliers for packaging substrates, die-bonding and test sockets. India’s plan therefore ties chip approvals to infrastructural commitments — ports, roads, and power procurement deals — and encourages states to compete by offering clustered ecosystems for input suppliers and logistics services.
Another pillar is the growth of testing and packaging, where India already has an advantage in manpower costs and manufacturing skills. OSAT units can scale faster than fabs and serve as an immediate domestic market for wafers while local demand for components such as camera modules, power ICs and microcontrollers grows. Success in packaging and testing could position India as a regional OSAT hub, plugging into global supply chains even as leading-edge wafer production remains concentrated elsewhere.
Industrial policy also accounts for niche bets. The approval of SiC wafer fabs, for example, targets high-growth areas like electric vehicles and renewable inverters where demand for rugged, high-efficiency semiconductors is rising. This targeted approach allows India to chase segments with higher margins and strategic value instead of trying to leapfrog immediately to the bleeding edge of process technology — a pragmatic trade-off given the high capital intensity and know-how required to produce the most advanced nodes.
Outcomes: Economic Payoffs, Risks and Global Realignment
If India executes well, the $18 billion package could produce tangible dividends: secure domestic supply for strategic industries, hundreds of thousands of new skilled jobs, and a growing export base in mature-node chips and OSAT services. A successful semiconductor cluster would also attract ancillary investments in chemicals, equipment servicing and logistics, multiplying the economic impact across states that win the projects. Politically, it would be a strong demonstration of industrial policy converting market size into manufacturing capability.
But the risks are real and complex. Producing at scale requires more than incentives: it demands consistent policy implementation, stringent IP protection, rapid supply-chain development, and time-tested operational excellence. Global competition remains intense; incumbents in East Asia and the U.S. enjoy decades of accumulated expertise, supplier ecosystems and capital equipment networks that cannot be replicated overnight. There is also the danger of stranded assets if demand shifts or if the projects cannot attract sufficient downstream customers.
Finally, the move will reshape regional competition. Multinational firms now have more strategic options when diversifying production away from single geographies, and India could capture a slice of that re-routing. Whether the country becomes a niche supplier of specialty chips and packaging services, or progressively climbs the ladder to more advanced fabrication, will depend on execution in the coming three to five years — a window in which policy clarity, industrial partnerships and supply-chain depth will determine whether the $18 billion bet becomes a lasting semiconductor legacy or a costly learning curve.
(Source:www.cnbc.com)
