How India Is Emerging as a Semiconductor Superpower

In the lengthy hallways of a semiconductor manufacturing facility, there is a point at which the scope of what is being attempted becomes truly difficult to comprehend. These aren’t your typical factories. A modern chip factory is the size of 14 to 28 football fields, uses enough energy each year to run a mid-sized Indian city, and runs in clean rooms where a single dust particle could ruin months’ worth of work. Constructing one is an act of industrial ambition in every way. Additionally, India, which as recently as 2021 sourced less than 9% of its semiconductor needs domestically, is now attempting to build multiple of them simultaneously.

It’s difficult to ignore the timing. Industries that had never given much thought to the source of their microchips were shaken by the global chip shortage in 2021. Production lines were halted by automakers. Product launches were delayed by electronics companies. The fragility of the world’s reliance on a small number of East Asian manufacturing hubs was made evident by that one supply disruption. Taiwan’s share of the global chip market is approximately 44%. China has 28. Twelve more are added by South Korea. What happens if that supply chain breaks is a question that should have been asked decades ago, and the rest of the world, including the US, has been frantically trying to find an answer.

India appears to be carefully weighing its options as it has watched this anxiety play out. The government approved a $10 billion incentive plan that offers manufacturers a 50% rebate on upfront capital costs in December 2021, along with the launch of the India Semiconductor Mission. The signal was intentional. This is not a nation that is secretly hoping for the arrival of foreign businesses. This nation is making a concerted effort to become unavoidable. And so far, the strategy is effective. An engineering center will receive $400 million from Applied Materials. Lam Research promised to train 60,000 Indian engineers with $25 million. In Sanand, Gujarat, Micron is constructing the first significant semiconductor plant in India. The project will cost $2.75 billion, of which 70% will be covered by federal and state government subsidies. The figures are startling.

The fact that India isn’t starting from scratch in terms of humanity is what makes its case truly intriguing rather than just another tale of government industrial policy. About 20% of the world’s talent for semiconductor design comes from this nation. It’s not a small footnote. Since the 1990s IT outsourcing boom, India has developed a deep engineering workforce, which companies like Intel, Qualcomm, and Texas Instruments have quietly tapped into for years. “Now is the perfect opportunity for India to take advantage of something it has long had, but been unable to capitalize on,” says Sarah Kreps, a professor at the Tech Policy Institute at Cornell University. There was always engineering talent. Only now is the geopolitical time to take advantage of it.

India’s supporters also present a geographical and political argument, which is not irrational. India is big, historically non-aligned, and situated near enough Asian supply chains to avoid the particular security concerns that currently plague Taiwan and, to a greater extent, China. India is a democratic partner with a legal framework, a growing English-speaking workforce, and no territorial disputes that keep defense analysts up at night, making it an attractive option for American policymakers looking to lessen reliance on a small group of East Asian chipmakers. At a roundtable in New York earlier this year, Prime Minister Modi met with Jensen Huang of Nvidia, Sundar Pichai of Google, Lisa Su of AMD, and other tech executives. Huang’s statement that “this is India’s moment” went viral, but it’s still unclear whether he was referring to sincere conviction or deft diplomacy.

The flagship projects provide a tangible representation of the narrative. In Dholera, Gujarat, Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corporation are constructing a $10.9 billion fabrication plant, with production anticipated by late 2026. An additional $3.3 billion has been invested in Tata’s assembly and testing facility in Morigaon, Assam. In Sanand, CG Power, Stars Microelectronics of Thailand, and Renesas Electronics of Japan are building a joint facility. These are no longer press releases. The ground is being shattered. The money is flowing.

And yet. India’s government communications seem to skirt the difficulties it faces with suspicious ease. India has historically struggled to ensure the uninterrupted power supply and massive amounts of ultra-pure water required for chip fabrication. The presence of foreign investment does not make the nation’s infrastructure deficiencies go away. In addition, there is a talent shortage in manufacturing and operations, which is different from India’s current design talent. Designing chips for a fabrication plant is not the same as operating one. Eri Ikeda, an assistant professor at IIT Delhi, has noted that although “the speed of development seems to be fast and the momentum is there, India has just started to embark on the semiconductor industry from scratch.” That’s a cautious way of saying that while the goal is sincere, there is still a long way to go.

China has a significant influence on all of this, both overtly and covertly. In one recent fiscal year, India imported $4.2 billion worth of smartphone and telecom components from China. Bilateral trade between the two nations totaled $118.4 billion. India is attempting to provide competition in the semiconductor market, but it is doing so while maintaining a close economic relationship with its primary rival. “India is far behind China in semiconductor manufacturing,” the Institution of Engineering and Technology’s Rishi Bhatnagar stated. “Although India may be able to run fast and catch up, China will be running faster.” This is a sobering observation, and it’s probably true. However, it’s also possible that India is competing with China in tandem with a global supply chain that is changing and accommodating multiple major players.

Sitting with all of this, it seems like India is at one of those real turning points that nations experience maybe once every generation. By 2030, the semiconductor industry will be valued at $1 trillion, up from its current value of over $580 billion. India is benefiting from changes in the geopolitical landscape. There is an engineering foundation. The commitments for investments are coming in. With the infrastructure, water, power, and skilled labor, the nation’s ability to turn all of that into actual, operational, competitive fabrication capacity is still up for debate, and anyone claiming certainty is most likely selling something. However, as Kreps has pointed out, South Korea and Taiwan were not always the industrial giants we know today. At one point, their populations were foraging for food in nations with per capita incomes of $100. Nevertheless, they changed. At the very least, India might be able to.