[Answered] Analyze how India’s extreme semiconductor import reliance threatens its electronics ecosystem. Evaluate NITI Aayog’s strategy of shifting from cutting-edge fabrication to collaborative co-creation.

Introduction

NITI Aayog’s 2026 report reveals India imports 90–95% of its semiconductors despite demand projected to exceed $200 billion by 2035, making semiconductor self-reliance central to economic resilience, technological sovereignty, and national security.

India’s Extreme Semiconductor Dependence

1. Massive Forex Outflow: India spent roughly $150 billion on chip imports between FY17 and FY25. Without localized intervention, annual chip import costs are projected to skyrocket to $240 billion by 2035. Rising chip dependence threatens competitiveness of Electronics-Manufacturing-Services (EMS), smartphones and EV sectors. Example: Mobile manufacturing.
2. Exploding Internal Demand: Driven by advancements in AI, electric vehicles, and telecom, domestic semiconductor demand is expected to reach $100–110 billion by 2030 and cross $200 billion by 2035.
3. Supply Chain Fragility: Semiconductor production remains concentrated in Taiwan, South Korea and East Asia. Geopolitical tensions, natural disasters, or maritime disruptions can halt production across automobiles, telecom and healthcare sectors. Example: COVID chip shortage.
4. National Security Risks: Defence systems, UAVs, aerospace platforms and critical infrastructure rely heavily on imported chips. Dependence on foreign “black-box” semiconductors creates risks of embedded vulnerabilities and strategic coercion. Example: Defence electronics.
5. Industrial and Employment Constraints: Limited domestic semiconductor capabilities reduce value addition within India. High-end manufacturing jobs and intellectual property creation remain concentrated abroad. Example: Design migration.
6. Strategic-Geopolitical Dimension: The ongoing US–China technology rivalry has transformed semiconductors into instruments of geopolitical leverage. Supply restrictions may affect India’s strategic sectors. Example: Export controls.

Evaluating NITI Aayog’s “Co-Creation” Strategy

The report advocates moving beyond the costly race for leading-edge sub-5nm fabrication and focusing on areas where India can become globally indispensable.

1. Strengthening Design Leadership (Pioneering): India possesses nearly 20% of global semiconductor design talent. Focus on developing 100+ indigenous semiconductor IPs by 2035. High-value and less capital-intensive; leverages India’s comparative advantage. Example: VLSI ecosystem.
2. Advanced Packaging and OSAT Leadership: Targeting top-three global status in Advanced Packaging and OSAT. Packaging is increasingly strategic in the chiplet era. Realistic entry point with faster returns than advanced fabs. Example: ATMP facilities.
3. Focus on Mature Nodes and Compound Semiconductors: Prioritizing 28–65 nm chips, Silicon Carbide (SiC) and Gallium Nitride (GaN).  Aligns with domestic demand rather than prestige-driven technology races. These dominate automotive, industrial automation and power electronics. Example: Electric vehicles.
4. Talent and Institutional Development: Proposal for National Fab Academy and semiconductor talent pyramid. Supports long-term ecosystem deepening. Example: Clean-room training.
5. Trusted Global Partnerships: Strategic cooperation with the US, Japan, South Korea and EU. Facilitates technology transfer and supply-chain diversification. Example: Quad technology cooperation.

Challenges in the Co-Creation Model

1. Capital requirement of $135–180 billion over a decade.
2. Dependence on imported equipment, wafers and specialty chemicals.
3. Infrastructure deficits: ultra-pure water, uninterrupted power and logistics.
4. Risk of remaining confined to lower-value segments if indigenous R&D remains weak.

Way Forward

1. Adopt a “Fab + Design + Packaging” Triad: Balance mature-node fabrication with design IP and advanced packaging.
2. Institutionalize ISM 2.0: Create a statutory Semiconductor Development Authority with long-term policy certainty.
3. Build Semiconductor Clusters: Fab-ready industrial corridors with dedicated utilities. Example: Dholera.
4. Strengthen Research Ecosystem: Industry-academia collaboration through IITs, IISc and Semiconductor Research Centres.
5. Secure Critical Mineral Supply Chains: Strategic partnerships for gallium, germanium and rare-earth access.
6. Promote Demand-Side Procurement: Preference for trusted domestic chips in defence, telecom and public infrastructure.

Conclusion

Echoing Dr. A.P.J. Abdul Kalam’s vision of technological self-reliance in India 2020, semiconductor sovereignty demands not imitation but strategic co-creation, transforming India from consumer market to indispensable global innovator.