Contents
Introduction
The Economic Survey 2025–26 identifies semiconductors as the backbone of India’s digital economy, while Budget 2026–27 deepens the India Semiconductor Mission, reaffirming that enduring technological sovereignty depends on innovation ecosystems beyond fiscal incentives alone.
Semiconductor Sovereignty Beyond Subsidies
- Semiconductors have become the currency of geopolitical power, underpinning AI, defence, telecommunications, quantum computing and critical infrastructure.
- While governments worldwide have announced massive subsidy programmes US-CHIPS Act, EU-Chips Act, Japan’s semiconductor revival, and India’s ₹76,000-crore India Semiconductor Mission (ISM), recent developments such as China’s LineShine exascale supercomputer (2026) demonstrate that sustained investment in indigenous capabilities, rather than subsidies alone, determines long-term silicon sovereignty.
Why Subsidies Alone Cannot Deliver Silicon Sovereignty
- Semiconductor Value Chain Determines Strategic Power: Strategic dominance lies in EDA software, processor architecture, lithography equipment, advanced materials and fabrication, not merely assembly. Upstream IP generates maximum value, design capabilities create long-term technological leverage. Example: ARM architecture.
- China’s Value-Chain Ascent: US export controls accelerated China’s indigenous ecosystem. Developed LX2 processors, Kylin OS, LingQi interconnect. Domestic toolmakers entered global top rankings. Demonstrates state-led technological persistence. Example: LineShine Supercomputer.
- Assembly Does Not Equal Autonomy: Assembly, Testing, Marking and Packaging (ATMP/OSAT) remain low-value activities. Limited intellectual property ownership, minimal strategic bargaining power are vulnerable to upstream technology restrictions. Example: OSAT facilities.
- Indigenous Design Creates Competitive Advantage: Chip design contributes nearly half of semiconductor value addition. Custom architectures build technological independence, enables sector-specific processors and strengthens domestic patent portfolio. Example: RISC-V ecosystem.
- High-Margin Moats: Leverage lies in design/IP (ARM/x86) and tooling (ASML EUV). Subsidies alone fail without talent, materials, and co-design ecosystems.
Critical Evaluation of India’s Semiconductor Strategy
India has taken major strides via its India Semiconductor Mission (ISM), but a critical gap remains between spending capital and building deep capabilities:
| Strategic Parameter | Current Indian Approach (Subsidies) | Gaps in Achieving “Silicon Sovereignty” |
| Value Chain Focus | Heavy focus on setting up assembly plants (OSAT/ATMP) and foundational commercial foundries (e.g., mature 28nm+ nodes). | Avoids the immediate R&D-heavy front-end choke points like advanced node fabrication and lithography tooling. |
| Talent Utilization | India hosts a massive portion of the world’s chip design talent, but they largely work for global multinationals. | Intellectual property (IP) and high-value patents flow back overseas rather than staying within domestic entities. |
| Ecosystem Depth | Fiscal capital is aimed at attracting foreign direct investment (FDI) and external technology partners. | Limited local supply of ultra-pure chemicals, specialized gases, silicon wafers, and stable industrial infrastructure. |
Way Forward
- Pivot Upstream: Fund fabless design/IP retention via targeted grants.
- Talent Sovereignty: Scale IIT/IISc R&D; reverse brain drain incentives.
- Ecosystem Depth: Build chemical/gas/silicon clusters; public-private labs for EDA/alternatives (GaN).
- Sustained Effort: Decade-long funding beyond subsidies; monitor via national missions.
- Global Positioning: Leverage Quad/IndiaAI for alliances without dependency.
Conclusion
As Dr. A.P.J. Abdul Kalam envisioned in India 2020, technological self-reliance emerges from knowledge, innovation and perseverance; semiconductor sovereignty will ultimately rest on indigenous capability, not fiscal incentives alone.
