{"id":372107,"date":"2026-09-18T18:31:21","date_gmt":"2026-09-18T13:01:21","guid":{"rendered":"https:\/\/forumias.com\/blog\/?p=372107"},"modified":"2026-09-18T18:31:21","modified_gmt":"2026-09-18T13:01:21","slug":"semiconductor-industry-in-india-significance-challenges-explained-pointwise","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/semiconductor-industry-in-india-significance-challenges-explained-pointwise\/","title":{"rendered":"Semiconductor Industry in India &#8211; Significance &#038; Challenges &#8211; Explained Pointwise"},"content":{"rendered":"<p><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-372115\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/09\/Gemini_Generated_Image_6zlen96zlen96zle.png?resize=750%2C409&#038;ssl=1\" alt=\"Semiconductor manufacturing in India\" width=\"750\" height=\"409\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/09\/Gemini_Generated_Image_6zlen96zlen96zle.png?resize=1024%2C559&amp;ssl=1 1024w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/09\/Gemini_Generated_Image_6zlen96zlen96zle.png?resize=300%2C164&amp;ssl=1 300w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/09\/Gemini_Generated_Image_6zlen96zlen96zle.png?resize=768%2C419&amp;ssl=1 768w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/09\/Gemini_Generated_Image_6zlen96zlen96zle.png?w=1408&amp;ssl=1 1408w\" sizes=\"auto, (max-width: 750px) 100vw, 750px\" \/><br \/>\nRecently, Prime Minister Narendra Modi inaugurated the fifth edition of <strong data-start=\"88\" data-end=\"110\">SEMICON India 2026.\u00a0<\/strong>The event reflects India\u2019s transition from policy formulation towards actual semiconductor production and a broader domestic ecosystem.<br \/>\nIndia is emerging as a semiconductor hub, developing indigen<span style=\"color: #000000;\">ous chips like <strong>VIKRAM 3201,\u00a0 DHRUV64<\/strong> to boost self-reliance. The market is growing from $38 billion in 2023 and is expected to reach $110 billion by FY30 &amp; $200bn by FY35.<\/span><br \/>\nThis article examines the semiconductor industry in India, focusing on its significance, key challenges, government initiatives, and the way forward.<\/p>\n<table style=\"width: 100%; border-collapse: collapse; border-style: solid; height: 270px;\">\n<tbody>\n<tr style=\"height: 30px;\">\n<td style=\"width: 100%; text-align: center; height: 30px;\"><strong>Table of Content<\/strong><\/td>\n<\/tr>\n<tr style=\"height: 240px;\">\n<td style=\"width: 100%; height: 240px;\"><a href=\"#toc1\">What are semiconductors? What is their importance?\u00a0<\/a><br \/>\n<a href=\"#toc2\">What are the defining features of Semiconductor manufacturing?<\/a><br \/>\n<a href=\"#toc3\">Why is there a global race to diversify semiconductor supply chains?<\/a><br \/>\n<a href=\"#toc4\">What is the significance of development of indigenous semiconductor industry in India?<\/a><br \/>\n<a href=\"#toc5\">What have been the government efforts towards development of semiconductor industry in India?<\/a><br \/>\n<a href=\"#toc6\">What are the challenges in the semiconductor industry in India?<\/a><br \/>\n<a href=\"#toc7\">What should be the focus area for Indian Semiconductor Industry?<\/a><br \/>\n<a href=\"#toc8\">What Should be the Way Forward?<\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><span style=\"color: #000000; text-decoration: underline;\"><strong><a id=\"toc1\"><\/a>What are Semiconductors? What is their importance?\u00a0<\/strong><\/span><\/span><\/h2>\n<ul>\n<li><strong>Semiconductors:<\/strong> Semiconductors are materials whose electrical conductivity lies between that of conductors and insulators. Their conductivity can be controlled by factors such as temperature, impurities, electric fields and light. They can either be <strong>pure elements<\/strong>, like silicon or germanium or <strong>compounds<\/strong>, like gallium, arsenide, or cadmium selenide.<\/li>\n<li><strong>Important Properties of Semicondictors:<\/strong>\n<ul>\n<li><strong>Intermediate conductivity<\/strong>: Their electrical conductivity is between conductors like copper and insulators like glass.<\/li>\n<li><strong>Negative temperature coefficient<\/strong>: Unlike metals, their electrical resistance generally decreases as temperature increases, because more charge carriers become available.<\/li>\n<li><strong>Conductivity can be controlled<\/strong>: Their conductivity can be deliberately modified by adding small quantities of impurities (a process called doping).<\/li>\n<li><strong>Sensitive to light<\/strong>: Some semiconductors change their electrical behaviour when exposed to light, forming the basis of solar cells, photodiodes and light sensors.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><strong><span style=\"text-decoration: underline;\">Importance of Semiconductors<\/span>:<\/strong><\/p>\n<ol>\n<li><strong>Foundation of modern electronics:<\/strong>\u00a0Semiconductor chips are the heart and brain of all modern electronics and communications technology products, contemporary automobiles, household gadgets such as refrigerators, and essential medical devices such as ECG machines.<\/li>\n<li><strong>Propeller of emerging technologies:<\/strong> The development of emerging technologies like AI, 5G, or driverless cars is dependent upon a fast and cheap semiconductor industry.<\/li>\n<li><strong>Telecommunications<\/strong>: Semiconductors are crucial for 5G\/6G equipment, routers, satellites, optical communication and wireless devices, enabling high-speed communication.<\/li>\n<li><strong>Economic importance<\/strong>: The semiconductor industry supports high-value manufacturing, R&amp;D, skilled employment, exports and technological innovation. Countries with strong semiconductor capabilities can participate more deeply in the global digital economy.<\/li>\n<li><strong>Aiding the further development of electronic devices:<\/strong>\u00a0Semiconductors make the devices more compact, less expensive, and more powerful. <strong>For e.g.<\/strong> Semiconductor chips have enhanced the features of smartphones with powerful processing.<\/li>\n<li><strong>Most traded products after petroleum: <\/strong>Semiconductors are globally the most-traded products after petroleum and cars, with an annual turnover of $500 billion.<\/li>\n<li><strong>Transformative potential:<\/strong>\u00a0Semiconductors continue to enable the world\u2019s greatest breakthroughs and transformation in industries, ranging from aerospace and consumer electronics to energy and medicine.<\/li>\n<\/ol>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><a id=\"toc2\"><\/a><span style=\"color: #000000; text-decoration: underline;\"><strong>What are the defining features of Semiconductor manufacturing?<\/strong><\/span><\/span><\/h2>\n<p>Semiconductor manufacturing involves following stages:<\/p>\n<p><span style=\"color: #800000;\"><strong>Raw materials \u2192 Wafer manufacturing \u2192 Chip design \u2192 Fabrication \u2192 Packaging \u2192 Testing \u2192 Integration into electronic products<\/strong><\/span><\/p>\n<ol>\n<li><strong>Front-end manufacturing and back-end assembly:<\/strong>\u00a0Semiconductor manufacturing comprises the front-end fab manufacturing and the back-end assembly, including packaging and testing. However, the front-end fab manufacturing is a complex process, with only a handful of companies involved in large scale fab-manufacturing.<\/li>\n<li><strong>Highly technology-intensive<\/strong>: Manufacturing semiconductors requires advanced technologies such as photolithography, etching, deposition, ion implantation and chemical-mechanical polishing (CMP). Even tiny manufacturing errors can make a chip defective.<\/li>\n<li><strong>Extremely high precision<\/strong>: Modern chips contain billions of transistors on a very small area. Manufacturing therefore requires extremely precise control at microscopic and sometimes nanometre scales.<\/li>\n<li><strong>Capital-intensive<\/strong>: Setting up a semiconductor fabrication plant (<strong data-start=\"816\" data-end=\"823\">fab<\/strong>) requires enormous investment in specialised equipment, cleanrooms and supporting infrastructure. Advanced fabs can require billions of dollars in capital.<\/li>\n<li><strong>Requires ultra-clean environments<\/strong>: Even microscopic particles can damage semiconductor wafers. Fabs therefore operate in highly controlled cleanrooms with strict control over dust, temperature, humidity and vibrations.<\/li>\n<li><strong>Highly concentrated global supply chain: <\/strong>Globally, the entire semiconductor value chain has seeped in the interdependence between a handful of countries like the <strong>USA<\/strong>, <strong>Taiwan<\/strong>, <strong>Japan<\/strong>, <strong>China<\/strong>, and <strong>some European nations<\/strong>. Within this chain, there\u2019s an extraordinary degree of specialisation that makes it vulnerable to shocks. <strong>For e.g. <\/strong>100% of the world\u2019s most advanced (below 10 nanometres) semiconductor manufacturing facilities are located in just two countries, <strong>Taiwan <\/strong>and <strong>South Korea<\/strong>.<\/li>\n<li><strong>Revenue sharing b\/w few companies:<\/strong> The top 3 companies in each stage of the semiconductor supply chain take in about 80-90% of the revenue.<\/li>\n<\/ol>\n<p><strong><span style=\"text-decoration: underline;\">Semiconductor manufacturing status in India<\/span>:<\/strong><\/p>\n<ol>\n<li><strong>Semiconductor R&amp;D footprint in India:<\/strong><span style=\"color: #000000;\">\u00a0India has an existing base for design and verification for the semiconductor industry. Most of the global semiconductor companies having an R&amp;D footprint in India.<\/span><\/li>\n<li><strong style=\"color: #000000;\">Fabrication facilities limited to strategic semiconductor development:<\/strong><span style=\"color: #000000;\"> India has two fabs &#8211; <span style=\"color: #800000;\"><strong>SITAR<\/strong><\/span>, a unit of the Defence Research and Development Organisation (DRDO) in Bengaluru, and a <span style=\"color: #800000;\"><strong>semiconductor laboratory<\/strong><\/span> in Chandigarh. These build silicon chips for <\/span><span style=\"color: #000000;\">strategic purposes like defence and space<\/span><span style=\"color: #000000;\">, and not for commercial use.<\/span><\/li>\n<li><strong>High import dependence:<\/strong>\u00a0<strong>100%<\/strong> of our semiconductor chips, memory, and display cards are imported into the country. In 2020, India spent $15bn on electronic imports, with <strong>37%<\/strong> coming from China.<\/li>\n<li><strong>Rapid expansion of ATMP\/OSAT (Packing &amp; Testing) facilities<\/strong>: India has made faster progress in Assembly, Testing, Marking and Packaging (ATMP)\/Outsourced Semiconductor Assembly and Test (OSAT).<\/li>\n<li><strong>Strong position in chip design<\/strong>: India already has a significant advantage in semiconductor design and engineering talent. Government data indicates that India hosts about <strong>20%<\/strong> of the global semiconductor chip-design workforce and around <strong>7%<\/strong> of global semiconductor-domain GCCs.<\/li>\n<li><strong>Progress under ISM 1.0:<\/strong> As of December 2025, 10 projects worth Rs. 1.60 lakh crore have been approved across 6 states, covering silicon fabs, silicon carbide fabs, advanced packaging, and ATMP facilities.\n<p><figure id=\"attachment_359056\" aria-describedby=\"caption-attachment-359056\" style=\"width: 335px\" class=\"wp-caption aligncenter\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-359056\" src=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/03\/Semiconductor-Industry-in-India.jpg?resize=335%2C338&#038;ssl=1\" alt=\"Semiconductor Industry in India\" width=\"335\" height=\"338\" srcset=\"https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/03\/Semiconductor-Industry-in-India.jpg?w=335&amp;ssl=1 335w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/03\/Semiconductor-Industry-in-India.jpg?resize=297%2C300&amp;ssl=1 297w, https:\/\/i0.wp.com\/forumias.com\/blog\/wp-content\/uploads\/2026\/03\/Semiconductor-Industry-in-India.jpg?resize=150%2C150&amp;ssl=1 150w\" sizes=\"auto, (max-width: 335px) 100vw, 335px\" \/><figcaption id=\"caption-attachment-359056\" class=\"wp-caption-text\">Source- PIB<\/figcaption><\/figure><\/li>\n<\/ol>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><strong><span style=\"color: #000000; text-decoration: underline;\"><a id=\"toc3\"><\/a>Why is there a global race to diversify semiconductor supply chains?<\/span><\/strong><\/span><\/h2>\n<ol>\n<li><span style=\"color: #000000;\"><strong>Over concentration of manufacturing units:<\/strong>\u00a0Semiconductor chip manufacturing is concentrated in a few countries. <strong>For e.g.<\/strong> Taiwan produces over 60% of the world\u2019s semiconductors, and along with South Korea makes 100% of the most advanced chips (below 10 nanometers). A disruption in one major producing region can affect industries worldwide.<\/span><\/li>\n<li><strong><span style=\"color: #000000;\">Su<\/span>pply chain disruption due to epidemic:<\/strong><span style=\"color: #000000;\"> The semiconductor industry experienced significant supply shortages during the pandemic due to disruptions in China\u2019s production. The pandemic demonstrated how semiconductor shortages can disrupt automobiles, electronics, telecommunications and other downstream industries. Because chips are an upstream input used across numerous industries, a shortage can have economy-wide effects.<\/span><\/li>\n<li><strong>Geopolitical conflicts:<\/strong><span style=\"color: #000000;\">\u00a0The ongoing Russia-Ukraine conflict has resulted in shortages of raw materials for domestic industries. <strong>For e.g.<\/strong>\u00a0Ukraine plays a critical role as a key supplier of neon, which is an essential input in semic<\/span>onductor manufacturing.<\/li>\n<li><span style=\"color: #000000;\"><strong>Emerging geopolitical contestations: <\/strong>Growing US\u2013China strategic competition, export controls, trade restrictions and technology disputes have made dependence on a limited number of suppliers a strategic concern. Governments therefore want greater control over critical semiconductor capabilities. <strong>For e.g.<\/strong>\u00a0US has restricted its firms and its allies from assisting the Chinese production of 16 nanometers or smaller chips.<\/span><\/li>\n<li><strong>Economic and national-security importance<\/strong>: Semiconductors are essential not only for consumer electronics but also for AI, telecommunications, automobiles, defence, satellites and critical infrastructure. Consequently, reliable access to chips has increasingly become an element of economic and technological security.<\/li>\n<li><strong>Rise of AI and advanced computing<\/strong>: The rapid expansion of AI, data centres and high-performance computing is increasing the strategic importance of advanced chips. This has encouraged countries to secure domestic or trusted access to semiconductor manufacturing and related technologies.<\/li>\n<li><strong>Pursuit of technological sovereignty<\/strong>: Countries increasingly want to reduce excessive dependence on foreign suppliers for technologies considered strategically important. This has led to policies supporting domestic fabs, chip design, advanced packaging, semiconductor equipment and materials.<\/li>\n<\/ol>\n<p><span style=\"color: #000000;\">There<\/span>fore, many countries are looking to diversify their supply chain. India seeks to take advantage of countries eyeing for diversification of supply chains.<\/p>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><span style=\"color: #000000; text-decoration: underline;\"><strong><a id=\"toc4\"><\/a>What is the significance of development of indigenous semiconductor industry in India?<\/strong><\/span><\/span><\/h2>\n<ol>\n<li><span style=\"color: #000000;\"><strong>Tackling supply shocks: <\/strong>The pandemic and the subsequent lockdowns impacted the supply of chips to India.<strong> For e.g.<\/strong>\u00a0Automobile manufacturers like Mahindra &amp; Mahindra and Tata group were compelled to reduce their production due to the shortage.<\/span><\/li>\n<li><strong style=\"color: #000000;\">Meeting the rising demand:<\/strong><span style=\"color: #000000;\">\u00a0Experts estimate that around <\/span><span style=\"color: #000000;\">50 crore people will join the internet in the next decade<\/span><span style=\"color: #000000;\">, which will <\/span><span style=\"color: #000000;\">increase the demand of more phones and laptops<\/span><span style=\"color: #000000;\">. <\/span>Similarly, the <span style=\"color: #000000;\">post-pandemic world is showing a greater inclination towards work from home culture<\/span><span style=\"color: #000000;\">. This warrants an enhanced demand for servers, internet connectivity, and cloud usage. <\/span>Hence, indigenous semiconductor industry is needed to meet the rising demands. There is a huge domestic market for semiconductors which <span style=\"color: #000000;\">could exceed $60 billion by 2026<\/span><span style=\"color: #000000;\">.<\/span><\/li>\n<li><strong>Reduce import dependence<\/strong>: A domestic ecosystem can reduce India&#8217;s dependence on imported chips and other critical semiconductor components, particularly as domestic demand for electronics, EVs, AI and data centres expands.<\/li>\n<li><strong style=\"color: #000000;\">Boost high-value employment:<\/strong><span style=\"color: #000000;\"> The semiconductor industry requires specialised engineers, technicians, researchers and manufacturing professionals. It can therefore create high-skilled, high-productivity employment and strengthen India&#8217;s technical talent base.<\/span><\/li>\n<li><strong style=\"color: #000000;\">Revenue boost:<\/strong><span style=\"color: #000000;\">\u00a0Indigenous capacity would attract local taxes and boost the export potential. Further, India would be required to import fewer semiconductor chips, which would decrease the import bill.<\/span><strong style=\"color: #000000;\"> For e.g.<\/strong><span style=\"color: #000000;\">\u00a0India imports almost all semiconductors to meet its demand, which is estimated to <\/span><span style=\"color: #000000;\">reach around $100 billion by 2025<\/span><span style=\"color: #000000;\">.<\/span><\/li>\n<li><strong style=\"color: #000000;\">Enhanced Security:<\/strong><span style=\"color: #000000;\">\u00a0Chips made locally will be designated as \u201c<\/span><span style=\"color: #000000;\">trusted sources<\/span><span style=\"color: #000000;\">\u201d and can be used in products ranging from CCTV cameras to 5G equipment. This would <\/span><span style=\"color: #000000;\">improve the national cybersecurity profile<\/span><span style=\"color: #000000;\">.<\/span><\/li>\n<li><strong style=\"color: #000000;\">Geopolitical Benefits:<\/strong><span style=\"color: #000000;\"> Countries having a sufficient supply of chips would be in a better position to mold the future course of geopolitics, driven by data and the digital revolution. Further self-sufficiency will decrease reliance on Chinese chip imports, especially during hard times like the <\/span><span style=\"color: #000000;\">Galwan Valley border clash<\/span><span style=\"color: #000000;\">.<\/span><\/li>\n<li><strong>Promote R&amp;D and innovation<\/strong>: Building fabs and advanced packaging facilities can encourage research in materials science, electronics, nanotechnology, chip architecture and semiconductor equipment, while creating stronger links between universities, startups and industry.<\/li>\n<li><strong>Generate economic multiplier effects<\/strong>: Semiconductor manufacturing can stimulate related industries such as specialty chemicals, gases, precision machinery, electronics, logistics, testing and advanced materials, creating a wider industrial ecosystem.<\/li>\n<\/ol>\n<h2><span style=\"text-decoration: underline;\"><span style=\"color: #000000; text-decoration: underline;\"><strong><a id=\"toc5\"><\/a>What have been the government efforts towards development of semiconductor industry in India?<\/strong><\/span><\/span><\/h2>\n<table style=\"width: 100%; border-collapse: collapse; border-style: solid; background-color: #f7f6d7; border-color: #000000; height: 750px;\">\n<tbody>\n<tr style=\"height: 120px;\">\n<td style=\"width: 27.0401%; height: 120px;\"><strong>National Policy on Electronics, 2019<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 120px;\">It envisions positioning India as a <span style=\"color: #ff0000;\">global hub for Electronics System Design and Manufacturing (ESDM) sector<\/span>. It aims to encourage the development of core components (including chipsets) and create an enabling environment for the industry to compete globally.<\/td>\n<\/tr>\n<tr style=\"height: 90px;\">\n<td style=\"width: 27.0401%; height: 90px;\"><strong>Semicon India Programme (2022)<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 90px;\">The government has approved the Semicon India programme with a total outlay of INR 76,000 crore for the <span style=\"color: #ff0000;\">development of semiconductor and display manufacturing ecosystem in the country<\/span>.<br \/>\n<strong>Semicon 1.0:\u00a0<\/strong>Launched with an initial outlay of \u20b976,000 crore to build a domestic semiconductor and display manufacturing ecosystem. It provided fiscal support for setting up fabs, compound semiconductor\/silicon carbide facilities, and OSAT\/ATMP (packaging and testing) units.<br \/>\n<strong>Semicon 2.0: <\/strong>In July 2026, the Union Cabinet approved <strong data-start=\"1948\" data-end=\"1997\">Semicon 2.0 <\/strong>with an outlay of \u20b91,27,500 crore. It seeks to build on Semicon India and expand capabilities in areas such as <strong data-start=\"2075\" data-end=\"2182\">chip design, semiconductor equipment and materials, Indian semiconductor IP and supply-chain resilience.<\/strong><\/td>\n<\/tr>\n<tr style=\"height: 150px;\">\n<td style=\"width: 27.0401%; height: 150px;\"><strong>Modified Scheme for setting up of Semiconductor Fabs in India<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 150px;\">It aims to attract large investments for setting up semiconductor wafer fabrication facilities in the country. The Scheme extends a <span style=\"color: #ff0000;\">fiscal support of 50% of the project cost on an equal footing basis for setting up of Silicon complementary metal-oxide semiconductor<\/span> (CMOS) based Semiconductor fabrication in India.<\/td>\n<\/tr>\n<tr style=\"height: 90px;\">\n<td style=\"width: 27.0401%; height: 90px;\"><strong>Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 90px;\">Under this, the government will <span style=\"color: #ff0000;\">provide support for the setting up of Electronics Manufacturing Clusters<\/span> (EMCs) and <span style=\"color: #ff0000;\">Common Facility Centres <\/span>(CFCs).<\/td>\n<\/tr>\n<tr style=\"height: 90px;\">\n<td style=\"width: 27.0401%; height: 90px;\"><strong>Foreign Direct Investment<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 90px;\">The Government of India has allowed <span style=\"color: #ff0000;\"><strong>100%<\/strong>\u00a0(FDI) under the automatic route in the Electronics Systems Design &amp; Manufacturing sector<\/span>.<\/td>\n<\/tr>\n<tr style=\"height: 90px;\">\n<td style=\"width: 27.0401%; height: 90px;\"><strong>Production Linked Incentive Scheme(PLI)<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 90px;\">Under this, the government will provide an <span style=\"color: #ff0000;\">incentive of 4% to 6% on goods manufactured in India<\/span> and <span style=\"color: #ff0000;\">covered under target segments to eligible companies for a period of five years<\/span>.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 27.0401%;\"><strong>Design Linked Incentive (DLI)<\/strong><\/td>\n<td style=\"width: 72.9599%;\">The DLI Scheme provides financial incentives and design infrastructure support for <strong data-start=\"1290\" data-end=\"1353\">ICs, chipsets, System-on-Chips (SoCs), systems and IP cores<\/strong>. This helps India leverage its existing strength in semiconductor design and move towards higher-value activities.<\/td>\n<\/tr>\n<tr style=\"height: 120px;\">\n<td style=\"width: 27.0401%; height: 120px;\"><strong>India Semiconductor Mission<br \/>\n<\/strong><\/td>\n<td style=\"width: 72.9599%; height: 120px;\">The <strong data-start=\"925\" data-end=\"956\">India Semiconductor Mission<\/strong> was established as the institutional framework for implementing India&#8217;s semiconductor strategy, facilitating investment, evaluating projects and developing the semiconductor ecosystem.<br \/>\nAs of 2026, it has approved 13 semiconductor projects with cumulative investments exceeding \u20b91.64 lakh crore, spread across Gujarat, Assam, Uttar Pradesh, Odisha, Punjab, and Andhra Pradesh.<br \/>\nThe Union Budget 2026-27 launched <strong>India Semiconductor Mission 2.0<\/strong> with Rs. 1,000 crore to boost domestic chip capabilities through local equipment and material production, full-stack IP design, and industry-led R&amp;D and skilling.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 27.0401%;\"><strong>Skill Development\u00a0<\/strong><\/td>\n<td style=\"width: 72.9599%;\">The government has set targets to train 1,00,000 semiconductor technicians and engineers and attract 200 chip design startups, aiming to address a projected one-million-person talent gap in the global semiconductor and AI sector.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 27.0401%;\"><strong>International technology partnerships<\/strong><\/td>\n<td style=\"width: 72.9599%;\">India has entered into semiconductor-related cooperation with major technology partners, including the <strong data-start=\"2622\" data-end=\"2665\">US, European Union, Japan and Singapore<\/strong>, to strengthen technology transfer, investment and supply-chain resilience.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><span style=\"color: #000000; text-decoration: underline;\"><strong><a id=\"toc6\"><\/a>What are the challenges in the semiconductor industry in India?<\/strong><\/span><\/span><\/h2>\n<ol>\n<li><strong>Very high capital requirements:<\/strong><span style=\"color: #000000;\"> Setting up a semiconductor fabrication plant requires billions of dollars of investment in cleanrooms, specialised machinery and supporting infrastructure. As per a government estimate, it would cost roughly $5-$7 billion to set up a chip fabrication unit in In<\/span>dia.<\/li>\n<li><strong>Dependence on imported equipment and technology<\/strong>: Advanced semiconductor manufacturing requires highly specialised equipment, materials and intellectual property. India remains dependent on global suppliers for several of these critical inputs, limiting complete technological self-reliance.<\/li>\n<li><strong>Shortage of specialised skilled manpower<\/strong>: While India has a large pool of engineers and a strong chip-design workforce, there is a relative shortage of professionals with hands-on expertise in fab operations, semiconductor process engineering, equipment maintenance, materials science and advanced packaging.<\/li>\n<li><strong>Bureaucratic inefficiencies:<\/strong>\u00a0The process of establishing an indigenous semiconductor facility requires clearances and approvals fro<span style=\"color: #000000;\">m multiple government departments. Further, there exists a considerable degree of bureaucratic delays at each stage that discourages the establishment of manufacturing units.<\/span><\/li>\n<li><strong>Infrastructure requirements:<\/strong><span style=\"color: #000000;\"> Fabs require uninterrupted power, large quantities of ultrapure water, specialised gases, chemicals, cleanrooms and reliable logistics. Establishing this ecosystem at scale is complex and expensive<\/span>.<\/li>\n<li><strong>Technological Constraint:<\/strong><span style=\"color: #000000;\">\u00a0The indigenous manufacturing of semiconductors requires the use of high-end technologies. These te<\/span>chnologies are licensed from patent holders at a very high price.<\/li>\n<li><strong>Structural Flaws: <\/strong><span style=\"color: #000000;\">FDI in electronics is less than 1% of the total FDI inflow because of the dearth of skilled labor, delays in lan<\/span>d acquisition, and the uncertain tax regime.<\/li>\n<li><strong>Competition from established semiconductor hubs<\/strong>: India faces competition from established manufacturing ecosystems in <strong data-start=\"3198\" data-end=\"3268\">Taiwan, South Korea, Japan, the United States, China and Singapore<\/strong>, which possess decades of accumulated technological expertise, supplier networks and manufacturing experience.<\/li>\n<\/ol>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><span style=\"color: #000000; text-decoration: underline;\"><strong><a id=\"toc7\"><\/a>What should be the focus area for Indian Semiconductor Industry?<\/strong><\/span><\/span><\/h2>\n<table style=\"height: 210px; width: 100%; border-collapse: collapse; border-style: solid; background-color: #f7e9e9; border-color: #000000;\">\n<tbody>\n<tr style=\"height: 120px;\">\n<td style=\"width: 20.3815%; height: 120px;\"><strong>R&amp;D-intensive activities<\/strong><\/td>\n<td style=\"width: 79.6185%; height: 120px;\">R&amp;D-intensive activities like <span style=\"color: #ff0000;\">electronic design automation<\/span> (EDA), <span style=\"color: #ff0000;\">core intellectual property<\/span> (IP), and <span style=\"color: #ff0000;\">chip design.<\/span> The US is the leader in this segment. India can get part of the business by <span style=\"color: #ff0000;\">supporting its existing chip-design experts<\/span> and <span style=\"color: #ff0000;\">funding technology and innovation centres<\/span>, including top engineering colleges.<\/td>\n<\/tr>\n<tr style=\"height: 30px;\">\n<td style=\"width: 20.3815%; height: 30px;\"><strong>FABS facilities for advanced chips<\/strong><\/td>\n<td style=\"width: 79.6185%; height: 30px;\">India should focus on setting up of semiconductor fabrication (FABS) facilities for making of advanced chips.<\/td>\n<\/tr>\n<tr style=\"height: 30px;\">\n<td style=\"width: 20.3815%; height: 30px;\"><strong>Focus on medium and low-end chips<\/strong><\/td>\n<td style=\"width: 79.6185%; height: 30px;\">Due to the pandemic related <span style=\"color: #ff0000;\">supply disruptions and tensions between the US and China<\/span>, the US, Japan, and many other countries have <span style=\"color: #ff0000;\">announced plans for setting up local Fabs<\/span>. This might lead to a surplus capacity for high-end Fabs in the near future. Hence, India should focus on making medium and low-end chips.<\/td>\n<\/tr>\n<tr style=\"height: 30px;\">\n<td style=\"width: 20.3815%; height: 30px;\"><strong>Assembly, testing and packaging (ATP) segment<\/strong><\/td>\n<td style=\"width: 79.6185%; height: 30px;\">This segment captures <span style=\"color: #ff0000;\">10% of the value<\/span>. China is the current leader. With low-cost skilled technical manpower, India is a natural choice to take some part of the business.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20.3815%;\"><strong>Full-Stack IP Design<\/strong> <strong><br \/>\n<\/strong><\/td>\n<td style=\"width: 79.6185%;\">ISM 2.0 emphasises indigenous IP creation &#8211; reducing royalty payments and establishing technological sovereignty.<\/td>\n<\/tr>\n<tr>\n<td style=\"width: 20.3815%;\"><strong>Local Equipment &amp; Materials<\/strong> <strong><br \/>\n<\/strong><\/td>\n<td style=\"width: 79.6185%;\">ISM 2.0 focuses on producing semiconductor equipment and materials domestically, a critical supply chain gap<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 class=\"blue-h2-box\"><span style=\"text-decoration: underline;\"><span style=\"color: #000000; text-decoration: underline;\"><strong><a id=\"toc8\"><\/a>What Should be the Way Forward?<\/strong><\/span><\/span><\/h2>\n<ol>\n<li><strong>Build an end-to-end ecosystem<\/strong>: India should develop capabilities across the entire value chain (chip design, semiconductor-grade materials, equipment, wafer fabrication, packaging, testing and electronics manufacturing) rather than focusing only on fabs.<\/li>\n<li><strong>Strengthen semiconductor R&amp;D<\/strong>: Greater public and private investment should be directed towards semiconductor process technology, materials, equipment, chip architecture and indigenous intellectual property (IP). Stronger industry\u2013academia\u2013research-institution linkages can accelerate commercialisation.<\/li>\n<li><strong>Develop specialised human capital<\/strong>: India should create specialised programmes in semiconductor fabrication, process engineering, equipment maintenance, materials science, chip design and advanced packaging. Industry-oriented training and apprenticeships can complement conventional engineering education.<\/li>\n<li><strong>Ensure reliable infrastructure<\/strong>: Semiconductor clusters need 24\u00d77 high-quality electricity, ultrapure water, waste-treatment facilities, cleanrooms, high-speed logistics and robust digital infrastructure. Dedicated semiconductor industrial clusters can help provide these facilities.<\/li>\n<li><strong>Provision of adequate funding:<\/strong><span style=\"color: #000000;\">\u00a0Adequate funding must be provided to augment the research and development potential of technical institutes. <strong>For e.g.<\/strong>\u00a0IIT Madras developed a microprocessor named \u2018Moushik\u2019 with funding support f<\/span>rom the Ministry of Electronics and Information Technology.<\/li>\n<li><strong>Expeditious execution of Sovereign Patent Fund (SPF):<\/strong><span style=\"color: #000000;\">\u00a0 The Sovereign Patent Fund (SPF) under National Policy on electronics should be established expeditiously. It is a wholly or partly Government-backed entity that aims to bolster domestic businesses thr<\/span>ough the acquisition and licensing of patented technology.<\/li>\n<li><strong><span style=\"color: #000000;\">Su<\/span>pport of businesses:<\/strong><span style=\"color: #000000;\">\u00a0The government should also support businesses in the acquisition of semiconductor manufacturing units in other countries. This is easier than setting up a domestic facility and can be done swiftly for ensuring a continuous supply of chips. Hand-holding startups of entrepreneurial enginee<\/span>rs can also produce large payoffs.<\/li>\n<li><strong>Initial Focus on back-end of manufacturing:<\/strong><span style=\"color: #000000;\">\u00a0Semiconductor foundries are the world\u2019s most expensive factories, accounting for 65% of industry capital expenditure but only 25% of the value addition. Therefore, to lower the risks of investment, India should especially look at back-end of manufacturing such as assembly, packaging and testing. Once<\/span> it stabilises and an ecosystem develops, front-end of manufacturing will follow.<\/li>\n<li><strong>Integrate with global value chains<\/strong>: India should pursue <strong data-start=\"3499\" data-end=\"3559\">\u201cChina+1\u201d<\/strong> and supply-chain diversification opportunities while avoiding an unrealistic goal of complete self-sufficiency. The objective should be to become a trusted, competitive and resilient node in global semiconductor value chains.<\/li>\n<\/ol>\n<p><span style=\"color: #000000;\"><strong>Conclusion: <\/strong>The 21st century will be an era of Digital revolution signifying an increased use of mobile phones and computer devices. This enhanced usage can be met only with a robust availability of semiconductor chips that sustains<\/span> their functioning. Therefore India needs to focus on the indigenous development of semiconductors in order to realize its digital potential and emerge as a strong power in the present era.<\/p>\n<table style=\"width: 100%; border-collapse: collapse; border-style: solid;\">\n<tbody>\n<tr>\n<td style=\"width: 100%;\">Read More: <a href=\"https:\/\/indianexpress.com\/article\/business\/narendra-modi-semicon-india-2026-delhi-chip-bases-10881893\/\" target=\"_blank\" rel=\"noopener\">Indian Express\u00a0<\/a><br \/>\nUPSC Syllabus- GS 3- Indian Economy<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n","protected":false},"excerpt":{"rendered":"<p>Recently, Prime Minister Narendra Modi inaugurated the fifth edition of SEMICON India 2026.\u00a0The event reflects India\u2019s transition from policy formulation towards actual semiconductor production and a broader domestic ecosystem. India is emerging as a semiconductor hub, developing indigenous chips like VIKRAM 3201,\u00a0 DHRUV64 to boost self-reliance. The market is growing from $38 billion in 2023&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/semiconductor-industry-in-india-significance-challenges-explained-pointwise\/\">Continue reading <span class=\"screen-reader-text\">Semiconductor Industry in India &#8211; Significance &#038; Challenges &#8211; Explained Pointwise<\/span><\/a><\/p>\n","protected":false},"author":10391,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[130],"tags":[],"class_list":["post-372107","post","type-post","status-publish","format-standard","hentry","category-7-pm","entry"],"jetpack_featured_media_url":"","views":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/372107","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10391"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=372107"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/372107\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=372107"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=372107"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=372107"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}