• India’s push into global semiconductor manufacturing reaches a commercial milestone.
• Country prepares to begin chip production by the end of 2025.
• $18 bn investment in 10 projects could reshape supply chains, despite challenges.

“When the chips are down, you can bet on India,” Prime Minister Narendra Modi declared as he received the country’s first indigenous 32-bit microprocessor this week. The Vikram processor, developed by ISRO’s Semiconductor Lab, marks India’s entry into domestic chip production – a journey that began just four years ago and faces its first commercial test by year-end.

Modi announced Tuesday that commercial chip manufacturing will begin by the end of 2025, transitioning India from a semiconductor importer to a producer. The statement came as industry leaders gathered for Semicon India 2025, where the scale of the country’s ambitions became clear.

The numbers behind the push

India has committed US$18 billion in 10 semiconductor projects, representing one of the largest industrial investments in the country’s recent history. The government allocated ₹76,000 crore (US$9.1 billion) through the Production Linked Incentive scheme, with ₹65,000 crore already committed to approved projects, according to the Press Information Bureau.

The market trajectory shows rapid growth: from US$38 billion in 2023 to an estimated $45 – 50 billion in 2024 – 25. The government targets a projected US$100 – 110 billion by 2030, though achieving this would require sustaining growth rates that few countries have managed in semiconductor manufacturing.

The financial scale reflects both opportunity and risk. Semiconductor manufacturing requires sustained capital investment over many years, with no guarantee of commercial success. Historical attempts by countries, including Malaysia, Thailand, and others, have demonstrated the difficulty of building competitive chip industries from scratch.

From test chips to commercial reality

The CG Power facility in Sanand, Gujarat, launched in August 2024, represents India’s first operational semiconductor assembly and test capability. The facility currently handles 0.5 million units per day, with plans to scale to 14.5 million units daily. CG-Semi expects to produce the first commercial “Made in India” chips from the facility.

The Vikram processor demonstrates existing capabilities but also limitations. Fabricated using 180-nanometer CMOS technology, it functions in space applications but represents older technology compared to the 3-nanometer processes that define current leading-edge manufacturing.

Major international partnerships include Micron Technology’s ₹22,516 crore investment in Gujarat and Tata Electronics’₹91,000 crore partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp. The partnerships provide technology transfer and expertise, though they also highlight India’s current dependence on foreign knowledge and equipment.

Technology gap: 25-year-old manufacturing process

The Vikram processor demonstrates both capabilities and limitations of India’s current semiconductor manufacturing. Fabricated using 180-nanometer CMOS technology – state-of-the-art in 2000 but now 25 years behind leading-edge processes – it functions reliably in space applications but highlights the technological gap India faces.

For context, today’s advanced smartphones use 3-nanometer chips, while even mid-range consumer electronics typically employ 7-14 nanometer processes. The 180nm technology, while proven and suitable for specific applications, represents a significant technological lag compared to current commercial standards.

Major international partnerships include Micron Technology’s ₹22,516 crore investment in Gujarat and Tata Electronics’ ₹91,000 crore partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp. The partnerships provide technology transfer and expertise, though they also highlight India’s current dependence on foreign knowledge and equipment.

Design capabilities and talent

India contributes approximately 20% of global semiconductor design, according to industry estimates. The Design Linked Incentive scheme has approved 23 chip design projects, supporting both startups and established companies.

Two 3-nanometer design facilities in Noida and Bengaluru position India among countries with advanced design capabilities. However, design capabilities differ significantly from manufacturing expertise. While India has demonstrated strong software and design skills, semiconductor manufacturing requires different competencies, including process engineering, yield optimisation, and supply chain management.

The government also reports training over 60,000 students in semiconductor-related skills, though industry sources suggest the sector will need significantly more specialised talent to achieve stated production goals.

Geopolitical context

India’s semiconductor push occurs amid global supply chain diversification efforts. Taiwan produces over 60% of global semiconductors and 90% of advanced chips, creating concentration risks that governments worldwide seek to address.

Japan’s commitment to invest 10 trillion yen (US$68 billion) in India, including semiconductor cooperation, reflects international interest in alternative manufacturing locations. However, these partnerships often come with technology transfer limitations and competitive constraints.

The US CHIPS Act, European Chips Act, and similar initiatives worldwide demonstrate how governments are subsidising domestic semiconductor capabilities. This creates both opportunities and challenges for India, as it competes for investment and talent in an increasingly crowded field.

Technical and economic challenges

The semiconductor industry presents formidable barriers to entry. Advanced chip manufacturing requires:

• Capital investments of US$10-20 billion per leading-edge facility
• Highly specialised equipment from a limited number of suppliers
• Process expertise that typically takes years to develop
• Consistent yields and quality that meet global standards

India’s current projects focus on assembly, testing, and older-generation manufacturing rather than cutting-edge production. While this provides a foundation, competing with established manufacturers in Taiwan, South Korea, and China requires capabilities that India is still developing.

Supply chain complexity adds another layer of difficulty. Semiconductor manufacturing depends on hundreds of specialised materials, chemicals, and components. Building reliable domestic suppliers for these inputs requires time and sustained investment.

Market realities

Industry observers note the gap between policy announcements and commercial execution. Producing test chips differs significantly from achieving commercial-scale manufacturing with competitive costs and yields.

Delta Electronics India’s Sanjeev Srivastava stated that “the semiconductor industry has started in India over the last 1-2 years,” acknowledging the sector’s early stage. Emerson’s Shitendra Bhattacharya noted that while semiconductors produced in India will target global markets, domestic demand is also rising, providing a potential foundation for the industry.

The economic multiplier effects remain theoretical until commercial production begins. Each semiconductor job typically supports additional positions in related industries, but these benefits depend on achieving sustainable production volumes.

Execution risks

Several factors could impact India’s semiconductor ambitions:

Technology access: Advanced semiconductor manufacturing depends on equipment from companies including ASML and Applied Materials. Export controls and technology restrictions could limit access to the latest capabilities.

Talent development: While India has engineering capabilities, semiconductor manufacturing requires specialised skills that differ from software development or design work.

Global competition: Established manufacturers benefit from decades of established supply chains, talent, and have gained economies of scale that new entrants find difficult to match.

Capital requirements: Semiconductor technology evolves, requiring continuous investment. The industry’s capital intensity has, historically, challenged even well-funded government initiatives.

Assessment

India’s semiconductor initiative shows early progress, with operational facilities and international partnerships providing a foundation for expansion. The country’s design capabilities and engineering talent offer advantages, while government financial support addresses some traditional barriers.

However, the transition from current capabilities to competitive semiconductor manufacturing remains unproven. The industry’s technical complexity, capital requirements, and competitive dynamics present challenges that policy support alone cannot address.

The next 12-18 months will provide crucial evidence of India’s execution capabilities as commercial production begins and facilities scale operations. Success will depend on factors including yield rates, production costs, and quality standards that meet global market requirements.

Modi’s declaration that “when the chips are down, you can bet on India” will face its first real test as the country attempts to transform semiconductor ambitions into commercial reality. The outcome will influence not only India’s technology sector but global supply chain dynamics in one of the world’s most strategic industries.

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