PM pitches India as a global destination for chip making

Why in news?

Prime Minister Narendra Modi, at the SEMICON 2026,  pitched India as a “new and trustworthy location” for global electronics manufacturing, urging chipmakers to help relieve the industry from the “weaponisation” of supply chains.

UPSC Relevance

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GS3, Changes in Industrial Policy and their Effects on Industrial Growth.

​”Semiconductors constitute the bedrock of the modern digital economy, acting as a multi-billion-dollar multiplier that powers downstream electronics manufacturing, Industry 4.0, and green transition technologies. For India, establishing an indigenous semiconductor ecosystem is crucial to curbing massive non-oil import liabilities, moving up global tech value chains, and realizing the vision of an Atmanirbhar $5 trillion economy.”

Factors affecting development of robust Semiconductor Ecosystem

• Policy & Capital Support: Fabs are capital-intensive, requiring heavy subsidies.
  • The India Semiconductor Mission (ISM) provided a ₹76,000 crore ($9.1B) outlay in Phase 1 and extended Semicon 2.0 with ₹1.28 lakh crore ($13B) to offer up to 50% fiscal support for fabs, packaging, and supply chain ecosystem players.
• Ultra-Reliable Infrastructure: Manufacturing demands uninterrupted power and massive volumes of ultra-pure water (UPW).
  • Fabs require 18-megohm-cm purity water. To overcome municipal limits, Tata Electronics built dedicated desalination and reverse-osmosis facilities alongside grid substations for its $11B Dholera fab.
• High-Skilled Talent Pool: While India holds ~20% of the world’s chip design workforce, scaling up requires talent across front-end fab operations and back-end assembly.
  • Global firms like Micron rely heavily on Indian engineers, with its R&D teams in Bengaluru and Hyderabad contributing to over 3,700 patents and disclosures.
• Robust Domestic & Global Supply Chains: A fab cannot run without immediate access to specialty gases, raw silicon wafers, and machinery.
  • Applied Materials and Lab Research are expanding localized equipment infrastructure, while companies like Japan’s Inabata are establishing local specialty chemical and scrubber supply chains in India.
• Sustained Local Market Demand: Fabs require domestic off-takers in consumer electronics, automotive, and telecom to maintain high capacity utilization.
  • India’s domestic semiconductor market is projected to reach $100B+, propelled by EV adoption, local consumer electronics assembly, and 5G/BharatNet fiber expansions.

Why the Semiconductor push ?

• Economic Sovereignty & Resilience
  • Import Burden Reduction: Microchips are one of India’s largest non-oil import liabilities. Localizing production cushions foreign exchange reserves and shields domestic industries from costly trade imbalances.
  • Industrial Multiplier Effect: A localized supply chain accelerates the broader electronics manufacturing sector—creating high-value jobs across hardware design, advanced packaging, chemical processing, and equipment servicing.
  • Upward Mobility in Value Chains: Capturing front-end fabrication and intellectual property (IP) moves India away from low-margin assembly to high-margin tech export leadership.
• Geopolitics & International Relations
  • “China+1” Global Alternative: As global firms seek resilient alternatives to East Asian manufacturing monopolies, India positions itself as a critical, trusted node in global tech supply chains.
  • Strategic Alliances: A credible chip ecosystem strengthens bilateral technology ties with major economies—such as the US, Japan, and the EU—underpinning initiatives like iCET (Initiative on Critical and Emerging Technology).
• Defense & Domestic Security
  • Prevent espionage: Indigenous chips eliminate espionage and backdoor vulnerabilities in defense systems, space programs (ISRO), intelligence networks, and critical power infrastructure.
  • Defense Modernization: Ensures an uninterrupted supply of radiation-hardened and specialized chips required for indigenous missile guidance, radar systems, and autonomous defense platforms.
• Environmental & Technological Sustainability
  • Green Tech Acceleration: Locally produced power-management microchips enable efficient energy conversion in Electric Vehicles (EVs), smart grids, and renewable energy storage.
• Domestic Governance & Societal Scale
  • Digital Public Infrastructure (DPI): Indigenous silicon bolsters national digital platforms (UPI, Aadhaar, 5G networks, and rural broadband) against supply shocks, ensuring cheap access to technology for a billion-plus citizens.
  • AI & Frontier Tech Sovereignty: Domestic processing power ensures India isn’t reliant on foreign computational hardware to drive homegrown AI models and cloud computing.

Challenges 

• High Capital Outlays & Long Gestation Periods : Semiconductor fabs require multi-billion-dollar investments upfront with long break-even cycles, making financing difficult without heavy, sustained government subsidization.
• Specialized Utility & Infrastructure Demands : Fabs require uninterrupted zero-fluctuation power and massive quantities of ultra-pure water (UPW). Even a millisecond voltage drop or micro-contamination in water can ruin entire production runs.
• “Design-Rich, Fabrication-Thin” Talent Gap : While India accounts for nearly 20% of global semiconductor chip design engineers, it severely lacks personnel experienced in front-end wafer fabrication, process engineering, yield optimization, and cleanroom maintenance.
• Ecosystem & Supply Chain Fragmentation : Semiconductor fabs do not exist in isolation—they depend on hundreds of micro-suppliers for raw silicon wafers, ultrapure specialty gases, photolithography chemicals, and precision machinery servicing which  are heavily concentrated in Japan, Taiwan, and South Korea. 
• Technological & IP Disadvantage : The global chip market is dominated by legacy players with thousands of patents on process nodes (e.g., TSMC, Samsung, Intel). Entering advanced-node manufacturing (sub-7nm) requires decades of continuous proprietary R&D.
  • Most initial domestic fabs in India are focusing on legacy nodes (28nm or higher) for automotive and power electronics rather than cutting-edge smartphone/AI processors, limiting short-term competitiveness in high-margin frontier tech.

Way Ahead : ISM 2.0