The Future of India’s Chip Industry

Why in News?

NITI Aayog’s Frontier Tech Hub released India’s first comprehensive 10-year roadmap titled “Future of India’s Semiconductor Industry.”  The report complements ISM 2.0, announced in the Union Budget 2026-27.

What is a Semiconductor?

• A semiconductor is a material (typically silicon) whose electrical conductivity lies between that of a conductor and an insulator, making it the fundamental building block of all modern electronic devices.
• Semiconductors are the foundation of technologies such as computing, mobile communications, telecommunications, automobiles, defence systems, and artificial intelligence. 
• The chip value chain runs from design → wafer fabrication (fab) → assembly, testing, marking & packaging (ATMP/OSAT) → end products.

India’s Current Position: 

• India currently imports 90-95% of its total domestic semiconductor consumption, exposing the economy to supply-chain disruptions, foreign-exchange outflows, and geopolitical shocks. 
• India’s semiconductor market has grown to $45-50 billion in 2024-25, and is projected to reach $100-110 billion by 2030. 
• The global semiconductor market is expected to exceed $1.5 trillion by 2035, while India’s semiconductor demand could reach around $200 billion by the same year. 
• India does not yet have a single operational fabrication unit; the first is expected to begin production at Dholera, Gujarat, in 2028.
• Tata Electronics fab at Dholera, set up in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp, will have the capacity to produce 50,000 wafers per month and involves an investment of ₹91,000 crore, with the Centre contributing 50% of capex on a pari passu basis. 

India Semiconductor Mission (ISM) 1.0: 

• ISM 1.0 was launched with a financial outlay of ₹76,000 crore ($10 billion) to reduce India’s reliance on imported semiconductor chips and establish a robust, self-reliant electronics manufacturing ecosystem. The
• Indian government has approved 12 major semiconductor manufacturing projects (encompassing silicon fabs, compound semiconductors, and packaging units) alongside 24 chip design projects.
• The Mission offers fiscal support of up to 50% for silicon fabs, compound semiconductor facilities, assembly and testing units, and chip design. 

ISM 2.0 (Announced in Union Budget 2026-27):

• A provision of ₹1,000 crore has been made for ISM 2.0 in FY 2026-27. 
• ISM 2.0 focuses on designing and manufacturing semiconductor equipment in India, manufacturing of materials used in semiconductor production, and the creation of a large design ecosystem. 
• It focuses on developing full-stack Indian intellectual property in chip design and manufacturing and fortifying semiconductor supply chains to reduce import dependence. 
• ISM 2.0 coincides with the expansion of the Electronics Components Manufacturing Scheme (ECMS), which was launched in 2025 and has already received investment commitments double its original target.

NITI Aayog Roadmap Vision 2035:  

• Strategic Vision: The roadmap lays out a clear, actionable vision for India to build a $120-150 billion semiconductor value chain by 2035. 
  • India is targeting 70-75% self-sufficiency in domestic chip demand by 2029.
  • To become a leading semiconductor nation with 3 nm and 2 nm manufacturing capabilities by 2035. 
  • To create more than 100 breakthrough advanced semiconductor design IPs by 2035. 
• Five Strategic Pillars: India’s strategy is built around five mutually reinforcing pillars:
  1. Pioneering: frontier R&D and design IP, including over 100 advanced semiconductor design IPs.
  2. Policy & Investment: mobilising long-horizon capital.
  3. Production: focus on advanced packaging, OSAT, compound semiconductors, and wide-bandgap materials.
  4. People: building a full semiconductor talent pyramid from design to fab.
  5. Partnerships with trusted nations and the global industry. 
• Production Strategy: India should- 
  • Become a top-three global destination for outsourced semiconductor assembly and test (OSAT) and advanced packaging. 
  • Build leadership in wide-bandgap materials such as silicon carbide (SiC) and gallium nitride (GaN). 
  • Shift away from costly frontier chips (3-7 nm nodes) and towards mature nodes, compound semiconductors, and advanced packaging, which offer better bankability and strategic returns.
• Capital Investment: The roadmap estimates that India will need cumulative semiconductor investments of nearly $135-180 billion over the next decade and recommends that the government commit at least one-third of this amount to de-risk projects and attract large-scale private capital.  

The report calls for industry-led research and training centres to develop technology and a skilled workforce. 

Also Read:  https://anantamias.com/current-affairs/indias-semiconductor-mission-policy-push-challenges/