India has long been a silent force in global technology, with nearly 20% of the world’s semiconductor design talent based in cities like Bangalore and Hyderabad. But designing chips and manufacturing them are vastly different challenges. Until recently, the country lacked the advanced fabrication plants, or ‘fabs,’ required to turn designs into physical silicon.
The COVID-19 pandemic exposed the fragility of global supply chains, halting car production and highlighting the dangers of relying entirely on a few countries for chips. Driven by these lessons, India is now racing to build a semiconductor industry from scratch. The launch of the India Semiconductor Mission (ISM) 2.0, backed by billions in government support, marks a determined shift from being a design house to becoming a global manufacturing hub.
Starting with Assembly and Testing
Building a cutting-edge chip factory is one of the most expensive and complex undertakings imaginable—a single advanced machine can cost more than a large airplane. Instead of immediately competing with giants like Taiwan on 2-nanometer AI chips, India is pursuing a bottom-up strategy. The initial focus is on Outsourced Semiconductor Assembly and Test (OSAT): taking raw silicon wafers, slicing them into individual chips, and packaging them. This 10-to-12-step process is less capital-intensive than a full fab but equally vital.
Companies such as Kaynes Semicon have already started production in Gujarat, concentrating on chips for automotive, telecom, and defense applications. These may not power the latest smartphones, but they are the workhorses of the modern economy. By serving its domestic market first, India is building the scale and manufacturing culture needed to eventually produce more advanced, smaller chips.
Government Policy and Self-Reliance
The Indian government is backing this push with investment and clear policy. The Union Budget for 2026-27 introduced ISM 2.0, allocating Rs. 8,000 crore specifically for manufacturing and design this year. The target is ambitious: by 2029, India aims to design and manufacture 70% to 75% of its own semiconductor needs—from home appliances to advanced defense technology.
Under the first phase of the mission, ten major projects worth about Rs. 1.60 lakh crore have been approved, spanning silicon power plants and packaging units across six states. The broader vision is to position India as a trusted ‘Plan B’ for the world amid rising geopolitical tensions.
Building Talent and Indigenous Tech
One of the biggest hurdles is the shortage of trained engineers for chip manufacturing, which demands extreme precision and cleanroom protocols. India has launched programs like ‘Chips to Startup,’ providing hundreds of universities and over 1,000 startup engineers access to high-end design tools. Partnerships with firms like Lam Research aim to train 60,000 engineers over the next decade.
India is also developing its own intellectual property to reduce reliance on foreign licensing. Indigenous microprocessors such as ‘DHRUV64,’ ‘SHAKTI,’ and ‘THEJAS’ are built on open-source architectures, lowering costs and fostering innovation in 5G, automotive electronics, and industrial automation. These chips represent a move toward digital sovereignty.
Strategic Importance and Job Creation
Semiconductors have become the oil of the 21st century, powering everything from medical devices to satellites. With India’s chip market projected to grow from $38 billion in 2023 to $110 billion by 2030, domestic production is a matter of national security and economic resilience. The new semiconductor units are expected to create thousands of high-quality jobs for engineers and technicians, helping retain top talent within the country.
What Lies Ahead
Progress is already visible. According to IT Minister Ashwini Vaishnaw, four semiconductor plants are expected to be operational by the end of 2026. Facilities in Sanand, Gujarat, have moved from foundation to production in just 14 months—a pace that has surprised global observers. India’s first major fabrication unit in Dholera is slated to be ready by 2028, targeting advanced 3-nanometer and 2-nanometer technologies.
The journey is long and requires patient capital, but the pieces are falling into place. Combining world-class design talent with a new focus on assembly, testing, and eventually full-scale fabrication, India is slowly turning its semiconductor dreams into silicon reality. The government has set a goal of becoming a top-three semiconductor nation by 2047.
