India has long been a hidden force in global semiconductor design. Nearly 20% of the world’s chip design talent is based in the country, with engineers in Bangalore and Hyderabad playing a crucial role in creating the processors inside countless devices. However, designing a chip and manufacturing one are vastly different challenges. Until recently, India lacked the advanced fabrication plants—or fabs—needed to turn those designs into physical silicon.
The COVID-19 pandemic delivered a harsh lesson about the fragility of global supply chains, disrupting car production and countless industries. That wake-up call has spurred India to move beyond its role as a design house and build a full-fledged chip manufacturing ecosystem. The India Semiconductor Mission (ISM) 2.0, backed by billions in government funding, represents the country’s most ambitious push yet to achieve this goal.
A Strategic, Bottom-Up Approach
Rather than trying to immediately compete with established leaders like Taiwan on cutting-edge 2-nanometer AI chips, India is pursuing a smarter, incremental strategy. The initial focus is on the third stage of production: Outsourced Semiconductor Assembly and Test (OSAT). This involves slicing raw silicon wafers into individual chips and packaging them—a process that is less capital-intensive than building a full fab but equally vital. Companies like Kaynes Semicon have already begun production in Gujarat, targeting chips for automobiles, telecommunications, and defense. These chips may not be as glamorous as those powering premium smartphones, but they are essential to the modern economy.
Policy Support and Investment
The government is backing this vision with substantial resources. The Union Budget for 2026-27 introduced ISM 2.0, allocating Rs. 8,000 crore specifically to support domestic manufacturing and design. By 2029, India aims to design and produce 70% to 75% of the chips it needs, from home appliances to advanced defense systems. Under the first phase, ten major projects—representing an investment of approximately Rs. 1.60 lakh crore—have been approved across six states. The plan positions India as a reliable ‘Plan B’ for global supply chains amid rising geopolitical tensions.
Talent Development and Indigenous Innovation
One of the biggest hurdles is the shortage of skilled workers for chip manufacturing, which demands extreme precision and meticulous documentation. To address this, India has launched training programs such as ‘Chips to Startup,’ providing high-end design tools to hundreds of universities and over 1,000 startup engineers. Partnerships with global firms like Lam Research aim to train 60,000 engineers in specialized manufacturing and cleanroom protocols over the next decade. Additionally, the development of indigenous microprocessors like DHRUV64, SHAKTI, and THEJAS demonstrates a push toward digital sovereignty. These open-source chips are more affordable and foster innovation in areas like 5G, automotive electronics, and industrial automation.
Strategic Importance and Economic Impact
Semiconductors have become the oil of the 21st century, powering everything from medical devices to satellite communications. India’s chip market is projected to grow from $38 billion in 2023 to $110 billion by 2030. Local production is not just an economic imperative but a matter of national security, ensuring the economy remains resilient during global crises or trade wars. The sector is also expected to create thousands of high-quality jobs for engineers and technicians, reducing brain drain and keeping India’s top talent engaged in cutting-edge technology.
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, with a facility in Sanand, Gujarat, moving from foundation to production in just 14 months—a pace that has impressed global observers. The country’s first major fabrication unit in Dholera, targeting advanced 3-nanometer and 2-nanometer technologies, is slated for completion by 2028. India’s journey is long and requires patient investment, but the pieces are falling into place. By combining world-class design talent with new manufacturing capabilities, the nation is steadily turning its semiconductor dreams into a reality. The government’s goal is to become one of the top three semiconductor nations by 2047.