India’s efforts to build a semiconductor ecosystem since its independence have been uneven, with several well-intentioned but false starts. In December 2021, however, India renewed its attempt at incubating a respectable semiconductor network. This time, it is going well and without major hiccups.

The Indian Semiconductor Mission (ISM) was established as the nodal agency under the federal government’s Ministry of Electronics and Information Technology (MeitY) to vet and screen investments and implement semiconductor schemes in the country. In less than four years, it has already approved ten projects to galvanize India’s semiconductor ecosystem. These projects range from the massive, $10 billion fab investment announced by Tata Electronics Private Limited to the more than $2.75 billion cumulative investment from Micron Technology in setting up an assembly, testing, marking, and packaging (ATMP) plant. Other projects include an outsourced semiconductor assembly and test (OSAT) plant in Assam; two manufacturing facilities in Sanand, Gujarat; and a semiconductor plant in Uttar Pradesh.

On August 12, 2025, four new projects were cleared, including a separate packaging plant in Odisha, a semiconductor manufacturing unit in Andhra Pradesh, and the expansion of an existing manufacturing facility in Mohali, Punjab. Though estimates suggest that a proportion of the original corpus of approximately $10 billion has been availed, the exact number is unclear.

Four years after the ISM’s launch, it appears that the Indian semiconductor ecosystem has the green shoots to grow. This article looks at the main features of India’s semiconductor journey so far.

Notable Contrast Between India’s Approach and China’s

Like India, China has also been keen to nurture a robust domestic industry in semiconductors. China’s motivations have been ascribed to reasons such as the pursuit of a larger strategy of technological self-reliance, being spurred by U.S. export controls, and the desire to “design out” American components. However, China’s semiconductor market is perceived as more “inward looking,” perhaps driven by the quest to accelerate self-reliance as opposed to working with the best semiconductor firms in the market, many of which are based in the United States and Europe.

India, on the other hand, has adopted an approach that solicits interest from key anchor firms, often American, to move to India. This has the advantage of not just the anchor firm but also its larger supplier ecosystem moving as well. India has also tried this in other sectors— it incentivized Apple to move a considerable degree of its assembly operations and supplier ecosystem to India; similar efforts have been made with Tesla and electric vehicles (EVs).

Simultaneously, India has been encouraging its domestic firms to invest in nascent semiconductor hubs and clusters and to target activities such as small-scale manufacturing units and OSAT plants.

In terms of capital, China has also devoted considerably more funds toward its semiconductor journey, although with mixed results, when considering the overall scale of funds deployed. That being said, China is still looking to undertake the ambitious task of building its own version of technologies that currently serve as chokepoints in the semiconductor supply chain.

India’s Efforts Are Gradually Paying Off

Onshoring the semiconductor supply chain is certainly a challenging task, given the number of players involved and the competitive pressures of matching other countries’ incentive schemes. In this regard, larger shifts in global commerce have also come to India’s aid. For instance, data from the World Bank revealed that India was among the top six economies that benefited from U.S. trade policy measures in terms of supply chain onshoring. Most countries that ranked ahead of India were economies that were already well integrated into global value chains. For instance, Vietnam, the main beneficiary of U.S. trade policy measures, was already a part of the trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) with China and other countries. While U.S.-China trade growth was 30 percent slower than the two countries’ trade with other countries, economies like Vietnam saw a surge of exports to the United States, perhaps an indicator that the supply chains in question were not necessarily onshored to Vietnam, but merely lengthened and stretched as a result of the tariffs.

This makes India’s advances even more impressive, as it is not part of any major multilateral trade agreements like the RCEP or even the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. A recent report by Moody’s highlights how India has fared rather well, along with countries like Malaysia and Singapore, when it comes to new global investments for semiconductor projects. The announcement of the new Electronics Component Manufacturing Scheme in April 2025 may lead to a surge of investments in the larger electronic ecosystem, which may drive upstream semiconductor investments in the country.

A Sequential Federal-State Process Is in Place

In all the semiconductor policies issued by several Indian states, and reviewed so far—namely, those of Gujarat, Uttar Pradesh, Karnataka, Tamil Nadu, Odisha, Andhra Pradesh, and Assam—“eligible” projects must be those approved by the ISM. Once a project is approved, states compete with each other to provide state-level incentives over and above what the federal government provides. (The exception here is Odisha’s semiconductor scheme, which also provides incentives to projects not approved by the ISM.)

This structure is similar to that of the EU, where the Chips for Europe Initiative aims to “facilitate better coordination and closer synergies between the existing funding programmes at Union and national levels.” This is also similar to the approach in the United States, though the sequence is seemingly the inverse of that for India. Under the CHIPS and Science Act, the applicant must have a “covered incentive from a state or local jurisdiction . . . where the project is located” for the construction, expansion, or modernization of the facility.

Indian States Compete With Each Other to Provide Incentives

It is well understood that state-level incentives are independent of federal incentives, and that industry players are free to establish operations in the state of their choice. The example of the Tata Semiconductor Assembly and Test (TSAT) choosing to set up an OSAT plant in Assam is instructive here. TSAT’s investment in Assam was despite the fact that Assam may appear to most as neither (until that point) being a traditional destination for such semiconductor-oriented investments, nor having the strongest financial incentive scheme.

Gujarat Emerges as a Frontrunner

Many believe that Gujarat has been chosen by industry players as the site of many semiconductor investments because of a top-down push. Gujarat, however, may have very well succeeded in courting investments due to the following reasons:

• A dedicated semiconductor policy: Gujarat was the first state to come out with a dedicated semiconductor policy. Others, like Karnataka, did have existing incentive schemes and policies to court investments from the electronics industry. However, even preexisting policies of other states were not strictly focused on semiconductors and instead addressed the larger electronics industry.
• The cluster argument: The semiconductor industry works best in clusters, where key players across the value chain are in each other’s vicinity. Standing at about 900 square kilometers, the Dholera Special Investment Region (Dholera SIR) has been highlighted as a dedicated and massive industrial city. Karnataka, Tamil Nadu, and Andhra Pradesh are also in the fray to compete, with bespoke clusters for electronic and automotive manufacturing. However, these are brownfield clusters, not focused on semiconductors, and not at the scale of a Dholera SIR. With its proximity to two major ports in Gujarat alone, Dholera SIR appears to have stolen a march on other semiconductor investment destinations in India.
• Micron’s investment as a catalyzing force: Micron Technology’s 2023 investment in India’s (and specifically Gujarat’s) semiconductor ecosystem, even if heavily subsidized by the Indian government and the State of Gujarat, was a game-changer. Micron brought with it its own ecosystem of suppliers, subsuppliers, and other players to India. The Micron investment was also a proof-of-concept validation that India’s semiconductor environment was ready for business.
• Effective project execution: Sometimes it is not merely about incentive, but also about a first-mover advantage realized through swift project execution. For instance, Uttar Pradesh is also a key state when seen from the perspective of job creation and industrialization. It is also a key determinant of how India’s political dispensation plays out every election cycle. It offers attractive financial incentives and is, in fact, the only Indian state to provide “an overall ceiling of 100 percent of the total eligible project cost approved by the Government of India” under its semiconductor policy. Despite that, UP has not generated interest from any major semiconductor firms. Compare this with Gujarat’s “additional capital assistance” in its semiconductor policy. At the rate of 40 percent of the capex assistance given by the Government of India, less than the 50 percent capex financial support offered by Tamil Nadu, Odisha, Karnataka, and Andhra Pradesh and at par with the 40 percent capex provided by Assam, it is clear that financial incentives alone do not determine the overall attractiveness of a state’s incentive scheme. Even though Karnataka signed an MOU in 2022 with a consortium (dubbed ISMC) comprising semiconductor firm Tower Semiconductor and other players, the proposed investment of $3 billion did not materialize.

Limited Focus on Creating New Electronic Design Automation Tools

Semiconductor design and complexity have grown considerably, driven by technology scaling/integration and rising demands for power, performance, reliability, and security. It is worth considering whether there is an opportunity here to create another vertical in the semiconductor value chain, such as a simplification of the current electronic design automation tools, currently only manufactured by three U.S.-based companies. The semiconductor industry’s history is replete with instances that show the industry’s ability to pioneer new use cases when confronted by cost considerations or pressed to serve the market’s needs.

At the same time, the opening up of new markets has also led to innovations in the semiconductor supply chain. This virtuous cycle is constant and never-ending, for example, in the case of Qualcomm. As mobile phones entered the market, handset makers were determined to develop technology that would allow people to talk to each other via handsets. Qualcomm recognized early on that the shrinking of chips would allow for more computing power and, by extension, more processing power to move call data between different frequencies (as opposed to the system being proposed by other players, which would transmit such call data on the same frequency). It came up with the requisite technological infrastructure to implement this idea. As a result, Qualcomm successfully patented key technology on specialized chips that could interpret complex signals across different frequencies.¹ This is one example of how new markets drove innovation in chip design. This leads to the point below on how certain novel markets can be explored, and how, within such markets, new devices can be created.

Focus on Creating IP for Novel End-Products

Accordingly, it is worth exploring whether Indian firms can work on the next generation of technological devices that may be required a decade or so from now, and where no country has emerged as a frontrunner. It is often trite to say that India houses 20 percent of the global chip design workforce. However, this workforce often follows specifications prescribed by global multinational firms. Creating and owning the underlying intellectual property in India itself remains elusive. While manufacturing mature nodes of semiconductors also addresses a serviceable market need, a focus should also be placed on the development of advanced devices, say, in the field of medical diagnostics. Medical diagnostic devices include those that utilize sensors, imaging technologies using ultrasound technology, and neural interface technology (as seen with new devices such as Neuralink).

There will also be a need to crunch data gathered by these devices and make sense of it all, by either recommending a diagnosis or suggesting an appropriate analysis by a third-party technician. Therefore, it may be feasible to invest in R&D on next-generation technology like the integration of tech wearables and software. While this is not a task for the ISM and is more an overarching issue of the requisite industrial policy being put in place, it must be considered in tandem with the Design Linked Incentive scheme being administered by the Centre for Development of Advanced Computing.

Conclusion

India’s semiconductor mission has paid off, for now. With a $10 billion corpus, some of which is, perhaps, yet to be utilized, the ISM has done a commendable job of shepherding resources toward projects that serve each stage of the semiconductor value chain. This is what building a resilient supply chain was always about. The goal was never to completely build every part of the ecosystem in its entirety, but to build sufficient resilience in the value chain.

For a country that started from scratch four years ago, in an industry as complex as semiconductor supply chains, the current effort has been implemented well. While challenges certainly lie ahead, whether they relate to broad basing the supply chain to other parts of India or to moving up the value chain, the current trajectory of India’s semiconductor journey bodes well for the future.