Prime Minister (PM) Narendra Modi has made building a globally competitive semiconductor industry a national priority. The Covid-19 pandemic and geopolitical tensions have exposed vulnerabilities in global supply chains, underscoring the need for domestic chip production to ensure both economic growth and national security. However, India’s current investment in low-level assembly and packaging mirrors China’s missteps, which limits the country’s ability to move up the value chain. To truly compete on a global scale, India must aim higher.
India’s semiconductor industry is in a foundational phase, with a $15 billion initiative underway to establish its first advanced fab and packaging facilities. A joint venture between Taiwan’s Powerchip and Tata Electronics to produce 28-110 nanometer chips for power management is a good start. As Silicon Valley entrepreneur Govind Kizhepat said, India must “start somewhere” rather than waiting for a technology transfer of the latest semiconductor fabrication technology. However, Micron’s packaging plant in Gujarat is an example of what not to do. Despite being touted as a significant milestone, this facility focuses on low-level assembly and testing, which provides minimal value in the semiconductor ecosystem. Micron continues to fabricate chips in the United States (US) and China, leaving India to handle only the final stages of assembly, offering little in terms of technology transfer or advancement in high-value areas like chip design and fabrication. With India subsidising 70% of the $2.75 billion cost (around $1.925 billion), the country is effectively investing in low-end jobs rather than fostering the critical advancements needed for long-term success — much like China’s early efforts.
A recent paper, China’s Interdependent Positioning in the Semiconductor Global Value Chain, by Seamus Grimes (University of Galway) and Debin Du (East China Normal University), highlights the pitfalls China encountered in its quest to build a competitive semiconductor industry. Despite significant government investments, China remains largely stuck in lower-value segments such as assembly and packaging while lagging in higher-value areas like design, intellectual property (IP) creation, and advanced manufacturing. It still relies heavily on foreign IP, often acquired through questionable means.
India must avoid repeating these mistakes by fostering innovation, encouraging private-sector leadership, and pursuing global collaborations to access cutting-edge technologies. It needs a more comprehensive and forward-thinking strategy. The following areas are critical for achieving PM Modi’s goals:
Invest in research and development (R&D): A strong R&D ecosystem is essential for chip design, fabrication, and advanced manufacturing innovation. India must significantly increase its investment in relevant semiconductor research and encourage collaborations between universities, private companies, and the government. Channelling the country’s engineering talent into semiconductor research and establishing top-tier institutes will be key to driving breakthroughs.
Foster global collaborations: Unlike China’s inward-looking approach, India must embrace international partnerships. Collaborations with global leaders such as TSMC, Intel, and Samsung will provide India with access to critical IP and technological know-how. Joint ventures and technology transfer agreements can help accelerate India’s learning curve and bolster its position in the global value chain.
Encourage private-sector leadership: Innovation thrives in competitive, market-driven environments. In addition to the big industry support that India is providing, it must create a favourable ecosystem for startups and entrepreneurs to enter the semiconductor space by offering incentives such as investment tax breaks and funding opportunities.
Expand venture funds with deep tech expertise: Arun Kumar, managing partner, Celesta Capital, emphasises that fostering the expansion of venture funds focused on deep tech expertise is crucial to advancing India’s semiconductor capabilities. Global Capability Centres of MNCs in India reportedly already employ over 200,000 chip designers working on chip design, verification, and related activities for companies like Intel, AMD, Qualcomm, and Broadcom. With the right venture ecosystem, many of these engineers could become entrepreneurs.
Develop advanced manufacturing capabilities: Building state-of-the-art fabrication facilities (fabs) is essential for India’s semiconductor aspirations. However, these fabs must focus on cutting-edge technologies. India should aim to produce chips at smaller nodes, such as seven nanometers or below, to stay competitive with global leaders.
Prioritise intellectual property creation and protection: India must invest in homegrown technologies and IP creation. Innovation in the semiconductor industry is driven by new intellectual property, and countries that lead in IP creation will ultimately lead in the market. India should encourage both domestic and foreign firms to invest in R&D within the country.
Build a skilled workforce: India’s large pool of highly educated workers is a strength, but the country must invest in developing specialised skills in chip design, fabrication, and semiconductor equipment maintenance. Strengthening partnerships between academia and industry will ensure graduates are ready to meet the semiconductor industry’s needs. Scholarships, training programmes, and collaborations with top universities can develop the talent pool.
It is not going to be easy. As Grimes told me, “Even though India is benefiting from the reconfiguring of the technology value chain, China continues to have major advantages in the sophistication of its supply chains.” But, he acknowledges that with its strong background in software — an important element of the chip industry — and by becoming part of trusted collaborative networks of shared IP, India can build its own niche in the global semiconductor landscape, capable of meeting domestic needs and competing on the global stage.
Vivek Wadhwa is CEO, Vionix Biosciences.The views expressed are personal
