India's Semiconductor Industry: Building a Trusted Technology Ecosystem

Context

1. Semicon 2.0 Approval: The Union Cabinet approved Semicon 2.0 (2026) with an outlay of ₹1.275 lakh crore, expanding support from fabrication to design, equipment, materials, advanced packaging, R&D and talent. 
2. It aligns with India's Semiconductor Vision 2035, which envisages a USD 120–150 billion value chain with leadership in chip design, Outsourced Semiconductor Assembly and Test (OSAT), advanced packaging, and SiC/GaN technologies. 
3. Global Technology Partnerships: Recent engagements under the India–EU Trade and Technology Council, together with expanded cooperation with the United States, Japan and the Netherlands, have strengthened collaboration in semiconductors, artificial intelligence, high-performance computing and trusted supply chains. 
4. These developments position semiconductors as a strategic pillar of India's technology diplomacy and industrial competitiveness.

Why Are Semiconductors Strategic Assets for India's Growth?

1. Semiconductors form the foundational infrastructure of the digital economy, powering Artificial Intelligence (AI), telecommunications, defence systems, healthcare, mobility and Digital Public Infrastructure (DPI). 
2. The Economic Survey 2025–26 identifies strategic technologies as critical to sustaining productivity growth, technological resilience and long-term economic competitiveness. 
3. The NITI Frontier Tech Hub regards semiconductor capability as the cornerstone of technological sovereignty and strategic autonomy.

1. Semiconductors constitute the core value-adding component of modern electronics manufacturing, determining technological sophistication and export competitiveness. 
2. The NITI Frontier Tech Hub projects India's semiconductor demand to exceed USD 200 billion by 2035, driven by electronics, electric vehicles, telecom equipment and data centres. 
3. Expanding domestic semiconductor capability is therefore indispensable for manufacturing-led growth and deeper integration into global value chains.

1. The OECD observes that semiconductor value chains are highly specialised, geographically concentrated and deeply interconnected, making them vulnerable to cascading disruptions. 
2. The pandemic and geopolitical tensions exposed the strategic risks of excessive dependence on a few production hubs, affecting automobiles, consumer electronics, healthcare and defence industries. 
3. Developing indigenous capabilities therefore strengthens both economic resilience and national security.

1. Semiconductors underpin frontier technologies including AI accelerators, 5G/6G, edge computing, quantum computing, advanced robotics and high-performance computing. 
2. The NITI Frontier Tech Hub identifies advanced packaging, chiplets, heterogeneous integration, Silicon Carbide (SiC) and Gallium Nitride (GaN) as the next frontier of global semiconductor competition. 
3. Leadership in these domains can accelerate innovation, intellectual property creation, high-skilled employment and technology-intensive exports.

What Structural Challenges Constrain India's Semiconductor Ambitions?

1. India imports nearly 90–95% of its semiconductor requirements, with cumulative imports estimated at USD 150 billion (FY17–FY25). 
2. Excessive reliance on external suppliers exposes electronics, defence and Digital Public Infrastructure (DPI) to geopolitical disruptions, supply-chain shocks and sustained foreign-exchange outflows.

1. Critical technologies—including Electronic Design Automation (EDA) software, Extreme Ultraviolet (EUV) lithography, semiconductor intellectual property (IP), fabrication equipment and specialty materials—are concentrated among a few global firms. 
2. This limits technology access, domestic innovation and India's progress towards higher-value manufacturing.

1. Although India accounts for nearly 20% of the global semiconductor design workforce, domestic capabilities in semiconductor-grade materials, fabrication equipment, specialty chemicals, substrates, precision manufacturing and Advanced Packaging remain limited. 
2. Weak backward linkages constrain domestic value addition and integrated ecosystem development.

1. Semiconductor fabrication requires investments exceeding USD 10–20 billion, along with uninterrupted power, ultra-pure water, cleanroom infrastructure and precision manufacturing. 
2. The NITI Frontier Tech Hub estimates that building a globally competitive ecosystem could require USD 135–180 billion over the next decade, posing significant financing and execution challenges.

1. India faces shortages of specialised talent in process engineering, cleanroom operations, equipment maintenance, materials science and semiconductor research and development (R&D). 
2. Limited industry–academia collaboration and weak commercialisation of research slow technology absorption and innovation capacity.

1. Semiconductor fabrication requires millions of litres of ultra-pure water daily, uninterrupted high-quality electricity and advanced waste management systems. 
2. Developing environmentally sustainable semiconductor clusters therefore requires significant investments in green energy, water recycling and resilient industrial infrastructure.

1. Global semiconductor supply chains demand consistently high quality, yield, reliability and certification standards before onboarding new suppliers. 
2. Building trusted manufacturing capability and integrating into resilient global value chains therefore requires sustained operational excellence and long-term international credibility.

How Is India Building a Competitive Semiconductor Ecosystem?

1. Approved with an outlay of ₹1,27,500 crore, Semicon 2.0 adopts a six-pillar strategy covering design, fabrication, semiconductor equipment, materials, advanced packaging, research and talent development. 
2. It marks a transition from attracting investments to building a globally competitive semiconductor ecosystem.

1. ISM serves as the nodal institution driving semiconductor development through support for fabs, Compound Semiconductors, Assembly, Testing, Marking and Packaging (ATMP)/Outsourced Semiconductor Assembly and Test (OSAT) facilities and design innovation. 
2. Complementary schemes such as Design Linked Incentive (DLI), Chips to Startup (C2S), Production Linked Incentive (PLI), Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and the Electronics Component Manufacturing Scheme (ECMS) strengthen manufacturing capability and skilled workforce development.

1. India has approved 12 semiconductor projects with cumulative investments exceeding ₹1.64 lakh crore, spanning fabrication, ATMP/OSAT, compound semiconductors, display manufacturing and chip packaging. 
2. These investments are laying the foundation for an integrated domestic semiconductor value chain.

1. India has expanded semiconductor cooperation through the India–US TRUST Initiative, India–EU Trade and Technology Council (TTC), India–Japan Semiconductor Memorandum and collaboration with the Netherlands. 
2. These partnerships promote trusted supply chains, critical minerals, technology transfer, advanced manufacturing, AI, research collaboration and talent mobility.

1. Reforms including amendments to the Special Economic Zone (SEZ) Rules, development of semiconductor clusters and infrastructure support have improved the ease of establishing semiconductor facilities. 
2. These measures reduce implementation bottlenecks and encourage long-term investments across the semiconductor ecosystem.

1. India is strengthening its role in resilient semiconductor supply chains through initiatives such as the Quad Semiconductor Supply Chain Contingency Network and partnerships across Europe and the Indo-Pacific. 
2. The objective is to position India as a trusted technology partner and an integral participant in global semiconductor value chains rather than merely a manufacturing destination.

What Should Be India's Long-Term Semiconductor Strategy?

1. India should implement the NITI Vision 2035 by prioritising leadership in selected high-value segments of the global semiconductor value chain rather than pursuing complete self-sufficiency. 
2. A comparative-advantage approach would maximise value addition, enhance global competitiveness and strengthen technological sovereignty.

1. India should emerge as a global hub for Advanced Packaging, Chiplets, Heterogeneous Integration, Assembly, Testing, Marking and Packaging (ATMP), Outsourced Semiconductor Assembly and Test (OSAT), and Silicon Carbide (SiC) and Gallium Nitride (GaN) semiconductors. 
2. These sunrise technologies offer opportunities for technological leapfrogging and leadership in electric mobility, renewable energy, defence and 5G/6G applications.

1. Establish a National Semiconductor Research Network integrating academia, national laboratories, industry and start-ups to accelerate research in AI chips, advanced materials, quantum semiconductors, semiconductor intellectual property (IP) and indigenous design. 
2. Stronger R&D capabilities are essential for long-term technological self-reliance and innovation-led growth.

1. Deepen cooperation with the European Union, United States, Japan, the Netherlands and Taiwan beyond investment by promoting co-development, joint R&D, technology transfer, critical minerals, equipment collaboration, standards harmonisation and resilient supply-chain governance.

1. Develop globally competitive semiconductor clusters by co-locating fabs, ATMP/OSAT facilities, design centres, equipment manufacturers, material suppliers, testing laboratories, research institutions and skilling hubs. 
2. Such integrated ecosystems generate innovation spillovers, supply-chain efficiencies and globally competitive manufacturing capabilities.

1. Expand specialised semiconductor education through industry-aligned curricula, cleanroom training, apprenticeship programmes and international research collaborations. 
2. A future-ready talent pipeline in process engineering, fabrication, packaging and semiconductor R&D will be critical to sustaining India's long-term semiconductor ambitions.

Concluding Insight

India's semiconductor journey must progress from assembly to innovation, import dependence to technological sovereignty, and market participation to global leadership. Guided by Vision 2035, a resilient ecosystem built on innovation, skilled talent, trusted partnerships and competitive manufacturing can position India as a pivotal node in the global semiconductor value chain.

UPSC Prelims Connect

Q. With reference to solar power production in India, consider the following statements:(2018)

1. India is the third largest in the world in the manufacture of silicon wafers used in photovoltaic units.   
2. The solar power tariffs are determined by the Solar Energy Corporation of India.   

Which of the statements given above is/are correct? 

(a) 1 only   

(b) 2 only   

(c) Both 1 and 2   

(d) Neither 1 nor 2   

Ans: (d)

UPSC Prelims Connect

Q. With reference to solar power production in India, consider the following statements:(2018)

1. India is the third largest in the world in the manufacture of silicon wafers used in photovoltaic units.   
2. The solar power tariffs are determined by the Solar Energy Corporation of India.   

Which of the statements given above is/are correct? 

(a) 1 only   

(b) 2 only   

(c) Both 1 and 2   

(d) Neither 1 nor 2   

Ans: (d)

UPSC Mains Connect

Q. India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the Indian Semiconductor Mission.(2025)

QuestlinkIAS Practice Question

Prelims:

Q. With reference to India's semiconductor sector, consider the following statements:

1. Semicon 2.0 (2026) has an outlay of ₹1,27,500 crore and extends support from fabrication to the entire semiconductor ecosystem.
2. India imports 90–95% of its semiconductor requirements, with cumulative imports of about USD 150 billion during FY17–FY25.
3. India's semiconductor strategy prioritises integration with trusted global value chains over complete self-sufficiency.
4. India's semiconductor demand is projected to exceed USD 200 billion by 2035.

Which of the statements given above are correct?

(a) 1, 2, 3 and 4

(b) 1, 2 and 4 only

(c) 2 and 3 only

(d) 1 and 3 only

Answer: (a)

Mains:

Q. India's semiconductor ambitions require building a competitive ecosystem rather than merely establishing fabrication plants. Examine the structural constraints that justify this approach. Discuss the policy measures needed to position India as a trusted node in global semiconductor value chains.(250 words)

Source Editorial- A semiconductor vision beyond the factory floor | The Indian Express