India's $13.2 billion push to become a global chipmaking powerhouse

More than 90% of the world's most advanced semiconductor chips are made in Taiwan, an island at the center of ongoing rivalry between the US and China.

Any disruption to Taiwan's chip industry would likely send shockwaves through the global economy, with modern semiconductors used to make everything from smartphones and electric vehicles (EVs) to aircraft and military systems.

During the COVID-19 pandemic, chip shortages forced automakers to halt production — exposing how dependent the world had become on a handful of manufacturers in East Asia.

The result has been a global race to build more resilient semiconductor supply chains. The US, Japan, South Korea and also the EU have all launched multi-billion-dollar programs to attract chipmakers.

India is now mounting its biggest push yet to become part of that network and enter the global arena as the next electronics powerhouse.

India's chipmaking ambitions

Last week, the Indian government approved a $13.2 billion (€11.4 billion) semiconductor program labeled Semicon 2.0. The project builds on the $9 billion India Semiconductor Mission (ISM) launched in 2021 and aims to develop the entire chip ecosystem — from chip design and fabrication to advanced packaging, specialty materials, equipment manufacturing and workforce training.

Thousands of engineers working for companies such as Nvidia, AMD, Qualcomm and Texas Instruments already design some of the world's most sophisticated chips from research centers in the Indian cities of Bengaluru, Hyderabad and Noida.

But analysts warn India has been lagging behind in large-scale manufacturing. In the semiconductor industry, this is the area that brings both economic value and strategic importance.

"India already has the expertise to design sophisticated semiconductor chips," said V Kamakoti, director of the Indian Institute of Technology in the city of Madras.

"Indian engineers working for both domestic companies and multinational firms have successfully designed and delivered complex chips," Kamakoti told DW. "The bigger challenge is manufacturing them."

So far, India's progress has been concentrated in chip packaging and testing rather than manufacturing the chips themselves.

Kamakoti said the next step is building a domestic fabrication ecosystem that can turn those design strengths into large-scale production.

Hopes of a $100 billion market by 2030

Micron Technology, a US memory chip maker, Kaynes Semicon and CG Semi, two Indian semiconductor assembly and packaging companies, have begun commercial production under the first phase of India's semiconductor program.

Indian Minister for Electronics and Information Technology Ashwini Vaishnaw says the next phase is intended to move more of the semiconductor value chain into India.

"Convincing global companies is no longer that difficult," said ISM chief executive Amitesh Kumar Sinha, pointing to the 12 approved fabrication and packaging projects, three of which are already in commercial production.

The government wants to build a domestic semiconductor market worth between $100 billion and $110 billion by 2030 and meet up to three-quarters of India's electronics demand through locally designed and manufactured chips.

A costly industrial leap

Becoming a major chip manufacturer, however, is one of the toughest industrial challenges any country could take on.

A leading-edge fabrication plant can cost more than $20 billion, requires uninterrupted electricity, vast quantities of ultra-pure water and an extensive network of suppliers producing specialized chemicals, silicon wafers and precision equipment.

Kamakoti argues that India should first prove it can manufacture mature 28-nanometer (28 nm) chips reliably at scale before attempting the most advanced 3 nm processors used in high-end smartphones and AI systems.

"28 nm [chips] will meet the majority of India's needs. Once that succeeds, we can gradually move to more advanced technologies," he said.

Riding the AI boom

India's ambitions are being helped by forces beyond its control.

In a time of geopolitical tensions and the rapid growth of AI, companies are rethinking their supply chains and demand for semiconductors is expected to rise sharply over the coming decade.

Sambit Sahu, a semiconductor industry veteran with more than three decades of experience at Qualcomm and Intel, says India must build capabilities across the semiconductor value chain from chip design and intellectual property to fabrication and manufacturing.

"The rapid growth of artificial intelligence will drive demand for semiconductors for years to come, creating a window of opportunity for India," Sahu told DW.

"Building a semiconductor manufacturing ecosystem will be expensive and technically challenging, but with sustained investment and supportive policies, India could emerge as an important manufacturing hub over the next decade."

However, not everyone is convinced India can narrow the manufacturing gap quickly.

A senior semiconductor industry executive, who preferred to stay anonymous, says India is likely to remain stronger in chip design than fabrication for the foreseeable future.

"India has built world-class capabilities in chip design, but manufacturing is a different challenge," he said. "The biggest opportunities in the near term are in packaging, testing and mature-node manufacturing."

Semicon 2.0 marks India's most ambitious attempt yet to enter the semiconductor race.

Whether it succeeds will depend less on the billions India has pledged and more on its ability to turn those commitments into factories, skilled workers and a competitive manufacturing ecosystem.