What's Happening?
India is making strides in the semiconductor industry with the construction of its first commercial chip foundry for mature semiconductors in Gujarat. This development is part of a $10 billion initiative
launched by Indian Prime Minister Narendra Modi in 2021 to position India as a key player in the global semiconductor supply chain. The foundry, a joint venture between Tata Group and Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC), is expected to become operational by late 2026. The initiative also includes support for nine assembly, testing, and packaging projects, with significant investments from companies like Micron Technology and Tata Group. Despite these efforts, India faces challenges in catching up with established leaders like the US, Taiwan, and China, particularly in advanced chip technology.
Why It's Important?
India's entry into semiconductor manufacturing is crucial as global demand for chips continues to rise. By developing its semiconductor capabilities, India aims to reduce its reliance on imports, which reached nearly $24 billion in 2024, and strengthen its domestic industries. The initiative could also enhance India's role in global supply chains, offering an alternative manufacturing hub for companies looking to diversify production away from China. However, India's incentives, while significant domestically, are smaller compared to China's $48 billion program and the US's $53 billion CHIPS Act. Sustained policy support, improved infrastructure, and a business-friendly environment are essential for India to scale up and compete globally.
What's Next?
The successful establishment of the foundry and other projects could mark a turning point for India's semiconductor industry, which has seen previous plans collapse. The focus on mature chip technology, used in cars and industrial equipment, provides a practical entry point for India. However, the country must address delays in project timelines and expand incentives for research and development to maintain its competitive edge in chip design talent. As the global semiconductor race accelerates, India will need to foster partnerships and implement long-term policy strategies to catch up with established leaders.
