India is making a monumental push into the global semiconductor race with a war chest reportedly around $23 billion. But its initial focus isn't on the most complex chip fabrication. Instead, the strategy starts with a crucial, practical step: assembly
and testing.
The Multi-Billion Dollar Blueprint
India has laid out an ambitious plan, backed by significant financial incentives, to establish itself as a key player in the global semiconductor landscape. The government's India Semiconductor Mission (ISM) has earmarked substantial funds, with reports mentioning a figure of around $23 billion over the last five years, to build a domestic chip ecosystem. This initiative aims to reduce the country's heavy reliance on imports, which currently satisfy over 90% of its demand, and to carve out a space in the strategically critical electronics supply chain. The mission provides robust financial support, in some cases up to 50% of the project cost for companies setting up shop in India, to attract both global giants and domestic players.
Why Start with Assembly and Testing?
Instead of immediately competing in the hyper-expensive and complex world of cutting-edge chip fabrication, India's strategy is to 'crawl before it can walk'. The initial focus is on what the industry calls OSAT (Outsourced Semiconductor Assembly and Test) or ATMP (Assembly, Testing, Marking, and Packaging). This is the final stage of semiconductor production, where silicon wafers are cut into individual chips, assembled into protective packages, and tested for quality. This approach is a pragmatic entry point. ATMP facilities are less capital-intensive than multi-billion dollar fabrication plants (fabs), require a large labour force which plays to India's strengths, and can be brought online faster, generating momentum and building crucial ecosystem experience. This strategy allows India to build foundational capabilities, a skilled workforce, and the necessary supply chains for chemicals and materials before tackling the next frontier.
First Movers and Major Projects
This strategy is already translating into concrete projects. US-based memory chip giant Micron inaugurated its ATMP facility in Sanand, Gujarat, in early 2026, marking the first major project under the ISM. The plant, a combined investment of nearly $2.75 billion with government support, has already begun shipping 'Made in India' memory chips to global customers. The Tata Group has also made a massive commitment, with two landmark projects: an ATMP facility in Jagiroad, Assam, with an investment of around ₹27,000 crore, and India's first major semiconductor fab in Dholera, Gujarat, in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corp (PSMC). While the Assam plant focuses on packaging, the Dholera fab targets the production of mature-node chips (28-nanometer and above), which are vital for the automotive, industrial, and consumer electronics sectors.
The Challenges on the Road Ahead
Despite the momentum, the path is fraught with challenges. The semiconductor industry demands more than just factories; it requires an entire ecosystem. This includes an uninterrupted supply of power and ultrapure water, a localized source of specialized chemicals and gases, and a robust logistics network. Perhaps the most significant hurdle is developing a highly skilled workforce, not just with software engineers, but with specialists in materials science, yield engineering, and cleanroom facility management. India faces a talent gap in these specific areas and must rapidly scale its training and academic programmes to meet the demand from these new facilities. Furthermore, the high cost of capital in India compared to established hubs in East Asia remains a concern for attracting longterm investment.
Beyond Assembly: The Fabrication Dream
The focus on assembly is just phase one. The ultimate goal is to move up the value chain into fullscale semiconductor fabrication. The TataPSMC fab in Dholera, expected to begin operations around 2028,' is the first major step in this direction. While it will produce oldergeneration chips initially,' this is a strategic move to serve a massive existing market and avoid direct competition with giants like TSMC in the race for the most advanced nodes. As India builds its ecosystem around these initial projects,' the vision is to attract more fab investments and eventually foster indigenous design and manufacturing capabilities,' transforming from a chip consumer into a globally significant producer.
