Beyond Design: India's strategic bet on semiconductor manufacturing

The Modi government has put semiconductors at the centre of both economic policy and national security, approving multiple fabrication and packaging projects.

By Chetan Aggarwal 

For years, India’s standing in global technology rested on software and chip design, while semiconductor manufacturing remained a conspicuous void. As recently as 2019, the country had no commercial fabrication capability beyond the government‑run SCL in Chandigarh, producing only legacy chips. The emphasis on downstream assembly and services created growth but left the core of the digital economy offshore.

Even in design, India’s strength was uneven: while a fifth of the world’s chip designers were Indian, few homegrown companies owned end-to-end products or significant IP blocks. This slowed the transition from services to product leadership, leaving India vulnerable to supply shocks.

An industrial strategy that dovetails national security needs

There is now an aggressive change in industrial strategy. The Modi government has put semiconductors at the centre of both economic policy and national security, approving multiple fabrication and packaging projects, and drawing in partnerships with Tata, Micron, and global players. Now, the first indigenous chips are slated to roll off assembly lines before the end of 2025, marking the first practical step away from external dependency and towards self-sufficiency in a short span.

The India Semiconductor Mission (ISM), launched in 2021 with a ₹76,000 crore corpus has been a gamechanger with ten approved plants, including four recently. It funds fabs and chip design, builds enabling infrastructure, and invests in talent.

It has two core schemes – the Production Linked Incentive (PLI) offers up to 50% support for fabrication, while the Design Linked Incentive (DLI) supports startups and IP development. Alongside, the Modified Electronics Manufacturing Clusters programme (EMC 2.0) fosters hundreds of companies to create an ecosystem by pairing capacity creation and a design pipeline.

From classrooms to fab floors

Talent is another key pillar. With projections suggesting that India’s chip sector will need up to 3.5 lakh additional specialists, dozens of training initiatives have been launched. Engineering curricula is being updated, and university-industry consortia are seeding cleanroom experience for students. The emphasis is on employability - turning classroom familiarity into fab‑floor readiness.

On the ground, these early bets are maturing. Multiple plants in Gujarat and Assam are coming up. Around these anchors, suppliers of gases, specialty chemicals, cleanrooms, HVAC, and metrology are setting up shop, clear evidence of the multiplier effects of precision manufacturing on local economies.

A broad focus will strengthen the innovation loop

Some experts like Chris Miller, author of Chip War, question why India pushes so hard on manufacturing when it already excels in design. But this view misses the broader context. Design without manufacturing keeps a country outside the core innovation loop, unable to innovate rapidly, and exposed to the uncertainties of foreign-controlled supply chains.

This lesson is already visible in Artificial Intelligence, where Indian engineers provide critical expertise for global platforms, yet the product innovation and monetisation remain abroad. Even in semiconductors, breakthroughs occur where design, engineering, and fabrication co‑locate. This is how the United States, Taiwan, and South Korea built an advantage.

Fab route is a necessary bet in a volatile geopolitical setting

The strategic dimension is important as well. Today, a handful of countries - whether the Netherlands in lithography, Taiwan in fabrication, or China in materials - hold outsized influence over supply. Export controls, tariff unpredictability, and geopolitical shocks can quickly cascade into shortages for countries like India. India has been at the receiving end as chips become weaponised. The Biden administration had excluded India from unrestricted access to AI chips. More recently, China had put curbs on rare earth exports to India (crucial for the electronic industry). Trump too has announced tariffs on chips.

As relationships become volatile, there is a need for indigenous high-end manufacturing. A robust semiconductor industry is a bargaining chip. Like the nuclear deterrent, it improves resilience, creates options during crises, and gives India a voice when standards and supply priorities are negotiated.

Execution is almost everything

Execution, however, is difficult. The cautionary tale of LG’s Newport Plant in Wales in the 1990s illustrates the risks. The plant promised thousands of jobs and a big electronics complex. When a contract to assemble Apple’s iMacs arrived, the site copied processes from Singapore. Poor localisation, damp conditions, and packaging mismatched to climate, led some iMac units to catch fire, and workers dubbed it the “toaster line.” The lesson for India is that manufacturing cannot be copy-pasted. Policy and plant design must reflect power and water realities, climate-proof logistics, and rigorous quality systems from day one.

India’s Aatmanirbhar push can also benefit the Global South by lowering costs and shortening supply chains. Technology transfer, skills development, and regional partnerships can keep value and jobs closer to home. As Mangalyaan demonstrated in space, frugal engineering can democratise access to high-tech domains; semiconductors can do the same for digital public infrastructure.

What is needed next is a widening of the base. Policy should continue to support applied research centres, pilot lines, and reusable IP libraries. Regulations need to be streamlined, and public-private partnerships for indigenous Electronic Design Automation (EAD) tools expanded. Universities and industry can deepen joint testbeds, ensuring graduates step directly into high-skill roles. Suppliers in gases, chemicals, and spares must be encouraged for they will decide whether India’s fabs run at world-class yields and costs.

India’s semiconductor push is no longer aspirational. With sustained effort, it has become a practical programme that ties industrial capability to national security and economic resilience. Multiple approved fabs, operational packaging plants, a growing supplier base, and a pipeline of trained talent mark the early stage of a durable build‑out.

Affordable, reliable chips can replicate ISRO’s role in lowering barriers and widening access to transformative technology. Done with discipline, this shift will move India from the periphery of the supply chain to its centre - reducing vulnerabilities, expanding opportunity, and strengthening the country’s bargaining power in a multipolar technological order.

(The writer is a graduate from the Harvard Kennedy School and a public policy consultant.)

Views are personal and do not represent the stand of the publication.