India’s Ambitious Drive to Become a Semiconductor Powerhouse

India, the world’s fifth-largest economy, has set its sights on becoming a global semiconductor leader. The country, under Prime Minister Narendra Modi, has laid out ambitious goals to boost its semiconductor sector, aiming to grow its electronics industry from $155 billion today to $500 billion by 2030. This target has generated a mix of skepticism and optimism, with experts highlighting both the opportunities and challenges that lie ahead.

Despite the high aspirations, there’s a consensus among industry insiders that India cannot achieve this milestone alone. Eri Ikeda, an assistant professor at the Department of Management Studies at the Indian Institute of Technology Delhi, noted that while the pace of progress is promising, the country is essentially starting from scratch. “While the speed of development seems to be fast and the momentum is there, India has just started to embark on the semiconductor industry development from scratch,” she said.

Globally, Taiwan is the leading chipmaker, holding 44% of the market share, followed by China with 28%, South Korea at 12%, the U.S. with 6%, and Japan at 2%, according to data from Taiwanese consultancy Trendforce. For India to compete at this level, collaboration with established industry leaders is crucial.

Rishi Bhatnagar, chair of the Institution of Engineering and Technology’s future tech panel, pointed out that partnerships with international companies are key to India’s success. He referenced Taiwan’s Powerchip Semiconductor Manufacturing Corporation working with Tata Electronics to establish India’s first 12-inch wafer fabrication plant in Gujarat. Additionally, American chipmaker Micron Technology is expected to produce India’s first semiconductor chip by 2025. Last week, U.S. chipmaker Analog Devices and Tata Group signed an agreement to explore semiconductor product development in India. “These examples show that collaboration is necessary,” Bhatnagar emphasized.

Learning from China

India is increasingly seen as a potential alternative to China for companies looking to diversify their supply chains. However, analysts caution that India must first master the complexities of semiconductor manufacturing, as its industry is still in its infancy. Despite this, China remains India’s top trading partner, with bilateral trade between the two nations reaching $118.4 billion in financial year 2024. India’s imports of telecom and smartphone components from China amounted to $4.2 billion, data from the Ministry of External Affairs showed.

Bhatnagar acknowledged the gap between India and China in terms of semiconductor manufacturing but expressed optimism about India’s ability to catch up. “India is far behind China in semiconductor manufacturing. Although India may be able to run fast and catch up, China will be running faster,” he remarked, adding that collaboration between the two countries is essential.

Even China, which is striving to keep up with Taiwan’s TSMC and other semiconductor giants, has been scaling up its industry by importing vast amounts of equipment from the U.S. and Japan, Ikeda noted. She highlighted that India should learn from China’s experience as it builds its semiconductor sector.

Strengthening U.S. Ties

India’s semiconductor ambitions align with its strategy to deepen ties with the U.S., as both countries aim to counterbalance China’s dominance. In September, the U.S. Department of State announced a partnership with the India Semiconductor Mission and the country’s electronics and IT ministry to enhance the global semiconductor value chain. This move came shortly before the Biden administration imposed new export controls on critical technologies, including semiconductor goods, aimed at limiting China’s progress in AI and computing.

For the U.S., collaborating with India offers an opportunity to diversify its chip supply sources, reducing dependence on Taiwan. Bhatnagar pointed out the strategic advantages of the partnership. “They’re investing in a democratically elected country with a legal framework and a growing number of English speakers. So when two democracies are talking, that’s a very different kind of discussion. And we need to accept and agree this is needed when global scenarios are changing,” he said.

Indian Prime Minister Modi’s recent meetings with tech CEOs, including Nvidia’s Jensen Huang and Google’s Sundar Pichai, have further underscored the country’s growing importance in the global tech landscape. Huang described this as “India’s moment” and pledged to work closely with the nation. Leaders of other semiconductor firms, such as GlobalFoundries’ Thomas Caulfield and AMD’s Lisa Su, were also part of the discussions.

Analysts suggest that India’s focus on semiconductors could bolster U.S. standing in its “chip war” with China. Ikeda remarked that India’s willingness to attract both U.S. and Chinese investments could ultimately position the country as a competitor to these global giants if its efforts are successful. However, she cautioned that India faces significant challenges, particularly in terms of infrastructure and investment.

India’s Commerce and Industry Minister Piyush Goyal echoed these sentiments, acknowledging the country’s early stage in semiconductor development. “We are encouraging [the] semiconductor industry in a big way. We started building up the ecosystem, which is essential before we can see more and more foundries coming into the country to the actual chip making,” Goyal said.

India’s Advantages

While India has a long way to go before it becomes a semiconductor powerhouse, it does have several advantages. One of the most significant is its low labor costs, which make the country an attractive option for companies seeking to reduce their dependence on China. In New Delhi, the monthly minimum wage for skilled workers is 21,215 Indian rupees ($253.85), compared to 2,420 yuan ($344.30) in Beijing. Minimum wages vary across states and provinces in both countries, but the general cost difference is significant.

Ikeda believes that if India can improve its technological capabilities and offer competitively priced products, it could gain an edge over China. “If India can become more technologically advanced and cater to the global demand with cheaper and fair quality products, it will have a competitive advantage over China,” she said.

With its growing population and potential to become the world’s second-largest economy by 2075, according to Goldman Sachs, India has already attracted major tech investors like Apple and Google. Tarun Pathak, research director at Counterpoint Research, noted that Apple is now exporting more products from India than it sells domestically. “It’s huge domestic market and young nation that gives India an edge,” Pathak added.

India’s progress in infrastructure development is also expected to bolster its semiconductor ambitions. In the interim budget for 2025, Finance Minister Nirmala Sitharaman estimated that capital expenditure would rise by 11.1% to 11.11 trillion rupees ($133.9 billion), with a focus on railways and airports. This infrastructure will be crucial for supporting the country’s semiconductor supply chain. Bhatnagar highlighted that the semiconductor industry’s needs are unique, as chips are small items that can be transported efficiently by air rather than requiring large cargo ships.

As demand for semiconductors continues to rise globally, India is positioning itself as a solution for companies looking to cut costs and meet growing needs. Samir Kapadia, CEO of India Index, expressed confidence in India’s ability to reach its semiconductor goals. “I would not bet against India. When you look around the world, there are very few places where you can see the right kind of infrastructure, economics, stability and workforce to actually achieve this goal,” he said.