India has taken bold and commendable steps toward realizing its vision of becoming a major player in the global semiconductor industry. With the launch of the India Semiconductor Mission (ISM), the government has sent a clear signal of its intent to build a vibrant, end-to-end semiconductor ecosystem. Strategic partnerships with global giants, approvals for chip and ATMP facilities, and initiatives to foster R&D and skill development mark a transformative moment in India’s tech landscape. As geopolitical shifts demand supply chain diversification and digital transformation accelerates worldwide, India’s entry into the semiconductor race is both timely and necessary.
However, behind this ambitious push lies a complex terrain of structural, technical, and operational challenges that must be navigated with care and long-term commitment. India’s semiconductor aspirations will not be realized overnight—they require deep capability building, strategic alliances, and an honest reckoning with on-the-ground realities.
India’s Semiconductor Dream: Navigating a Minefield of Challenges
1. Supply Chain Limitations
One of the most immediate and fundamental obstacles is the underdeveloped supply chain within India. The production of semiconductor chips necessitates a consistent and high-quality supply of essential raw materials such as silicon wafers, high-purity gases, specialty chemicals, and ultrapure water. Currently, India lacks adequate access to these non-negotiable inputs, forcing a reliance on imports. This import dependence not only escalates costs but also introduces vulnerabilities and potential disruptions to the entire manufacturing process. Building a robust domestic supply chain for these specialized materials, including achieving semiconductor-grade quality, remains a significant undertaking.
2. Skilled Workforce Shortage
Compounding the supply chain challenge is the shortage of skilled manufacturing talent. Despite India’s strength in chip design, which hosts a substantial portion of the global workforce, a critical gap exists in the workforce skilled in advanced semiconductor fabrication and testing. Countries with established semiconductor industries, like Taiwan, South Korea, Singapore, China, and Malaysia, have spent decades cultivating end-to-end ecosystems, including nurturing specialized manufacturing expertise. India is now in a position of “playing catch-up” in a sector where experience and scale are paramount. Addressing these skill gaps in critical areas like advanced fabrication and quality control is essential for the successful operation of manufacturing facilities.
3. Rapid Technological Change
The fast-evolving nature of chip technologies presents another significant structural challenge. As India embarks on setting up its initial fabrication plants, global leaders are already pushing the boundaries with next-generation nodes focused on chip miniaturization and enhanced processing power. This rapid technological advancement requires deep and sustained capital investments simply to remain competitive, let alone achieve a leading position. The constant need to upgrade technology and infrastructure adds another layer of complexity and financial burden to India’s semiconductor ambitions.
4. Global Competition
India’s efforts are unfolding against a backdrop of fierce international competition. Numerous countries, recognizing the strategic and economic importance of semiconductors, have launched their own incentive packages to attract global chipmakers. The global semiconductor landscape is currently dominated by China, Taiwan, and South Korea, which together account for the majority of global production. This intense competition necessitates that India not only attract investment but also offer a truly competitive environment in terms of infrastructure, talent, and cost-effectiveness.
5. High-Risk Nature of Fabs
Establishing semiconductor fabrication facilities, or fabs, comes with inherent high risks. These risks include unpredictable production yields, stringent quality assurance requirements, and the pressing need to rapidly achieve economies of scale to be financially viable. The long-term success of these manufacturing units in India will depend on securing reliable demand, both within the domestic market and through exports. Navigating these operational and market risks requires significant expertise and meticulous execution.
6. Geopolitical and Protectionist Barriers
The increasingly protectionist global economic order adds another layer of complexity. In this environment, securing access to technology, intellectual property, and global markets might become more challenging. India needs to strategically leverage its diaspora for knowledge transfer and actively pursue foreign direct investment to gain the necessary expertise and capital. However, attracting top-tier investors necessitates addressing last-mile infrastructure challenges, such as ensuring reliable access to land, power, and water, with state governments playing a crucial role.
7. From Design Services to Innovation Leadership
Finally, India’s historical position as a service hub for multinational tech giants, primarily contributing to chip design but with limited proprietary intellectual property creation, needs to evolve. To become a serious contender in the global chip race, India must transition from a predominantly service-driven model to one that emphasizes building and leading, not just designing and following. This requires fostering innovation, supporting indigenous research and development, and creating an environment conducive to the creation of proprietary technologies.
Conclusion: Staying the Course
Addressing these multifaceted challenges through a cohesive and long-term strategy will be critical for India to transform its semiconductor ambitions into tangible realities. The government’s vision, private sector participation, and international partnerships will all play pivotal roles in shaping India’s journey from a promising newcomer to a reliable and competitive player in the global semiconductor ecosystem.