India’s burgeoning semiconductor ambitions have captured global attention in recent years, and it has emerged as a potential alternative to China in the chip industry’s supply chain dynamics. With heavy investments and strategic policies, India seems poised to carve a niche in the global semiconductor market. But how realistic is the dream of replacing China or catching up with Taiwan, the world leader in semiconductor manufacturing?
Global semiconductor shift
Semiconductors are the backbone of modern technology, powering everything from smartphones and laptops to cars and military systems. The coronavirus disease (COVID-19) pandemic has highlighted the vulnerabilities of the global semiconductor supply chain, leading to semiconductor shortages and causing significant disruption to industry. Coupled with escalating U.S.-China tensions, these dynamics are reshaping the semiconductor industry and forcing countries to rethink their strategies.
Former US President Donald Trump and his successor Joe Biden imposed sweeping restrictions on China’s semiconductor industry, adding more than 140 Chinese companies to an export blacklist. Although these measures sought to curb China’s technological progress, they also created opportunities for other countries. Countries like India have emerged as a potential option in the semiconductor ecosystem due to their rich talent and competitive costs.
India’s Strategy: Ambitious Investments and Strategic Policies
The Indian government is taking bold steps to position itself as a global semiconductor hub. In 2024, it has approved more than $15 billion in investments in three semiconductor factories, aiming to strengthen domestic manufacturing capacity. These initiatives are aligned with broader initiatives such as ‘Make in India’ and ‘Atmanirbhar Bharat’, which focus on making critical industries more self-reliant.
India’s partnerships with global tech giants further underline India’s growing prominence. Companies like Nvidia, AMD, and Micron are expanding their operations in India. For example, Nvidia is collaborating with Indian companies on AI chip development, an important area of future technology. The United States and India recently agreed to establish a semiconductor manufacturing plant focused on chips for military equipment, signaling a deepening strategic partnership.
opportunities and strengths
India enjoys several competitive advantages in the semiconductor industry. Its large and highly skilled workforce is a major attraction for global companies. According to the report, 19% of the world’s chip designers are based in India, reflecting India’s strength in semiconductor design. The country’s cost advantages make it an attractive destination for companies looking to diversify their supply chains.
India is also leveraging its relationships with global semiconductor leaders. Companies like Taiwan-based TSMC and other international companies have been approached for technology transfer and cooperation. These partnerships could play a key role in accelerating India’s semiconductor ambitions.
Challenges to becoming a semiconductor powerhouse
Despite its strengths, India faces some major hurdles on its path to becoming a global semiconductor hub.
1. Infrastructure Gap: Semiconductor manufacturing is an infrastructure-intensive process that requires ultra-clean facilities, reliable utilities, and sophisticated machinery. Building such a facility from scratch takes time and capital.
2. Technology catch-up: Advanced semiconductor nodes require years of R&D and manufacturing expertise. Although India has a strong foundation in chip design, it lacks experience in manufacturing high-end chips. Closing this gap will require decades of sustained effort.
3. Ecosystem flaws: Successful semiconductor manufacturing requires a robust ecosystem that includes suppliers, logistics, and skilled labor. Unlike Taiwan, which has developed a world-class ecosystem around TSMC, India is just beginning to create such an environment.
4. Geopolitical Balancing Act: India’s geopolitical relationships further complicate its semiconductor aspirations. The United States supports India’s ambitions, but some of India’s progress relies on Chinese investment in low-tech components. It will be important to balance these relationships without compromising strategic autonomy.
India and Taiwan: Partners, not competitors
Experts argue that the rise of India’s semiconductor industry does not necessarily have to come at the expense of Taiwan. Instead, the two countries could work together to forge a mutually beneficial partnership. India’s strength in chip design complements Taiwan’s manufacturing expertise.
For example, training Indian engineers in Taiwan or inviting Indian startups to collaborate with Taiwanese chipmakers could foster shared innovation and growth. Such cooperation could also strengthen ties between the two countries and provide geopolitical advantages in countering Chinese domination.
The road ahead: realistic goals and long-term vision
India’s semiconductor efforts are undoubtedly ambitious, but expectations need to be tempered with reality. It is unlikely to be replaced by China or Taiwan in the short term. However, India’s gradual growth strategy, starting with mature technologies and gradually progressing to cutting-edge nodes, is pragmatic.
The key to success lies in continued investment from both governments and private companies. India also needs to focus on building an enabling ecosystem, including developing infrastructure, nurturing human resources and forming strategic global partnerships.
India should aim to diversify its semiconductor portfolio. While high-end manufacturing is a long-term goal, immediate opportunities lie in areas such as chip design, assembly, and test. These segments require relatively less investment and can provide a strong foundation for the Indian semiconductor industry.
