India’s Semiconductor Moment: Where Capital, Capability and Strategy Must Align
Introduction:
India still imports nearly 90-95% of the semiconductors it consumes. That’s not just a statistic. With demand expected to reach $200 billion by 2035, it is one of the most defining numbers in India’s technology story.
Semiconductors now power everything from AI and EVs to defence and telecom. They are the foundation of the modern economy. Which makes one thing clear: relying heavily on imports limits control over the technologies built on top. This is what makes India’s semiconductors push so critical right now. The opportunity is large, but success will depend on getting the timing, strategy, and execution right.
The Math Nobody Can Ignore
India’s semiconductor demand is growing at ~19% annually, expected to reach ~$90 billion by FY2030 and potentially cross $200 billion by FY2035. At the current pace, the annual import bill alone could reach ~$240 billion by 2035.
This is more than a forex issue. It is a supply chain risk.
Semiconductors production is concentrated in a few regions like Taiwan, South Korea, China, and the U.S. any disruption there directly impacts India’s automotive, electronics, healthcare, and defence sectors. Covid was a reminder; it won’t be the last.
Picking the Right Fight, Not Every Fight
This is where the strategy becomes clear. India isn’t trying to win the race for cutting-edge chip manufacturing. Competing at 2nm with Taiwan or South Korea from scratch would be expensive and time-consuming.
Instead, the focus is on choosing the right battles. The idea is to build strength in specific chokepoints of the global semiconductor value chain where India can create real, defensible advantages, not just be a participant. Three bets stand out:
- Mature & compound semiconductors: India is focusing on 28-65nm nodes, analogue/mixed-signal chips, and materials like SiC and GaN. These power EVs, telecom, and energy systems. Demand here is already strong and growing in India.
- Advanced packaging: As chip scaling slows, value is shifting to packaging and integration such as chiplets, 3D stacking, and system in package. This “More than moore” space needs less capital than fabs and has fewer dominant players, making it a practical entry point. India is aiming to become a global leader here.
- Design Leadership: India already has about 20% of the global chip design workforce. The next step is moving beyond services to ownership by building IP, architectures, and system level innovation in areas like AI, RF and 6G, and next generation chips.
The ambition is clear. Build a $120-to-150-billion-dollar domestic semiconductor ecosystem by 2035, improve self sufficiency to as much as 50%, and retain more value within the country. This is not about chasing everything. It is about choosing where to win.
What’s Actually Standing in the Way
This isn’t easy and it helps to be clear about why.
- Capital intensity is huge: A modern analogue fab costs over $5B. Leading-edge fabs can cross $15B. Building a full ecosystem across fabs, packaging, materials, and design could need $135 to $180 billion over the next decade.
- Talent is still building: Areas like lithography, process engineering, cleanroom operations, and advanced packaging need deep expertise. India has strong design talent, but manufacturing skills are still scaling up.
- Trust takes time: Global OEMs have worked with East Asian suppliers for decades. These relationships are built on consistent quality and yields. India-made chips will need to prove the same reliability before supply chains shift.
- Timelines are long: Fabs take 4 to 5 years just to start production. Getting to stable yields takes more time. This is not a quick-return sector. It requires patience.
The Global Race Context:
It helps to look at what other countries are doing. The U.S. has committed $52.7 billion. Europe around €43 billion. Japan nearly $28 billion. South Korea about $23 billion. China has already deployed over $100 billion.
The pattern is clear. Semiconductors are no longer just a market story. They are strategic, and governments are backing them with serious capital. India’s ambition fits this global shift. But a $150–180 billion gap can’t be filled by the government alone. The real test is simple: can public capital attract large-scale private and global investment, instead of getting spread too thin?
What actually needs to happen
A few things separate ambition from delivery here:
- Institutional clarity: India needs a single empowered agency, faster approvals, and a stable policy roadmap. Semiconductor investments are long-term bets, and companies need confidence that policies will remain consistent.
- Demand visibility: Government procurement, defence requirements, telecom adoption, and structured offtake agreements can give early manufacturers the confidence to invest and scale.
- A strong talent pipeline: The industry needs more than engineering graduates. It needs trained technicians, process engineers, packaging specialists, materials experts, and system designers with skills aligned to semiconductor manufacturing.
- Strategic global partnership: As technology access becomes increasingly shaped by geopolitics, India needs deeper partnership with the US, Japan, Europe, and South Korea that create real capabilities, not just signed agreements.
Bottom Line:
The opportunity is real, but it will not stay open forever. Supply chains are shifting, companies are diversifying beyond China, and India’s own technology demand is growing rapidly. The cost of delay is visible in rising imports, strategic dependencies, and missed opportunities to create value domestically.
India does not need to build every part of the semiconductor ecosystem overnight. The bigger opportunity is to build strong capabilities in areas where it can compete globally, such as chip design, advanced packaging, compound semiconductors, and specialised materials. The goal is not simply to catch up. It is to build a sustainable position and stay relevant in an industry that rewards long-term commitment.
