India’s burgeoning semiconductor ambitions have captured global attention in recent years, emerging as a potential alternative to China in the supply chain dynamics of the chip industry. With significant investments and strategic policies, India appears poised to carve its niche in the global semiconductor landscape. But how realistic is the dream of replacing China or catching up with Taiwan, the global leaders in semiconductor manufacturing?
The Global Semiconductor Shift
Semiconductors are the backbone of modern technology, powering everything from smartphones and laptops to automobiles and military systems. The COVID-19 pandemic highlighted vulnerabilities in the global semiconductor supply chain, leading to shortages that crippled industries. Coupled with intensifying U.S.-China tensions, these dynamics have reshaped the semiconductor industry, pushing nations to rethink their strategies.
Former U.S. President Donald Trump and his successor Joe Biden imposed sweeping restrictions on China’s semiconductor industry, adding over 140 Chinese firms to export blacklists. These measures sought to curb China’s technological advancements but also created opportunities for other nations. Countries like India, with its large talent pool and competitive costs, have emerged as potential alternatives in the semiconductor ecosystem.
India’s Strategy: Ambitious Investments and Strategic Policies
India’s government has taken bold steps to position itself as a global semiconductor hub. In 2024, it approved investments exceeding $15 billion for three semiconductor plants, aiming to boost domestic manufacturing capabilities. These efforts align with broader initiatives such as “Make in India” and “Atmanirbhar Bharat,” which focus on enhancing self-reliance in critical industries.
India’s partnerships with global tech giants further underscore its growing prominence. Companies like Nvidia, AMD, and Micron are expanding their operations in India. For instance, Nvidia is collaborating with Indian entities on AI chip development, a critical area of future technology. U.S. and India recently agreed to establish a semiconductor manufacturing plant focused on chips for military equipment, signaling a deeper strategic alignment.
Opportunities and Strengths
India boasts several competitive advantages in the semiconductor industry. Its large, highly skilled workforce is a major draw for global companies. Reports suggest that 19% of the world’s chip designers are based in India, reflecting its strength in semiconductor design. Country’s cost advantage makes it an attractive destination for firms looking to diversify their supply chains.
India is also leveraging its relationships with global semiconductor leaders. Companies like TSMC, based in Taiwan, and other international players have been approached for technology transfers and collaborations. These partnerships could play a crucial role in accelerating India’s semiconductor ambitions.
Challenges on the Road to Becoming a Semiconductor Powerhouse
Despite its strengths, India faces several significant hurdles in its journey to become a global semiconductor hub:
1. Infrastructure Gaps: Semiconductor manufacturing is an infrastructure-intensive process requiring ultra-clean facilities, reliable utilities, and sophisticated machinery. Building such facilities from scratch is both time-consuming and capital-intensive.
2. Technological Catch-Up: Advanced semiconductor nodes demand years of R&D and manufacturing expertise. While India has a strong base in chip design, it lacks experience in manufacturing high-end chips. Bridging this gap will require sustained effort over decades.
3. Ecosystem Deficiencies: Successful semiconductor manufacturing requires a robust ecosystem, including 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. While the U.S. supports India’s ambitions, some of its progress depends on Chinese investments in lower-tech components. Balancing these relationships without compromising its strategic autonomy will be critical.
India and Taiwan: Partners, Not Competitors
Experts argue that India’s rise in the semiconductor industry does not have to come at the expense of Taiwan. Instead, the two countries could collaborate to create a mutually beneficial partnership. India’s strength in chip design complements Taiwan’s expertise in manufacturing.
For example, training Indian engineers in Taiwan or inviting Indian startups to work alongside Taiwanese chipmakers could foster innovation and shared growth. Such collaborations could also strengthen ties between the two nations, offering geopolitical advantages in countering China’s dominance.
The Road Ahead: Realistic Goals and Long-Term Vision
India’s semiconductor journey is undoubtedly ambitious, but expectations must be tempered with realism. Displacing China or Taiwan in the short term is unlikely. However, India’s strategy of incremental growth, starting with mature technologies and gradually advancing to cutting-edge nodes, is pragmatic.
The key to success lies in sustained investments, both from the government and private players. India must also focus on creating an enabling ecosystem, which includes developing infrastructure, fostering talent, 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 like chip design, assembly, and testing. These segments require relatively lower investments and can provide a strong foundation for India’s semiconductor industry.
