Comrades Editorial · 14 Sep 2026 (PDF)
In this edition
- Shaping India’s Semiconductor Ecosystem Science & Technology
Science & Technology
Shaping India’s Semiconductor Ecosystem
Source This editorial is based on “Semicon 2.0 gets it right on the issues that matter” published in the Hindustan Times on 09/09/2026. The article highlights that Semicon 2.0 successfully prioritizes chip design, raw material supply lines, and research backing. However, executing this complex mission requires boosting administrative capacity within the ISM and overcoming deep-tech venture funding risks. The Ministry of Electronics and Information Technology (MeitY) notified Semicon 2.0 with ₹1.28 lakh crore in additional funding to restructure India’s strategy from isolated fabrication plants to an integrated, resilient ecosystem. Covering the entire value chain, including chip design, advanced packaging, R&D, and talent development, the policy targets mature nodes, compound semiconductors, and indigenous Intellectual property (IP). Long-term success ultimately depends on robust execution, bridging skill gaps, localizing critical inputs, and cultivating commercially viable enterprises. What are Key Developments in India’s Semiconductor Ecosystem?- Mission-Mode Policy Support and ISM 2.0:
- The India Semiconductor Mission (ISM) 1.0, launched in 2021 with a ₹76,000-crore incentive framework, provides up to 50% fiscal support for semiconductor fabs, compound semiconductors, ATMP/OSAT facilities and chip design.
- As of December 2025, the Government had approved 10 projects across 6 states, involving approximately ₹1.60 lakh crore in investment.
- The Union Budget 2026–27 announced ISM 2.0, with a ₹1,000-crore provision for FY2026–27, shifting attention towards domestic semiconductor equipment, materials, full-stack Indian intellectual property, industry-led R&D and resilient supply chains.
- Entry into Commercial Wafer Fabrication:
- India is moving beyond chip design and packaging into capital-intensive front-end wafer fabrication.
- Tata Electronics–PSMC’s ₹91,000-crore fab at Dholera, Gujarat, is designed to produce nearly 50,000 wafers per month, using mature technology nodes such as 28 nm, 40 nm, 55 nm and 110 nm.
- Its chips will serve automotive electronics, power management, telecommunications, defence and consumer electronics, where mature-node chips remain commercially critical.
- Collaboration with global technology partners such as Taiwan’s PSMC and the Netherlands’ ASML illustrates India’s strategy of combining domestic scale with international process expertise.
- Rapid Expansion of ATMP and OSAT Capacity:
- India is developing the back-end semiconductor value chain through Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) facilities.
- Micron’s ₹22,516-crore unit at Sanand focuses on assembly and testing of DRAM (Dynamic Random-Access Memory) and NAND (non-volatile memory) memory products.
- Tata Semiconductor Assembly and Test’s ₹27,000-crore Jagiroad facility in Assam is designed to produce up to 48 million chips per day, while CG Power–Renesas and Kaynes Semicon are establishing packaging units in Gujarat.
- These projects can integrate India into global supply chains faster because packaging facilities generally require lower capital and shorter gestation periods than advanced wafer fabs.
- Diversification into Compound Semiconductors and Advanced Packaging:
- India is moving beyond conventional silicon into specialised technologies such as silicon carbide (SiC), gallium nitride (GaN), silicon photonics and glass-substrate packaging.
- The SiCSem project in Odisha covers integrated SiC fabrication and packaging for electric vehicles, renewable-energy systems, railways and industrial power electronics.
- In 2026, Crystal Matrix Limited received approval for a Dholera-based integrated GaN fab and ATMP facility for Mini/Micro-LED displays, with capacity for 72,000 square metres of display panels annually.
- These technologies provide higher power efficiency and heat resistance, allowing India to target high-value niche markets instead of competing only in conventional silicon chips.
- Growth of a Domestic Fabless-Design Ecosystem:
- India is leveraging its existing strength in semiconductor engineering to move from design services to Indian-owned chips and intellectual property.
- As of January 2026, the Design Linked Incentive (DLI) Scheme supported 24 semiconductor start-ups, which had attracted nearly ₹430 crore in venture-capital funding.
- Emergence of Indigenous Processor and Chip IP:
- India is developing sovereign computing platforms to reduce dependence on foreign processor architectures and licence-controlled technologies.
- C-DAC’s DHRUV64, a domestically developed 64-bit microprocessor, builds upon Indian processors such as SHAKTI, AJIT, VIKRAM and THEJAS.
- The Digital India RISC-V (DIR-V) Programme uses an open-source architecture to support processors and System-on-Chips such as DHANUSH and DHANUSH+ for 5G, industrial automation, automobiles, IoT, defence and strategic infrastructure.
- Democratisation of Design Infrastructure and Talent Creation:
- Expensive chip-design tools are being opened to universities and start-ups through the national Advanced Electronic Design Automation (EDA) platform.
- By January 2026, the platform had recorded around 2.25 crore tool-hours and was being used by approximately 67,000 students and over 1,000 start-up engineers.
- Programmes such as Chips to Startup (C2S) and industry-linked courses at IITs, IISc and NITs are creating expertise in VLSI (Very-Large-Scale Integration) design, process engineering, packaging, clean-room operations and yield optimization.
- Global Collaboration for Trusted Technology Supply Chains:
- India is leveraging strategic partnerships to obtain critical minerals, semiconductor equipment, advanced manufacturing capabilities, investment and skilled talent, while reducing supply-chain concentration and geopolitical vulnerabilities.
- For example, India joined the US-led Pax Silica initiative, connecting it with trusted partners across the value chain, from mineral processing and chip fabrication to AI infrastructure and data systems, and strengthening its integration into resilient global semiconductor networks.
- About: Semicon 2.0, formally the 2nd phase of the India Semiconductor Mission (ISM 2.0) seeks to move India from subsidising isolated chip-manufacturing units towards building a full-stack semiconductor ecosystem.
- Core Objective: Semicon 2.0 seeks to shift India from chip assembly and import dependence towards Indian-owned chip designs, advanced manufacturing, domestic equipment and materials, high-value packaging and technology sovereignty. It is expected to generate around 50,000–60,000 direct jobs.
- Six Pillars:
- The programme covers
- Chip design and Indian IP,
- Semiconductor equipment and materials,
- Wafer fabrication,
- Advanced ATMP/OSAT packaging,
- Research and development, and
- Talent creation.
- Design-Led Approach:
- It supports chips for strategic sectors, critical infrastructure and commercial markets.
- Eligible start-ups and MSMEs can receive seed support of up to ₹15 crore or 50% of project cost, alongside access to EDA tools, IP cores, Multi-Project Wafer fabrication and post-silicon validation.
- Manufacturing Support:
- Large silicon-wafer fabs can receive 40% capital support, while compound-semiconductor, photonics, sensor, display and advanced-packaging projects can receive up to 35% support.
- Semiconductor equipment and material facilities are eligible for 30% capital support, supplemented by production-linked incentives.
- Research and Skills:
- Advanced semiconductor R&D and talent-development projects can receive support of up to 75% of project cost.
- After training about 85,000 semiconductor engineers, the Government aims to develop another one lakh professionals.
- Persistent Dependence on Foreign Technology and Intellectual Property:
- India lacks domestic capability in several foundational technologies, including photolithography, Electronic Design Automation (EDA) software, advanced process nodes and proprietary processor architectures.
- The global EDA market is dominated by Synopsys, Cadence and Siemens, while the Netherlands-based ASML is the sole supplier of Extreme Ultraviolet (EUV) lithography machines.
- Consequently, an Indian-owned fabrication plant may still depend on foreign equipment, process recipes, chip architectures and software licences, limiting genuine technological sovereignty.
- India spent nearly $150 billion on semiconductor imports between FY17 and FY25.
- Gap in Advanced-Node Manufacturing:
- India’s initial manufacturing strategy largely concentrates on mature-node chips, compound semiconductors and packaging, whereas cutting-edge processors for artificial intelligence and high-performance computing increasingly use 5 nm, 3 nm and 2 nm nodes.
- Advanced fabrication is concentrated among TSMC, Samsung and Intel, creating steep technological entry barriers.
- Without indigenous advanced-node R&D, India risks becoming competitive in legacy chips and back-end operations while remaining dependent on imports for AI accelerators, GPUs and high-end processors.
- Project-Execution and Technology-Partner Risks:
- Semiconductor projects require reliable technology partners, long-term financing and assured process expertise; announcements do not automatically translate into commercially viable fabs.
- The Vedanta–Foxconn joint venture collapsed in 2023 after difficulties in securing an appropriate fabrication-technology partner.
- Construction delays, cost escalation and difficulties in achieving acceptable production yield, the proportion of defect-free chips on a wafer, could make approved projects uncompetitive despite substantial incentives.
- This creates an “approval-to-production gap”, requiring assessment based on operational capacity rather than proposed investment.
- Shortage of Fabrication-Ready Skills:
- India has a large chip-design workforce, but design expertise is not equivalent to experience in process engineering, clean-room operation, lithography, packaging reliability and yield management.
- Semicon 2.0 programme aims to develop another one lakh semiconductor engineers, underlining the scale of the workforce requirement.
- Globally experienced engineers may command high wages, while Indian curricula often lack access to operational fabs and advanced equipment.
- This produces a “design-rich but manufacturing-thin” talent profile, compounded by possible brain drain to established hubs such as Taiwan, the US and South Korea.
- Resource Intensity and Cluster Concentration:
- Chip fabrication requires uninterrupted high-quality electricity, ultra-pure water, specialty-gas networks and hazardous-chemical management.
- Any voltage fluctuation, water contamination or logistics disruption can halt production and damage expensive wafers.
- Concentration of major projects around Gujarat’s Dholera–Sanand corridor creates agglomeration benefits but also exposes national capacity to common water, infrastructure or climate-related disruptions.
- High Fiscal Exposure and Subsidy Competition:
- Central assistance of up to 50% of project cost, combined with state incentives such as land, electricity and tax concessions, transfers substantial investment risk to the public sector.
- Since semiconductor projects have long gestation periods, governments may face pressure to continue support even when commercial milestones are delayed.
- Global subsidy competition under the US CHIPS and Science Act, 2022, EU Chips Act, 2023, Japan’s incentives and China’s state support can trigger a costly “subsidy race” that India may find difficult to sustain.
- Weak Research-to-Commercialisation Pipeline:
- India’s universities and public laboratories undertake semiconductor research, but limited prototype-to-product funding, pilot fabs and industry–academia linkages constrain commercialisation.
- Institutions such as IIT Madras, IISc and C-DAC have developed processors and semiconductor technologies, yet few have achieved large-scale commercial deployment.
- This creates a “lab-to-fab valley of death”, where promising designs struggle to reach tape-out, certification and mass production.
- Adopt Performance-Linked rather than Investment-Linked Incentives:
- Fiscal support should be released against verified milestones such as plant commissioning, wafer starts, production yield, export performance and local value addition, instead of merely approving capital expenditure.
- An independent Semiconductor Programme Evaluation Office should publish project-level dashboards covering construction progress, employment and commercial production.
- A clawback mechanism must recover incentives where firms miss technology-transfer, production or localisation commitments, thereby limiting stranded public assets.
- Launch a “Critical Semiconductor Inputs” Localisation Challenge:
- India should map the most vulnerable imported inputs, including high-purity gases, silicon wafers, photomasks, photoresists, substrates, quartzware, valves, vacuum pumps and clean-room filters.
- Selected Indian chemical, metallurgy and precision-engineering firms should receive challenge grants to develop each input to semiconductor-grade purity.
- A national supplier-qualification facility should test contamination, reliability and process compatibility, enabling smaller Indian vendors to secure approval from fabrication plants.
- Policy must reward actual vendor qualification and commercial supply, rather than merely construction of component facilities.
- Use Government Procurement to Create Assured Domestic Demand:
- India should establish a Trusted Indian Chip Procurement Framework for defence, railways, smart meters, satellites, telecom networks and public digital infrastructure.
- Large orders from Indian Railways, defence public-sector units, BharatNet and power-distribution companies can provide the production volumes required to move Indian chips from prototypes to commercial scale.
- Build Patient Capital and Reduce the Cost of Chip Innovation:
- India should create a Semiconductor Deep-Tech Fund of Funds, combining sovereign, institutional and corporate capital for 10–12-year investment horizons.
- Tape-out vouchers, non-recurring engineering grants, IP-backed loans and first-loss guarantees can support fabless start-ups developing chips for edge AI, medical devices, electric vehicles and industrial automation.
- Public support should remain equity- and milestone-linked, allowing taxpayers to share the gains from successful innovation.
- Create a Fab-Ready Workforce through Apprenticeships:
- Semiconductor education should move beyond classroom-based VLSI design towards process integration, clean-room protocols, lithography, equipment maintenance, packaging and yield engineering.
- A National Semiconductor Apprenticeship Grid should link engineering institutions and ITIs directly with fabrication and packaging units.
- India should introduce dual-degree programmes, faculty residencies in fabs and diaspora-return fellowships, while certifying technicians through industry-designed competency standards.
- Pursue Co-Development-Oriented Semiconductor Diplomacy:
- India should move from importing turnkey technology to negotiating joint R&D, engineer exchanges, supplier localisation and co-owned intellectual property.
- Partnerships under the India–US Initiative on Critical and Emerging Technology, India–Japan Semiconductor Supply Chain Partnership and India–EU Trade and Technology Council should cover equipment, materials, advanced packaging and trusted chips.
- Technology agreements must incorporate export-control assurances, cybersecurity standards and continuity-of-supply clauses.
- Develop Green, Trusted and Shock-Resilient Semiconductor Clusters:
- Semiconductor policy should integrate environmental sustainability, cybersecurity and continuity planning from the design stage.
- Fabs should adopt mandatory targets for treated-wastewater utilisation, water recycling, renewable firm power, chemical recovery and zero-liquid discharge.
- India should create a Trusted-Chip Certification Authority to detect hardware Trojans, counterfeit components and malicious alterations in chips used in defence, telecom, energy and space systems.
- Each cluster should maintain alternative suppliers, strategic inventories of critical inputs and digital supply-chain twins to simulate disruptions caused by geopolitical conflict, cyberattacks, droughts or port closures.
- Regulatory Easing:
- India should establish a single-window, time-bound clearance mechanism for land, power, water, customs, environmental approvals and technology imports, while maintaining essential safeguards.
- Reflecting the Prime Minister’s call for “less paperwork and more wafer work,” predictable regulations can shorten project gestation, reduce compliance costs and attract global semiconductor investment.
- Semicon 2.0 shifts India’s strategy from capital-intensive fabrication to an integrated ecosystem encompassing design, advanced packaging, and indigenous IP. Rather than pursuing total self-sufficiency, India must aim for strategic capability and diversified interdependence, securing critical domestic technologies while building dependable international partnerships. Ultimately, success depends less on subsidies and more on execution, skilled talent, domestic material sourcing, and bridging the lab-to-fab gap, transforming India from a manufacturing destination into a global hub where chips are imagined, designed, and commercially scaled.