PM pitches India as trusted base for chip manufacturing

Why in the News

The Prime Minister has said the world needs “new and trusted locations” for semiconductor manufacturing and that India is readying itself to meet that requirement, while inaugurating SEMICON India 2026 in New Delhi. He said India has entered the second phase of its semiconductor journey, moving beyond policy announcements and plant construction toward commercial production of chips. The pitch answers a specific market condition, that chip companies are looking to diversify their global supply chains away from a narrow set of manufacturing locations. The tension is between the pitch and the base it rests on. India’s semiconductor demand is projected at $110 billion by FY30, while domestic manufacturing remains at a nascent stage and imports have grown at a compound annual rate of 23%.

What is the India Semiconductor Mission?

1. What it does: It is the central programme that provides fiscal support to semiconductor projects in India, covering fabrication, packaging and other parts of the chip value chain.
2. Phase one scale: Twelve semiconductor projects were approved under the first phase, spanning fabrication, packaging and other value chain segments.
3. Phase two scope: The programme has moved to Semicon 2.0, a Rs 1.27 lakh crore programme that widens the focus beyond large chip factories.

Why is India pitching itself as a trusted location now?

1. Supply chain diversification: Chip companies are looking to spread manufacturing across more countries, which creates an opening for a location that is not already in the established set.
2. The trust framing: The pitch was made as a claim about reliability rather than cost, on the stated ground that the world’s trust in India is increasing alongside its economic growth.
3. The supporting economic markers: The claim was anchored on 7.8% quarterly GDP growth, a recent sovereign rating upgrade by a Japanese credit rating agency, and the New Delhi Declaration adopted at the BRICS Summit India hosted this month.
4. The stated pace: India has achieved in about four years what generally takes countries around a decade to build, though semiconductor manufacturing was described as a journey with no end point.

What has the first phase actually delivered?

1. Projects in production: Five of the twelve approved projects have already started commercial production, which is the marker separating phase one from phase two.
2. Memory output from Gujarat: Micron Technology has begun shipping DRAM (Dynamic Random Access Memory) and NAND memory products to customers globally from its Sanand facility in Gujarat.
3. The scale up path there: The plant is expected to assemble and test tens of millions of chips this year, scaling to hundreds of millions next year.
4. Design and engineering presence: Infineon Technologies, a German chipmaker, now has over 2,800 employees in India, and has said India has potential to strengthen its position across the global semiconductor value chain as its domestic market and technology capabilities expand.

What does Semicon 2.0 change about the approach?

1. Beyond the fab: The programme extends support to semiconductor equipment, materials, design, research and development, supply chains and skilled manpower, rather than to large chip factories alone.
2. The ecosystem logic: A fabrication plant depends on a surrounding base of tool makers, chemical and gas suppliers and trained engineers, which the first phase did not fund directly.
3. Project count: The next phase is expected to see the number of approved projects increase further.

How large is the demand gap the mission is chasing?

1. Projected demand: India’s semiconductor demand is projected to reach $110 billion by FY30 and to exceed $200 billion by FY35.
2. The import bill so far: The country spent almost $150 billion on semiconductor product imports between FY17 and FY25.
3. The trajectory if nothing changes: Imports grew at a compound annual growth rate of 23% over that period, and on the same trend annual imports could reach $240 billion by 2035.
4. The policy conclusion drawn: Building a comprehensive semiconductor ecosystem has been identified as an urgent national priority on the strength of that gap.

Challenges to the India Semiconductor Mission

1. Utility reliability at fab sites: A fabrication plant needs continuous ultrapure water and uninterrupted power, and an interruption of either scraps the wafers in process. Eg. Taiwan’s chip plants cut water use and trucked in supplies during the 2021 drought when the island’s reservoirs fell to record lows.
   The Fix: Ring fence dedicated water recycling plants and captive power capacity for each approved site as a condition of disbursal.
2. Fabrication workforce depth: India’s semiconductor engineers sit in design centres rather than in fabrication and process engineering, which is a different skill base. Eg. Design centres of global chipmakers have operated in Bengaluru and Hyderabad for over two decades without a commercial fabrication plant alongside them.
   The Fix: Tie a share of the incentive to process engineer placements trained through partnerships with operating fabs abroad.
3. Equipment and materials import dependence: The tools and high purity inputs a fab consumes come from a handful of global suppliers, so domestic assembly does not by itself reduce external exposure. Eg. Extreme ultraviolet lithography machines are produced by a single company, ASML of the Netherlands.
   The Fix: Anchor equipment and materials suppliers in India through long term purchase commitments from the approved plants rather than through subsidy alone.
4. Competition at mature nodes: India’s approved capacity targets older process nodes, where large capacity additions elsewhere can push prices below the level a new entrant needs. Eg. Sustained capacity expansion in China at 28 nanometre and older nodes has driven down prices for legacy chips.
   The Fix: Condition support on secured long term offtake contracts rather than on installed capacity alone.

Conclusion

The pitch is that trust and diversification, rather than cost, are what bring chip manufacturing to India. The measurable claim behind it is narrower, five plants in commercial production against a demand curve heading for $200 billion. Semicon 2.0’s widening into equipment, materials and skills is the part that decides whether the fabs have a supply base around them, and the count of projects approved under it is the next thing to watch.

Matching Previous Year Question

“[2025, GS3, 15] India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.”