Q. India’s semiconductor strategy seeks to move beyond electronics assembly towards building strategic technological capabilities. Evaluate the...

2026-09-01

Question

Q. India’s semiconductor strategy seeks to move beyond electronics assembly towards building strategic technological capabilities. Evaluate the opportunities and challenges in achieving this transition. (15 marks 250 Words)

Model Answer

Paper

GS III

Subject

Science & Technology

Syllabus as Per Notification

Awareness in the fields of IT, Space, Computers, Robotics, Nanotechnology, Biotechnology and issues relating to Intellectual Property Rights

Topic

India’s Semiconductor Ecosystem, Semicon 2.0

Approach:

Introduction

Introduce by mentioning while India emerged as a major electronics manufacturing and chip-design hub, its dependence on imported semiconductors limits technological autonomy

Body

Give brief context on the shift From Electronics Manufacturing to Semiconductor Capability

Opportunities

Large and rapidly growing domestic demand, Strong chip-design and indigenous IP ecosystem, Advanced packaging as a gateway to higher-value manufacturing, Global supply-chain diversification and partnerships, AI–semiconductor convergence.

Challenges

Technological complexity and immature semiconductor ecosystem, High capital intensity and long gestation period, Dependence on critical foreign technologies and inputs, Shortage of specialised semiconductor talent.

Way Forward

Building self-reliant supply chain, Making R&D industry-driven, creating a fab-ready talent pool, Ensuring scale, clustering and patient capital.

Conclusion

Conclude with the need for Sustained R&D, specialised talent, indigenous IP and global integration to progress from “manufacturing in India” to “technology created and scaled in India.”

Context

Government notifies Semicon 2.0 scheme with 1.27 lakh crore rupees outlay

Introduction

Semiconductors are the foundation of modern technology, powering everything from smartphones and vehicles to satellites and AI systems. While India emerged as a major electronics manufacturing and chip-design hub, its dependence on imported semiconductors limits technological autonomy. Semicon 2.0 seeks to address this gap by moving India beyond assembly towards design, fabrication, advanced packaging, equipment, materials and indigenous IP, thereby building a globally competitive semiconductor ecosystem.

Body

From Electronics Manufacturing to Semiconductor Capability

India’s electronics manufacturing expanded rapidly, particularly in mobile phones and consumer electronics, but deeper value creation remains concentrated in design, fabrication and other upstream semiconductor capabilities.

The India Semiconductor Mission sought to address this structural gap by attracting investments across the semiconductor value chain.

The subsequent Semicon 1.0 and 2.0 framework broadens this ambition towards indigenous IP, advanced packaging, fabrication, equipment, materials and R&D.

This shift has gained importance amid AI-driven chip demand, geopolitical technology competition and global supply-chain diversification.

Opportunities in achieving this transition

Large and rapidly growing domestic demand

India's expanding electronics ecosystem provides a strong domestic market for indigenous chips.

Example: India’s semiconductor market is projected to reach $100–110 billion by 2030, driven by consumer electronics, automobiles, telecommunications, aerospace and power electronics.

Strong chip-design and indigenous IP ecosystem

India can leverage its design talent to move from design services to indigenous IP, fabless companies and commercially viable chip products.

Example: By April 2026, 211 chips had been taped out by 75 institutions, with 7 successfully fabricated, including at 12 nm, demonstrating the emerging design-to-fabrication capability.

Advanced packaging as a gateway to higher-value manufacturing

India can leverage its growing ATMP/OSAT (Assembly, Testing, Marking and Packaging/ Outsourced Semiconductor Assembly and Test) base to move from basic electronics assembly towards advanced packaging and heterogeneous integration.

Example: Of the 12 approved semiconductor projects, nine are packaging units, providing an emerging base for India to develop advanced ATMP/OSAT capabilities.

Global supply-chain diversification and partnerships

Geopolitical concentration of semiconductor production creates an opportunity for India to become a trusted and diversified node in global value chains.

Example: Partnerships with the US, Japan, Singapore, Netherlands, Germany and EU are strengthening technology collaboration and ecosystem integration.

AI–semiconductor convergence

Rapid AI adoption is creating demand for advanced chips, specialised processors and high-performance computing, opening new opportunities beyond conventional electronics.

Example: India is simultaneously developing semiconductor capabilities and sovereign AI infrastructure, with 45,000+ GPUs deployed under the IndiaAI Mission by June 2026

Challenges in achieving the transition

Technological complexity and immature ecosystem

Semiconductor manufacturing requires sophisticated processes, infrastructure and specialised know-how.

Example: India’s ecosystem concentrated in packaging, with only one approved silicon fab against nine packaging units, reflecting the relative immaturity of domestic fabrication.

High capital intensity and long gestation period

Fabs require massive upfront investment, continuous technological upgrades and high yields, making commercial viability challenging.

Example: Large advanced fabs such as TSMC’s Arizona facilities involve investments of tens of billions of dollars, illustrating the scale of capital required for competitive fabrication.

Dependence on critical foreign technologies and inputs

India remains dependent on a globally concentrated ecosystem for lithography equipment, semiconductor-grade materials, specialty chemicals and gases.

Example:ASML (Netherlands) is the only supplier of EUV lithography systems, while critical inputs such as neon gas and photoresist chemicals are concentrated among few countries such as Ukraine and Japan.

Shortage of specialised semiconductor talent

India's strength in chip design has not yet translated into adequate expertise in fab engineering, process integration, device physics, testing and advanced packaging.

Example:NITI Aayog identifies advanced packaging, testing and fabrication as segments where India faces specialised skill shortages, despite its strong design-engineering base.

Way Forward

Building self-reliant supply chain

Developing domestic capabilities in equipment, specialty chemicals, gases and advanced packaging, drawing on Japan’s METI supplier-development model.

Making R&D industry-driven

Establishing industry–academia research centres and global technology partnerships for indigenous IP, following R&D model of US CHIPS and Science Act.

Creating a fab-ready talent pool

Expanding industry-linked training and international exchanges in fab operations, process engineering and advanced packaging, emulating Taiwan’s university–industry model.

Ensuring scale, clustering and patient capital

Developing semiconductor clusters with stable incentives and long-term financing, drawing lessons from South Korea’s K-Semiconductor Belt and Vietnam’s electronics-led FDI strategy.

Conclusion

India’s semiconductor transition is more than an industrial-policy initiative. It is a strategic capability-building endeavour. With 12 projects approved and three facilities entering commercial production, the foundation is taking shape. Sustained R&D, specialised talent, indigenous IP and global integration will determine whether India can progress from “manufacturing in India” to “technology created and scaled in India.”