India’s vision of building a $5 trillion economy relies heavily on developing a world-class digital infrastructure. From 5G networks and electric vehicles to defence electronics and AI computing, India’s Semiconductor Mission and ISM 2.0 are central to achieving this goal.

However, recent global shortages have disrupted and exposed supply chain lags in automotive production lines, telecom rollouts and electronics manufacturing. What’s more, this scenario is expected to continue until 2027 as several countries look to set up data centres.

As billions of dollars are poured into data centre infrastructure, the demand for memory chips has gone through the roof, sparking an unprecedented price rise for semiconductors.

Recognising this vulnerability, India has repositioned semiconductors from an emerging manufacturing segment to a national priority.

With global semiconductor revenue exceeding $600 billion and preparing to reach $1 trillion, robust supply chain resilience and domestic capacity are important for economic strategy. Therefore, India’s semiconductor roadmap is no longer aspirational; it is structural.

The blog discusses the strengths, India’s Semiconductor Mission, where India can compete and challenges in the journey.

Also Read: India’s Third Semiconductor Plant to Begin Operations in July, Fourth Unit by Year-End

From Design Strength to Manufacturing Depth

The domestic semiconductor market was valued at about $38 billion in 2023, $45-$50 billion in 2024-2025, and is projected to reach around $100-$110 billion by 2030. The sector is driven by demand from smartphones, automotive electronics, industrial automation and data centres.

India’s strongest foothold in the global semiconductor value chain has historically been in design services. Nearly 20% of the world’s semiconductor design engineers are based in the country, contributing to chip architecture, verification, embedded software and system-on-chip (SoC) development for global technology firms.

In parallel, India has emerged as a preferred destination for back-end Assembly, Testing, Marking, and Packaging (ATMP). With evolving policy support, the country is now moving into front-end manufacturing, a strategic step in diversifying the global supply chain.

A stable political environment, an expanding domestic market and a strong engineering talent pool make it attractive for greenfield semiconductor investments. Yet, value capture has largely remained concentrated in ATMP operations, embedded firmware development and design support services.

The strategic gaps are limited domestic ownership of semiconductor intellectual property, inadequate wafer fabrication capacity and a fragmented packaging ecosystem. India’s next phase focuses on strengthening:

• Indigenous chip design startups
• Automotive-grade microcontrollers and power semiconductors
• Compound semiconductors and sensor technologies
• Globally competitive advanced packaging capabilities

Also Read: Iran Crisis Signals Urgency for India’s Semiconductor Push

India Semiconductor Mission: Building a Full-Stack Ecosystem

The launch of the India Semiconductor Mission (ISM) in 2021 marked the country’s initial steps towards a structured effort to build a comprehensive semiconductor ecosystem. With an incentive outlay of ₹76,000 crore, ISM aimed to catalyse investment across:

• Semiconductor fabrication units (fabs)
• ATMP facilities
• Display manufacturing
• Design-Linked Incentive schemes ((DLI)

The mission provided regulatory clarity and targeted support for compound semiconductor facilities, chip design and assembly units. To date, 10 projects have received approval, laying the foundation for a more resilient domestic semiconductor ecosystem.

The projects are focused on technologies such as ATMP (memory packaging), greenfield semiconductor fab (logic/power), OSAT, display driver chips, Silicon Carbide (SiC) fab, Glass substrate, Discrete / legacy chips and Advanced SiP & system-in-package.

The Union Budget 2026-27 unveiled the India Semiconductor Mission (ISM) 2.0, which further broadens the roadmap. This includes semiconductor equipment manufacturing, materials production and the development of full-stack Indian intellectual property (IP).

The focus areas under ISM 2.0 includes:

• Enhanced capital incentives for semiconductor and display manufacturers.
• Strengthened Design-Linked Incentive (DLI)  schemes for chip manufacturing startups.
• Support for compound semiconductors aligned with EV and renewable energy sectors.
• Funding for research and development for prototyping & silicon validation infrastructure.
• Industry-academia partnerships to bridge skill gaps.

The mission now moves beyond assembly incentives toward deeper technological ownership.

By 2030, India aims to manufacture chips catering to 70-75% of domestic demand. The long-term ambition includes participation in advanced technology nodes, positioning India among the leading semiconductor nations by 2035.

Also Read: Delhi Bets on Chip Design Over Fab Plants in New Semiconductor Push

Strategic Focus: Where India Can Compete

Rather than focusing immediately on bleeding-edge 3nm or 5nm nodes, India’s pragmatic growth path lies in mature nodes (16–28nm and above). We dominate in automotive, industrial and power-electronics applications.

Automotive & EV Electronics

EV adoption drives the demand for microcontrollers, battery management systems, power management ICs and silicon carbide (SiC) devices.

Industrial IoT & Smart Infrastructure

Smart cities, logistics networks and utility modernisation demand application-specific integrated circuits (ASICs), sensors and edge computing units.

Telecommunications & 5G/6G Hardware

India’s telecom expansion creates opportunities in RF components, embedded communication modules and network processors.

Also Read: Sold Out Before Start: India’s First 3D Semiconductor Plant Sees Full Capacity Lock-In

Important Challenges and Mitigation

While ISM 2.0 reflects policy recalibration in response to global competition, the concentration of advanced chip technologies is limited to a few decision-makers.

Countries with established semiconductor ecosystems are offering strong incentives, underscoring the importance of India refining its approach. Some challenges stand out for India and need immediate mediation.

Technology Gap:

India faces a significant technology gap in semiconductor fabrication, design and manufacturing processes due to limited R&D, insufficient innovation and inadequate technology transfer mechanisms. 

However, with policy incentives in place, industry-led public-private consortia are advancing R&D by focusing on areas such as chip design, process technologies, and system integration.

India’s globally recognised software expertise is helping develop indigenous semiconductor design tools.

Skilled workforce:

The industry is highly specialised and direly needs a skilled workforce. However, there is a shortage of trained professionals and labour. Leading institutions are now scaling their educational courses specifically for the semiconductor industry.

Certification programmes focused on design, engineering and manufacturing help professionals to upgrade their skills. Industry-academia collaborations are on the rise, facilitating on-the-job training.

Financial constraints:

The industry requires substantial capital investment, particularly to set up fabrication plants and related infrastructure. The problem is exacerbated by high upfront costs and a long gestation period before returns are realised.

The government is creating an ecosystem to enable public-private partnerships to reduce capital risk. Additionally, incentives and tax breaks are being provided to make loans more accessible. However, more needs to be done to attract FDI through diverse financial models to achieve equity participation and co-financing of projects.

Cybersecurity & IP risks:

Semiconductor manufacturing demands sensitive intellectual property (IP), including cutting-edge designs and technologies. As India’s semiconductor industry expands, cybersecurity risk and IP theft can be concerning.

As a country, we are strengthening cybersecurity by investing in secure networks, encrypting sensitive data and setting up monitoring systems to detect potential threats.

India needs to establish a national cybersecurity framework with stringent protocols for access control, data encryption and threat monitoring, especially for semiconductor fabs. India also needs to enact IP protection laws for the semiconductor industry to safeguard innovation. This would provide the industry with legal backing to secure its proprietary designs and processes from unauthorised access.

Also Read: Breaking | Union Budget 2026 Live: ₹40,000 Crore Semiconductor Mission 2.0 Announced

The Road Ahead:

India’s semiconductor mission is moving beyond policy intent to develop a long-term technology and manufacturing ecosystem. With ISM 2.0, the country is positioning semiconductors not just as an industrial opportunity, but as a strategic pillar for economic growth, digital infrastructure and technological self-reliance.

India’s biggest advantage is it’s pragmatic approach. Combined with a strong talent base, an expanding electronics market and global supply chain diversification, this creates a credible growth opportunity.

ISM 2.0 is the foundation, but India’s real success ultimately depends on how effectively we convert ambition into scalable manufacturing and innovation leadership over the next decade.