Can India Catch Up With the US, Taiwan and China in the Global Chip Race?

India’s Semiconductor Ambitions Take Shape

India has set its sights on becoming a meaningful player in the global semiconductor supply chain, positioning itself as an alternative manufacturing hub for companies seeking to diversify production away from China. While the country remains far behind established leaders such as the United States, Taiwan, and China, recent investments and policy momentum suggest a shift that could reshape India’s role in the chip ecosystem.

In October, Kaynes Semicon, a small electronics manufacturer based in Gujarat, shipped its first batch of chip modules to a client in California. The shipment marked a symbolic milestone for India’s semiconductor ambitions, as the chips were assembled at a newly built facility supported by incentives from Prime Minister Narendra Modi’s $10bn semiconductor programme, announced in 2021.

The project involved technology partnerships with Japanese and Malaysian firms, highlighting India’s strategy of collaborating with established global players rather than attempting to build an ecosystem entirely from scratch.

A Strategic Push Beyond China

India’s semiconductor drive is part of a broader effort to present itself as a “China Plus One” destination amid rising geopolitical tensions, supply chain disruptions, and trade restrictions affecting global manufacturing.

While India has had mixed success in attracting large-scale manufacturing away from China, progress is becoming visible. The country’s first commercial chip foundry, currently under construction in Gujarat, is a key example. The $11bn project, backed by Tata Group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), aims to manufacture mature chips and has already onboarded Intel as a potential customer.

If completed on schedule, the facility could begin operations by late 2026, marking a turning point for India, which has seen multiple semiconductor fab projects fail over the past two decades.

Understanding Where India Fits in the Chip Value Chain

The semiconductor supply chain is divided into three main stages:

Design – dominated by the United States
Fabrication (foundries) – led by Taiwan, particularly TSMC
Assembly, Testing and Packaging (ATP) – where China holds a major share

India has long been strong in chip design, employing roughly 20 percent of the global semiconductor design workforce. However, translating that talent base into manufacturing capacity has been a persistent challenge.

The upcoming Tata-PSMC foundry will focus on producing mature chips in the 28nm to 110nm range, which are widely used in consumer electronics, automobiles, industrial equipment and power devices. While these chips are not cutting-edge, they account for the majority of global semiconductor demand.

By contrast, advanced chips below 7nm — essential for artificial intelligence, data centres and high-performance computing — remain firmly dominated by Taiwan and the US.

Why Assembly and Packaging Is India’s Entry Point

More than half of India’s $10bn semiconductor incentive programme is allocated to the Tata-PSMC foundry. The rest supports nine ATP projects, including:

A $2.7bn Micron Technology facility in Gujarat
A $3.3bn Tata Group ATP plant in Assam
Smaller projects backed by Foxconn, Renesas, and Stars Microelectronics

ATP facilities require lower capital investment, carry less technological risk, and offer quicker returns compared to full-scale foundries. For India, they represent the most practical entry point into semiconductor manufacturing.

However, most projects have faced delays. Micron’s plant, initially expected to start production in 2024, has pushed its timeline into the latter half of the decade. Tata’s Assam facility has also been delayed to 2026.

Domestic Demand Is the Real Driver

India’s semiconductor push is driven less by export ambitions and more by surging domestic demand. The country’s chip market is projected to grow from $50bn today to $100bn by 2030, fueled by expansion in smartphones, electric vehicles, renewable energy, and digital infrastructure.

India’s chip imports surged 36 percent in 2024 to nearly $24bn, with China accounting for about 30 percent of supplies. Imports have continued rising this year, now making up roughly 3 percent of India’s total import bill.

Producing even mature chips domestically could significantly reduce import dependence and strengthen India’s manufacturing ecosystem.

Falling Behind on Incentives?

Despite recent progress, India’s semiconductor incentives remain modest compared with global competitors. China has committed around $48bn, while the US has allocated $53bn under the CHIPS Act.

Experts warn that to scale production, attract advanced technology, and move toward smaller chip nodes, India will need:

Stronger and longer-term incentives
Easier regulatory processes
Reliable power and logistics infrastructure
Deeper partnerships with US and Asian chipmakers

There is also concern that India’s decision to limit certain incentives to domestic firms could discourage multinational design companies from expanding R&D operations in the country.

The Geopolitical Dimension

India’s semiconductor plans are unfolding amid growing trade uncertainty. While US President Donald Trump has threatened steep tariffs on chips made outside the US, none have yet been imposed. Semiconductors also remain exempt from broader US tariffs on Indian goods related to India’s Russian oil imports.

Given that US-based firms control over half of the global semiconductor market, maintaining strong technology and trade ties with American companies remains critical for India’s ambitions.