Design, packaging or fabs: Where can India compete in global chipmaking?

Semicon 2.0 marks a shift from announcing projects to building capabilities. Here's where experts believe India can create lasting value in the global semiconductor industry

  With Semicon 2.0 now in place, India’s semiconductor push is moving from project approvals to execution. The India Semiconductor Mission (ISM) has backed projects spanning wafer fabrication, packaging, testing and chip design.

 

But the harder phase begins now. Semiconductor projects require large investments, specialised skills, dependable suppliers and customers willing to commit orders. Industry experts say their success will depend not merely on starting production, but on meeting global standards for cost, quality and scale.

 

India has entered several parts of the semiconductor value chain, but each presents a different opportunity and a different set of risks. The bigger question, therefore, is not whether India can manufacture chips, but where in the semiconductor value chain it can compete globally.

 

Why does India need more than fabrication plants?

 

Unlike many manufacturing industries, semiconductor production cannot depend on standalone factories.

 

The value chain begins with research, chip architecture and design. It then extends to IP, electronic design automation (EDA) software, specialised equipment and materials, wafer manufacturing, packaging, testing and, finally, electronic products. A weakness at any stage can limit the competitiveness of the entire industry.

 

Sarthak Sarin, partner at Khaitan & Co, said the government’s strategy had evolved in stages. ISM 1.0 focused on attracting investment and establishing manufacturing capacity. Semicon 2.0, by contrast, seeks to strengthen the wider ecosystem instead of concentrating only on individual projects.

 

Hitesh Bhardwaj, general manager, semiconductors and devices, Mitsubishi Electric India, said, “While fabrication remains important for supply chain resilience, the larger opportunity lies in ensuring that investments across different segments complement one another and create an integrated ecosystem.”

 

Where can India compete?

 

Industry experts agree that India does not need to dominate every stage of the semiconductor value chain to emerge as a globally competitive player. Instead, the country's biggest opportunities lie in areas where it already has established strengths or can build sustainable advantages.

 

One such area is chip design and intellectual property (IP). "India is home to nearly one-fifth of the world's integrated circuit (IC) design professionals and hosts major engineering and design centres for leading global semiconductor companies," said Sarin.

Experts say this strong talent base positions the country well to move beyond providing design services and towards developing India-owned IP and fabless semiconductor companies.

 

Another promising segment is advanced packaging and assembly, including Outsourced Semiconductor Assembly and Test (OSAT) and Assembly, Testing, Marking and Packaging (ATMP). Deepak Gupta, semiconductor and AI technology expert, and co-founder of Style Lounge, believes advanced packaging presents a major opportunity for India as chiplet-based architectures become mainstream. Unlike wafer fabrication (the process of manufacturing semiconductor chips on silicon wafers), it requires relatively lower capital investment while enabling countries to integrate into global semiconductor supply chains more quickly.

 

Gupta added that mature-node semiconductor manufacturing, which focuses on producing proven, high-volume chips used in sectors such as automotive, industrial equipment, power electronics, and telecom, also offers significant potential. Combined with India's growing electronics market, these segments can create sustainable long-term value.

 

What will make semiconductor projects commercially viable?

 

Gupta said while incentives can help build fabs, they cannot ensure long-term success. “Commercial viability depends on achieving high manufacturing yields, strong capacity utilisation and a steady pipeline of customers,” he said.

 

Manufacturing yield refers to the proportion of chips produced by a plant that meet the required quality standards. A low yield raises the cost of each usable chip, making it harder for a manufacturer to compete on price.

 

Sarin described yield as the most important determinant of a semiconductor plant’s economics because it directly affects production costs and pricing. He said India’s ecosystem was gradually reaching a stage at which commercial viability was becoming possible, particularly in design, packaging and back-end manufacturing.

 

Bhardwaj said government support had created momentum, but the next phase would depend on operational efficiency, consistent quality and long-term customer confidence.

 

India’s growing electronics manufacturing base could also create domestic demand for chips used in automobiles, industrial automation and consumer electronics, he added.

 

What gaps must India close?

 

Despite recent progress, India’s semiconductor ecosystem remains incomplete.

 

One of the largest gaps is in the upstream supply chain. India continues to depend heavily on imports of semiconductor-grade chemicals, speciality gases, wafers, substrates and sophisticated fabrication equipment, Sarin said. Developing domestic capabilities in these areas will be important for improving supply security and global competitiveness.

 

Specialised talent is another challenge. India has a large engineering workforce, but semiconductor manufacturing requires expertise in fabrication processes, yield improvement, advanced packaging and system integration.

 

Stronger collaboration among companies, universities and research institutions will be needed to develop these skills and accelerate innovation.

 

Financing is equally important. Gupta said semiconductor start-ups required patient capital because chip-development cycles were longer and considerably more capital-intensive than software-development cycles.

 

Bhardwaj said execution would ultimately determine whether India could compete globally. Sustained investment in skills, supply chains, semiconductor-grade materials, infrastructure and industry-academia partnerships would be essential for turning approved projects into a durable semiconductor industry.