Is smart hardware India's opportunity to lead the global race in GenAI?

From data centres and edge devices to robotics and spatial computing, hardware is being radically re-engineered to meet the demands of AI models that require massive processing power and energy

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After years of being overshadowed by software, hardware is back — and not just in the background. The surge in Generative AI (GenAI) applications is pushing hardware to the forefront of India’s digital revolution, reversing the long-held belief that computing infrastructure was a solved problem, according to a new Deloitte report.

 

From data centres and edge devices to robotics and spatial computing, hardware is being radically re-engineered to meet the demands of AI models that require massive processing power, speed and energy efficiency. The Deloitte report ‘Tech Trends 2025 – India Perspective’ called it a “hardware renaissance”, with India aggressively positioning itself as a key global hub for this AI-fuelled transformation.

 

“Software ate the world — but now, hardware is eating the world. This is evident across various sectors such as healthcare, manufacturing, agriculture, finance and beyond, where AI hardware is enhancing operational efficiency and helping India leapfrog into a new phase of technological growth,” the report reads.

 

India’s AI hardware and semiconductor race 

India’s semiconductor market is expected to reach ₹80.3 billion by FY28, driven by demand for chips that power AI across industries, the report projected. The IndiaAI Mission, with an outlay of over ₹10,000 crore, aims to provide access to 18,000+ GPUs, making India the home of the world’s most affordable compute — $1 per hour, as compared to $2.5–3 globally.

 

Public-private initiatives are multiplying. A leading Indian electronics manufacturer, in partnership with global firms, is building semiconductor fabs in Gujarat and Assam, while another conglomerate is setting up a 3 GW AI data centre powered by green energy.

 

As demand shifts from general-purpose CPUs to specialised processors like GPUs, NPUs and neuromorphic chips, India is also seeing a spike in domestic innovation, the report highlighted. These chips are powering real-time AI use cases in sectors like healthcare, autonomous driving, urban surveillance and smart factories.

 

Hardware’s expanding reach in India’s AI landscape 

India is witnessing a transition from centralised cloud computing to on-premises and edge AI systems (a distributed computing system that brings computation and data storage closer to the sources of data, like devices, sensors, and users), particularly in banking, defence and healthcare. Organisations are deploying custom AI hardware stacks — especially NPUs (Neural Processing Units) — to lower latency and gain data control.

 

In manufacturing, AI hardware is enabling autonomous robotics and predictive maintenance. The rise of digital twins, meanwhile, is driving demand for high-performance local computing for immersive simulations, the report noted.

 

What is fuelling the rise of spatial computing? 

Fuelled by this hardware resurgence, spatial computing (merging digital content with the physical world, enabling users to interact with computers in immersive ways) has emerged as one of India’s most transformative trends. It blends AI, AR/VR/MR and real-time sensors to enable natural interactions with the digital world—no mouse or keyboard needed.

 

India’s spatial computing market is projected to hit $11.3 billion by 2030, with a CAGR of 24.6 per cent. The AR/VR segment alone is expected to generate $917.5 million by 2025, led by AR software, the report said.

 

Across industries, the applications are multiplying:

 

> Healthcare: VR labs in Chennai train medical students on virtual organs.

> Automotive: AI-driven platforms allow customers to customise cars in 360° before production.

> Retail: VR-based gamified shopping experiences convert engagement into in-store footfalls.

> Agriculture: Smart digital twins simulate farming conditions to enhance crop yields.

> Urban planning: The ‘Sangam: Digital Twin’ initiative integrates 5G, AI and XR to redesign cities in real time.

 

What makes these experiences possible? Purpose-built AI hardware. Whether it’s motion-sensing chips, spatial audio processors, or real-time rendering units, these are now essential building blocks.

 

Indian start-up ecosystem filling hardware gaps 

India’s start-up ecosystem is racing to fill hardware gaps. The Experiential Technology Innovation Centre (XTIC) at IIT Madras is building a 1,000-member XR start-up consortium to develop affordable components—like haptic gloves, spatial displays and smart headsets—many of which are being designed for rural India.

 

At the same time, the lack of advanced headsets and high-end GPUs is fuelling import substitution. Indian firms are prototyping cost-effective alternatives to rival dominant Chinese players, with a strong focus on energy efficiency and low-latency design.

 

What are the challenges of expanding hardware for AI? 

However, challenges persist. Hardware for AI is energy-intensive. India’s data centre power demand is expected to grow by 160 per cent by 2030, prompting discussions around small nuclear units and direct power supply lines for AI clusters.

 

Regulation is another grey area, the report noted, especially for spatial computing, which collects sensitive real-world data. As of now, India lacks a dedicated regulator for XR and immersive tech, leaving gaps around data governance and consumer safety.

 

However, the report indicates that AI is no longer just a software challenge. As GenAI demands more from the physical layer, hardware is now the front line of innovation. And with hardware evolving from a commodity to a competitive edge, India’s ability to design, manufacture and deploy AI-optimised chips and devices could define its position in the global tech hierarchy.