India's $200 billion chip opportunity hinges on ecosystem depth: Report

An EY-IESA report says India's next semiconductor phase will depend less on adding factories and more on building suppliers, advanced packaging, R&D, specialised talent and domestic demand

India’s domestic semiconductor market is projected to reach $200 billion by 2035 from about $64 billion in 2026, but the next phase of the country’s chip push will be shaped less by the number of manufacturing facilities announced and more by the depth of the ecosystem built around them, according to a report by EY and the India Electronics and Semiconductor Association (IESA).

 

The report, Semicon India 2.0: From capacity creation to ecosystem leadership, said India would need capabilities spanning semiconductor design, fabrication, advanced packaging, materials, equipment, research and development (R&D), and specialised talent as its manufacturing base expands. 

The Semicon 2.0, launched by the Central government in July with an outlay of ₹1.275 trillion, has six pillars: chip design, machines and materials, fabrication, advanced packaging, research and development, and talent development.

  

Under Semicon 1.0, which had an outlay of  ₹760 billion, 12 semiconductor projects have been approved with cumulative investments of about ₹1.64 trillion. 

From anchor projects to the ecosystem around them

India’s first phase of semiconductor incentives focused on creating manufacturing capacity across fabrication, packaging and design. Semicon 2.0 goes a step further by supporting the design, machines and materials, fabrication, advanced packaging, R&D and talent development.

 

The report said the broader framework reflected a shift from creating individual manufacturing facilities towards developing suppliers and capabilities around them.

 

It noted that the economics of a semiconductor facility depend not only on the initial capital cost but also on the availability, quality and cost of materials, spares, technical services and equipment support over its operating life. Heavy dependence on imported inputs could raise domestic semiconductor output without producing a similar increase in domestic value addition, it said.

Gaps remain in suppliers, skills and policy alignment

While Semicon 2.0 covers a wider part of the value chain, the report identified continuing gaps in infrastructure, domestic suppliers, technology access, talent and commercialisation capabilities.

 

It also pointed to uneven state-level support. Several states did not have dedicated semiconductor incentive policies as of July 2026, while some existing state policies excluded design companies or offered limited support for utilities such as water, which is a major requirement for semiconductor fabrication.

 

On talent, the report said India’s existing strength was concentrated largely in chip design and engineering services. Manufacturing would require a wider pool of process and equipment engineers, packaging and testing specialists, technicians, cleanroom personnel, and quality and reliability professionals.

 

India already has nearly 20 per cent of the world’s semiconductor design engineers, according to the report, but the expansion of fabrication and packaging capacity would require training aligned with the operating requirements of the new facilities.

 

The report also recommended semiconductor-specific fiscal measures such as tax credits and lower withholding taxes, greater alignment between central and state policies, simpler export and customs procedures, and integrated semiconductor manufacturing clusters with common infrastructure.

 

It proposed dedicated certification programmes for design, fabrication and advanced packaging, along with a national semiconductor research and commercialisation platform modelled on institutions such as Taiwan’s Industrial Technology Research Institute and Belgium’s IMEC.