Can India Close the Chip Gap? Inside Its Push to Join the Global Semiconductor Race
India is accelerating its efforts to position itself as an alternative manufacturing hub for global semiconductor companies seeking to diversify production beyond China. While recent developments signal growing momentum, experts say the country still faces major hurdles in catching up with established leaders such as the United States, Taiwan, and China.
In October, Kaynes Semicon, a small electronics manufacturer based in Gujarat, shipped its first batch of chip modules to a client in California. The chips were assembled at a new facility backed by incentives under Prime Minister Narendra Modi’s $10bn semiconductor initiative launched in 2021, with support from Japanese and Malaysian technology partners.
India’s broader ambition includes hosting its first commercial foundry for mature chips, now under construction in Gujarat. The $11bn project, supported by technology transfer from Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), has also onboarded US chip giant Intel as a potential customer. Construction progress marks a turning point after more than two decades of stalled proposals due to financing, route, and technical challenges.
Semiconductors are typically designed, fabricated in foundries, and then assembled and packaged. The US dominates chip design, Taiwan leads in fabrication, and China has emerged as a global leader in assembly, testing, and packaging (ATP). India’s entry into the sector, analysts say, could strengthen its role in global supply chains, though catching up in advanced technologies will take time.
The Tata Group’s foundry project, developed in partnership with PSMC, is expected to focus on chips ranging from 28 to 110 nanometres—so-called mature chips widely used in consumer electronics, vehicles, and industrial equipment. Tata Electronics has also signed an agreement with Intel to explore manufacturing and packaging at its upcoming facilities. The foundry has received a 50 percent subsidy from the Indian government and could begin operations as early as December 2026.
More than half of the government’s semiconductor incentive package is allocated to the Tata-PSMC venture, with the remainder supporting nine other projects, mostly in the ATP segment. These include facilities by Micron Technology in Gujarat and Tata Group in Assam, along with smaller ventures backed by partners such as Foxconn, Renesas Electronics, and Stars Microelectronics.
ATP projects are seen as an easier entry point, requiring smaller investments and less specialized technology. However, many of India’s semiconductor initiatives have faced delays. Micron’s Gujarat facility and Tata’s Assam unit have both revised their production timelines, while companies have declined to comment on the reasons.
There have been some early successes. Kaynes Semicon exported sample chip modules in October, and CG Semi, part of the Murugappa Group, has begun trial production. At the same time, reports of large political donations by companies selected for subsidies have drawn scrutiny, though such contributions are legal and the firms involved have declined to comment.
India’s semiconductor strategy is driven largely by domestic demand, which is expected to double from $50bn today to $100bn by 2030. Imports of chips rose sharply in 2024 and continue to climb in 2025, with China remaining the largest supplier. Officials argue that even producing mature chips domestically would help improve India’s trade balance and strengthen chip-dependent industries.
Despite unprecedented support, India’s incentives remain far smaller than those of major competitors. China has committed around $48bn to its chip sector, while the US has allocated $53bn under its CHIPS Act. Analysts say India will need sustained government backing, improved infrastructure, and foreign partnerships to move beyond mature chips and compete at advanced nodes such as 7nm or 3nm.
India also faces competition in chip design, an area where it has traditionally been strong, employing roughly one-fifth of the global design workforce. Experts warn that insufficient incentives could push multinational research and development elsewhere, eroding this advantage.
Geopolitics adds another layer of uncertainty. While India’s chip facilities are expected to export to markets including the US, Japan, and Taiwan, global trade tensions and tariff threats could complicate partnerships. Still, industry leaders stress that collaboration with US-headquartered firms—who control more than half of the global semiconductor market—remains critical.
As the global chip race intensifies, India’s progress reflects a mix of promise and constraint. While recent projects mark tangible advances, turning ambition into global competitiveness will require sustained policy precision, technological partnerships, and long-term investment in one of the world’s most complex industries.
