India’s Semiconductor Strategy
Dr Saroj Bishoyi, Research Fellow, VIF

In pursuit of its goal to make India a global hub for electronics design and manufacturing, the government on 31 May 2023 announced that it is now accepting new applications under the Modified Semicon India Programme (MSIP) from 1 June for setting up semiconductor fabs and display fabs in India.[1] India Semiconductor Mission (ISM), the governing body of MSIP, will receive and evaluate the applications from both new and existing applicants. The move comes fifteen months after the first closing round of Semicon India Programme, which was open for 45 days till 15 February 2022. In the first round, it received three applications for semiconductor fabs and two applications for display fabs that were evaluated by ISM and its Advisory Committee.[2] It received five applications for setting up compound semiconductors and semiconductor ATMP/OSAT facilities in India. As of 31 May 2023, it also received a total of 26 applications under the Design Linked Incentive (DLI) scheme, of which five applications have been granted approval. The announcement of the modified programme is expected to facilitate more industry players to make semiconductors in the country.

Welcoming the applications from both new and current industry players, the Minister of State for Electronics &Information Technology (MeitY), Rajeev Chandrasekhar said in a tweet on 31 May 2023 that the “first window for more expensive 28 nm fabs was kept open for 45 days only in January 2022 and received 3 applications”. Now, the “Strategy is also encouraging mature nodes of >40nm”. Under the MSIP, a fiscal incentive of 50 per cent of the project cost will be available for the companies, consortia and joint ventures (JVs) planning to set up semiconductor fabs in India of any node (including mature nodes). Similarly, a fiscal incentive of 50 per cent of the project cost is available for setting up of display fabs of specified technologies in India.

The fiscal support of 50 per cent of project cost will be extended to the applicants, who are “found eligible and have the technology as well as capacity to execute such highly capital and resource intensive projects”.[3] In this regard, the central government will work closely with the State governments to setup “High-Tech Clusters” with required infrastructure in terms of “land, semiconductor grade water, high quality power, logistics and research ecosystem to approve applications for setting up at least two greenfield Semiconductor Fabs and two Display Fabs” in India.[4] In addition, to promote indigenous semiconductor manufacturing in India, the government has also exempted Basic Customs Duty (BCD) on specified capital goods, electrical equipment, machinery, and other instruments and their parts for use in the semiconductor manufacturing in the country.[5]

The programme has been modified in view of the enhanced incentives offered by the countries such as the US, Taiwan, South Korea, Japan and China, which already have an established semiconductor ecosystem, while Taiwan and South Korea have advanced node technologies. The strategy comes after the government’s consultation with various semiconductor companies and private experts. It also comes because the initial strategy received dismal response from the global players, where only five applications were evaluated – three semiconductor fabs and two display fabs. The modified strategy is, therefore, expected to attract more global players for setting up semiconductor and display fabs in India. The objective is to make India a semiconductor nation by developing semiconductor and display manufacturing ecosystem in India to meet the growing demands for semiconductor-chips.

Demand for Semiconductor-Chips in India

The demand for semiconductor-chips in India has significantly increased following the global Covid-19 pandemic because of the increasing use of electronic goods.[6] At present, India has more than 800 million active internet users. With 5G and the largest rural broadband connectivity network project at Bharat Net, it plans to connect more than 400 million users in the near future and bring the number of people having access to the internet to 1.2 billion.[7] This will lead to an enhanced demand for phones, laptops, servers, internet connectivity and cloud usage. In addition, the adoption of electric vehicles (EVs) will also lead to an increased demand for chips as a large number of chips are used in an EV than a normal car. For instance, a normal car uses around 300 chips, whereas a new EV uses up to 3,000 chips. However, the shortage of semiconductors has started affecting every sector of the Indian economy as new technologies become more accessible and become integral part of the modern day life. Moreover, the geographical concentration of semiconductor manufacturing, especially in the East Asia and the ongoing US-China tech war have generated speculation in India over the semiconductor supply chains security, which led to a realisation of making India self-reliant in critical technologies, including semiconductor-chips.

India currently imports almost 100 per cent of semiconductors. It spent US $67.637 billion on electrical machinery and equipment imports (about 9.5 per cent of India’s total import) in FY 2022-23.[8] The demand for semiconductors will further increase as it targets to achieve US $300 billion worth of electronics manufacturing in India and US $ 120 billion in exports by FY 2026-27 from US$23.57 billion in FY 2022-23, for realizing the goal of a US $ 1 trillion digital economy by 2025.[9] As the demand for semiconductor is growing, the India Electronics and Semiconductor Association (IESA) estimated that India’s semiconductor market, which is at $27 billion in 2021, projected to reach $64 billion by 2026 with a healthy Compound Annual Growth Rate (CAGR) of 16 per cent.[10] Its display panel market, which stood at $7 billion in 2021, is expected to reach $15 billion by 2025.[11] As the impact of digital on lives and business has considerably accelerated, the global semiconductor markets have increased with sales growing by more than 20 per cent to about $600 billion in 2021.

McKinsey analysis based on a range of macroeconomic assumptions projected that the global semiconductor market with annual growth averaging from 6 to 8 percent to become a trillion-dollar industry by 2030.[12] While the IESA projected that India’s semiconductor market would account for $85 billion-$100 billion in the global semiconductor market by 2030. Prime Minister Narendra Modi, while addressing the first Semicon India Conference 2022, emphasized that India’s own consumption of semiconductors will cross US $110 billion by 2030.[13] This growing demand for semiconductors will come from sectors such as consumer electronics and mobile phones, computers and data centers, automobiles, internet of things (IoT) devices, robotics, the 5G/6G ecosystem, smart TVs, and defence systems.

Semicon India Programme

In a big step towards realising the vision of Atmanirbhar Bharat or Self-Reliant India and positioning India as the global hub for Electronics System Design and Manufacturing (ESDM),[14] the Modi government in December 2021 announced the Semicon India Programme with an outlay of Rs. 76,000-crore (around $10 billion) under the Production Linked Incentive (PLI) Scheme, covering up to fiscal support of 50 per cent of project costs to develop semiconductors and display manufacturing ecosystem in India.[15] The Programme also offers fiscal support of 50 percent of Capital Expenditure for establishing Compound Semiconductors and Semiconductor Assembly, Test, Marking and Packaging (ATMP)/ Outsourced Semiconductor Assembly and Test (OSAT) facilities in India. Apart from fiscal support, the companies will also be “supported through purchase preference in the procurement of electronic products by the government under the Public Procurement (Preference to Make in India) order.”[16] In the current geopolitical scenario, it notes that developing “trusted sources” of semiconductors and displays hold strategic importance and are the key to critical information infrastructure security. In this context, the semicon India programme is expected to propel innovation and develop domestic capacities to make India a global hub for high-tech production, increase the share of manufacturing in the economy, create high-tech jobs, and integrate the country to the global semiconductor value chain.

Now, under the MSIP, the industry players, who had earlier applied under the scheme for setting up of semiconductor fabs and display fabs are allowed to submit their applications after incorporating suitable modifications in their proposals. As already mentioned, the MSIP provides 50 per cent financial support to companies for setting up semiconductor, display manufacturing, and ATMP/OSAT ecosystem in addition to exemption of BCD on specified items. In the union budget 2023-24, the government has also allocated ₹3,000 crores for the Semicon India Programme, which will help in the development of the semiconductor and display manufacturing facilities in the country. This is expected to pave the way for India’s growing presence in the global electronics value chains.

India Semiconductor Mission (ISM)

For implementing the schemes, the government established India Semiconductor Mission (ISM) as an Independent Business Division within the Digital India Corporation (DIC), which aims to “build a vibrant semiconductor and display design and innovation ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design.”[17] ISM focuses on attracting leading semiconductor industries for chip and display manufacturing in India, aiming to ensure security of its own growing demand for semiconductor-chips and electronics and also become a key player in the global semiconductor supply chain. Under the ISM initiative, it has announced a number of schemes including the PLI Scheme, Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme and Scheme for Promotion of Manufacturing Components and Semiconductors (SPECS).

At the same time, it aims to strengthen its current advantage in chip design. Nearly 2000 cutting-edge chips are designed every year by more than 20,000 Indian engineers for global companies such as ARM (a British semiconductor and software design company), AMD, Intel, Qualcomm (American multinational semiconductor companies), MediaTek (Taiwanese fabless semiconductor company), and Nvidia (an American software and fabless company).[18] India’s current chip design talent pool makes up to 20 per cent of the world’s semiconductor design engineers. In line with Semicon India Programme, the Chips to Startup (C2S) programme further aims to train over 85,000 engineers qualified in ESDM disciplines in the next five years. In this regard, the DLI scheme offers financial incentives and design infrastructure support across various stages of development and deployment of semiconductor design with the objective of nurturing 100 indigenous semiconductor design companies; achieving indigenization in semiconductor and electronic products with intellectual property (IP) rights; and, strengthening the design infrastructure for the startups and MSMEs.[19] The Centre for Development of Advanced Computing (C-DAC), as the nodal agency implements the DLI scheme with the aim to create a vibrant semiconductor chip design ecosystem in India.

Proposals for Setting up Semiconductor Fabs in India

During the first round of applications, which was open for 45 days only till 15 February 2022, ISM received five applications for Semiconductor and Display Fabs with total investment of Rs. 153,750 crore (US $20.5 billion).[20] ISM and its Advisory Committee have evaluated the following three proposals for setting up 28nm to 65nm semiconductor fabs in India:

  • A Joint Venture (JV) comprising Vedanta and Foxconn, Taiwanese electronics contract manufacturer, signed a Memorandum of Understanding (MoU) with the Gujarat government in September 2022 to invest $19.5 billion to set up a semiconductor and display production plants.[21] Vedanta-FoxConn announced to build the plants in Dholera Special Investment Region (SIR) of the state, and the project is expected to create 10,000 jobs.
  • International semiconductor consortium ISMC, a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, has signed a MoU with the Karnataka government to invest Rs 22,000 cr ($3 billion) in the state to set up a chip-making plant in 2023. ISMC has proposed a 65-nanometer analog semiconductor fabrication unit. Karnataka government’s investment promotion division in a tweet stated that it will generate more than 1,500 direct jobs and 10,000 indirect jobs.[22]
  • IGSS Ventures Pte. Ltd (IGSSV), a Singapore-based technology investment holding firm, and Guidance Tamil Nadu in July 2022 signed a MoU for establishing a 300-acre semiconductor high-tech park in the State with an investment and grants of ₹25,600 crore (US$3.5 billion).[23]The state has allocated nine strategic sites, including two in the vicinity of Chennai, to setup a semiconductor fab for producing three technology nodes of wafers, ranging from 28nm, 45 nm and >=65 nm, and an industry ecosystem infrastructure. The project is expected to generate 5,000 direct jobs in the next five years.

ISM received and evaluated two applications from Vedanta and Elest for establishing Display Fabs with the projected investment of US $6.7 billion, wherein they have sought a fiscal support of nearly US $2.7 billion from the government. The two applications were received for setting up Gen 8.6 TFT LCD Display Fab and sixth Generation Display Fab for the manufacture of AMOLED display panels that are used in the smartphones.[24] Besides, four companies: i) SPEL Semiconductor Ltd., ii) HCL Technologies, iii) Syrma Technology and iv) Valenkani Electronics have registered for setting up semiconductor packaging; and Ruttonsha International Rectifier Ltd. for Compound Semiconductors facilities in India.

The programme received a big boost after Micron Technology announced on 22 June 2023 to invest US $825 million in two phases for setting up assembly and testing facility in the state of Gujarat.[25] Under the government’s modified ATMP scheme, Micron will receive a fiscal support of 50 percent of the project cost from the central government and 20 percent of the project cost from the Gujarat government. The combined investment over the course of two phases will be up to $2.75 billion. The project is expected to create up to 5,000 new direct and 15,000 community jobs in next five years. Micron’s decision to investment in India comes amidst intensifying technology competition and rivalry between the US and China. After the Cyberspace Administration of China (CAC) in May 2023 banned Micron to sale its products in China on national security grounds, the company is seeking to expand and diversify its presence. Moreover, Applied Materials has announced to invest $400 million for establishing a Semiconductor Centre for Commercialization and Innovation in India to further strengthen the semiconductor supply chain diversification; and, Lam Research has submitted a proposal to train 60,000 Indian engineers through its “Semiverse Solution” to accelerate India’s semiconductor education and workforce development goals.[26]

Meanwhile, the government has also reached out to other global semiconductor manufacturing companies based in the Netherlands, Japan and South Korea for establishing semiconductor manufacturing facilities in India. On the basis of discussions with potential investors, it is expected that work for setting up the first semiconductor facility in India will begin soon.

The Way Ahead

India’s previous attempts to develop semiconductor manufacturing plants in India failed, because of the apprehensions over the business, tax and trade environment issues. In the last few years, the Modi government has come up with right policies, huge financial incentives, logistics support in addition to creating easy of doing business environment in the country to attract leading global semiconductor companies. These steps address the past apprehensions and have generated interest among key industry players, who are looking to set up semiconductors and display fabs in India. Thus, India, as the world’s fifth-largest economy with growing middle class and tech talents, is poised to play a larger role in the global semiconductor supply chain in the years ahead.

The indigenous production of semiconductor-chips and display panels would significantly reduce India’s electronics import bill since India’s electronics import bill is the second largest after oil.[27] This will create new talent pool and generate numerous employment opportunities for the Indian youths. It will have big impact on defence manufacturing sector as India aims to become a net defence exporter by 2025. In addition, India’s cyber security profile as well as digital economy will significantly improve. This will further advance India’s global positioning in terms of geopolitics and help address the prevailing concerns over global semiconductor supply chains. Indeed, developing indigenous “capabilities in semiconductor manufacturing is an imperative for industrial growth, digital sovereignty, and technological leadership. It is the foundation for establishing a trusted electronics supply chain which is critical for national security and self-reliance in strategic sectors.”[28]

Finally, semiconductor-chip design, manufacturing, and assembly are the three important components of global semiconductor supply chain. At present, the US based companies play leading role in semiconductor design, where the American companies hire thousands of Indian engineers for chip design. East Asia led by Taiwan, Singapore and Japan respectively produce about 75 to 90 percent of global semiconductors. While China plays a dominant role in the semiconductor assembly part of the supply chain.[29] Given the geopolitical conflict and its impact on the semiconductor supply chain, where the US and its allies are looking at alternatives to China, India can play an important role in this global value chain. In this regard, India needs to further strengthen its chip design capabilities by nurturing indigenous semiconductor design industries, developing IP rights and design infrastructure while focussing on developing semiconductor and display fabs in India. Its current strength in chip design could be leveraged to develop world class industry in Outsourced Semiconductor Assembly and Test (OSAT) and Assembly, Test, Marking and Packaging (ATMP) industries, which would help India in becoming an integral part of the global semiconductor value chain because chip design and ATMP/OSAT together constitute over 50 percent of semiconductor supply chain revenue.[30] Unlike semiconductor fabs, ATMP/OSAT facility set-ups also take care of less capital-intensive parts of the chip making. India’s growing technology partnership with US and its allies could help achieve this goal and integrate to the global semiconductor value chain. The government’s speedy and smooth approval of Micron Technology’s proposal to set up assembly and testing facility in India with combined investment of US $2.75 billion is a right step in this direction. With such policy decisions, incentive programmes, logistics supports and sustained leadership attention, India is poised to play a critical role in the global semiconductor value chain in the coming years.


[1]While the application window of Semiconductor Fabs and Display Fabs will remain open till further notice. The application window of Compound Semiconductors, Semiconductor ATMP/OSAT and the DLI scheme will remain open till December 2024. See “Government Invites Applications for Setting up Semiconductor and Display Fabs as per Modified Semicon India Programme from 1st June”, Press Information Bureau (PIB), Government of India, Delhi, 31 May 2023 at Press Information Bureau ( Last accessed on 14 June 2023
[2]The government has established a 17-member Advisory Committee of experts comprising of senior government officials, established academicians as well as industry and domain experts to steer and guide the Semicon India Programme. The Committee is chaired by the Minister of Electronics and IT with the Minister of State, MeitY as the Vice-Chairperson. Secretary, MeitY is the Convenor of the Committee. For details see at Advisory Committee | India Semiconductor Mission ( Accessed on 28 June 2023
[3] “Modified Programme for Semiconductors and Display Fab Ecosystem”, MeitY, GoI, Delhi, atModified Programme for Semiconductors and Display Fab Ecosystem | Ministry of Electronics and Information Technology, Government of India ( Accessed on 16 June 2023
[5]For details see “Basic Custom Duty (BCD) Exemption for Semiconductor Manufacturing in India”, MeitY, GoI, Delhi, 12 September 2022 at BCD Exemption for Semiconductor Manufacturing 12092022.pdf ( Accessed on 28 June 2023
[6]Semiconductors are building blocks of electronic goods. They are increasingly used to power a wide-variety of electronic goods ranging from mobile phones, laptops, IoT, EVs, industrial automation, defence system and among others.
[7] “India is the Largest ‘Connected’ Nation in the World Today With More Than 800 Million Broadband Users: MoS Shri Rajeev Chandrasekhar”, PIB, GoI, Delhi, 12 December 2023 at Accessed on 29 March 2023.
[8]Commodity-Wise Import Data, Commodity Code: 85, Department of Commerce, GoI, Delhi, data generated on 16 June 2023 at Accessed on 16 June 2023.
[9]Economic Survey 2022-23, Department of Economic Affairs Economic Division, Ministry of Finance, GoI, January 2023, pp. 274-277; and, “India’s Overall Exports Projected To Scale New Heights, Growing at 13.84 Percent During FY 2022-23 over FY 2021-22 to Achieve USD 770.18 billion Worth of Exports”, PIB, GoI, Delhi, 13 April 2023.
[10] “Driven by High Demand, Semiconductor Market to Reach $64 billion by 2026: Report”, The Financial Express, 19 April 2022.
[11] “Manufacturing Sector in India”, IBEF, at Manufacturing Sector in India: Market Size, FDI, Govt Initiatives | IBEF. Accessed on 19 June 2023
[12]Ondrej Burkacky, Julia Dragon, and Kikolaus Lehmann, “The Semiconductor Decade: A Trillion-Dollar Industry”, McKinsey & Company, 1 April 2022.
[13]Text of PM’s address at inaugural session of the Semicon India Conference 2022, PIB, GoI, Delhi, 29 April 2022 at Press Information Bureau ( Accessed on 19 June 2023
[14]The National Policy on Electronics 2019 (NPE 2019) aims to position India as a global hub for ESDM and create an enabling environment for the electronics industry to compete globally. See “Scheme for setting up of Semiconductor Fabs in India”, MeitY, GoI, New Delhi, the 21st December, 2021 at 1651758241_notification_semiconductor_fabs.pdf ( Accessed on 20 June 2023
[15] “Cabinet Approves Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India,” PIB, GoI, Delhi, 15 December 2021 at Press Information Bureau (
[16] “ISMC Announces Plan to Set Up India’s First Semiconductor Fabrication Unit,” Wion, 1 May 2022.
[17]In a written reply to a question in Lok Shabha on 23 March 2022, Minister of State for Electronics and Information Technology, Rajeev Chandrasekhar provided this information. “India Semiconductor Mission,” PIB, 23 March 2022. For more information see India Semiconductor Mission (ISM), Meity, GoI, at Home | India Semiconductor Mission ( Accessed on 19 June 2023
[18] “Building &Designing Semiconductors - Where Does India Stand?” Cover Story, 17 March 2021 at Building & designing semiconductors - where does India stand? ( Accessed on 10 May 2023
[19] “Design Linked Incentive (DLI) Scheme”, MeitY, New Delhi, the 21 December, 2021 at 1651757254_notification_dli.pdf ( Accessed on 10 May 2023
[20] “Semicon India Takes a Step Forward with Acceptance of Applications for Semiconductor and Display Fabs”, MeitY, GoI, Delhi, 19 February 2022 at Press Information Bureau ( Accessed on 10 June 2023
[21] “Vedanta, Foxconn to Invest $19.5 billion in Gujarat for Semiconductor Project”, The Indian Express, 14 September 2022 at Vedanta, Foxconn to invest $19.5 billion in Gujarat for semiconductor project | Business News,The Indian Express
[22]Munsif Vengattil, “Chip Consortium ISMC to Set up $3 billion Plant in India's Karnataka”, Reuters, 1 May 2022 atChip consortium ISMC to set up $3 billion plant in India's Karnataka | Reuters; and Girish Linganna, “India has a Long Way To Go in the Semiconductor Sector”, The Financial Express, 9 May 2022 at India has a long way to go in the semiconductor sector | The Financial Express. Accessed on 21 June 2023
[23] “IGSS Ventures’ India Consortium Inks MOU with Tamil Nadu Government To Establish Semiconductor Commercialisation Capabilities”, Press Statement, IGSS Ventures, 1 July 2022 at Final_-PRelease_IGSS-Ventures-and-Tamil-Nadu-govt-inks-MoU-to-establish-fab-infrastructure_01Jul22_Dist-1.pdf. Accessed on 21 June 2023(; and, “Singapore-based IGSS Signs MoU to Set Up 300-acre Semiconductor Park in Tamil Nadu”, The Hindu, 1 July 2022.
[24]See note 20.
[25] “Micron Announces New Semiconductor Assembly and Test Facility in India”, Micron, 22 June 2023 at Micron Announces New Semiconductor Assembly and Test Facility in India | Micron Technology. Accessed on 23 June 2023
[26] “Fact Sheet: Republic of India Official State Visit to the United States”, the White House, Washington DC,22 June 2023 at FACT SHEET: Republic of India Official State Visit to the United States | The White House. Accessed on 23 June 2023
[27]According to DGCI&S, India’s import of electronics goods constituted 12.84 per cent of the total imports and stood at second after oil, crude and products imports of 30.41 percent in April-April 2023-24. See Directorate General of Commercial Intelligence and Statistics (DGCI&S), Ministry of Commerce, Government of India, at Accessed on 15 June 2023
[28] “Scheme for setting up of Semiconductor Fabs in India”, MeitY, GoI, New Delhi, the 21st December, 2021 at 1651758241_notification_semiconductor_fabs.pdf (
[29]Strengthening the Global Semiconductor Supply Chain in an Uncertain Era, Semiconductor Industry Association, April 2021 at BCG-x-SIA-Strengthening-the-Global-Semiconductor-Value-Chain-April-2021_1.pdf ( Accessed on 15 June 2023
[30]Ibid., and also see Rakesh Kumar, “India’s Foray into Chip Manufacturing is Doomed. Better for the Country to Focus on Chip Battles It Can Win”, Fortune, 23 February 2022 at Commentary: India's foray into chip manufacturing is doomed | Fortune. Accessed on 16 June 2023

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