Future of India’s Semiconductor Industry: Chips, Strategy and the Road to 2035

The future of India’s chip industry underscores India’s ambition to become a key player in the global semiconductor value chain, driven by growing demand for AI, electric vehicles, telecommunications, and advanced electronics. 

India’s semiconductor industry is at a defining crossroads. With a new NITI Aayog roadmap and the India Semiconductor Mission (ISM) 2.0 signalling national intent, India is positioning itself as a player in the global semiconductor value chain, not just a consumer of chips, but a creator, manufacturer, and exporter.

Semiconductors power nearly everything in the modern world from smartphones and electric vehicles to defence systems, AI infrastructure, and digital public services. For India, building a semiconductor ecosystem is no longer optional. It is a strategic imperative.

Why India’s Semiconductor Ambition Matters Now

India’s semiconductor demand is growing at a compounding annual rate of 19%, projected to reach approximately USD 90 billion by FY2030 and USD 200 billion by 2035. Yet nearly 90–95% of this demand is currently met through imports.

That dependence is an economic, strategic, and national vulnerability.

The Covid-19 pandemic exposed how global chip shortages can cripple entire industries. A disruption in major global semiconductor manufacturing hubs could severely impact India’s automotive, defence, telecom, and consumer electronics sectors. 

National security adds another layer of urgency. Many semiconductor parts used in India’s defence platforms, UAVs, and aerospace systems are produced outside the country. As India modernises its military, the absence of a domestic chip supply is a risk the nation can no longer afford.

Beyond security, the drain on foreign exchange is substantial. India spent nearly USD 150 billion importing semiconductor products between FY17 and FY25. Without domestic manufacturing capacity, this outflow will only grow.

NITI Aayog Roadmap: Vision 2035

Released in May 2026, the NITI Aayog Frontier Tech Hub’s report titled Future of India’s Semiconductor Industry charts a 10-year strategy. Its ambition is to build a USD 120–150 billion semiconductor value chain by 2035, moving India from a consumer to a node in the global supply chain.

The roadmap is anchored in five strategic pillars.

• Pioneering: Focuses on building sovereign design and R&D capabilities, harnessing agentic AI for semiconductor engineering, and developing intellectual property in advanced packaging, compound semiconductors, and next-generation architectures.
• Policy and Investment: Calls for nearly USD 135–180 billion in investment over a decade. The government is expected to commit approximately USD 45–60 billion as anchor capital to de-risk projects and attract private investment. Priority areas include fabrication facilities, advanced packaging, compound semiconductors, and design infrastructure.
• Production: Advocates for a strategy of selective depth rather than attempting to replicate the full global manufacturing spectrum. India’s production focus should span mature-node wafer fabrication, advanced packaging and OSAT (Outsourced Semiconductor Assembly and Test), critical materials, and secure manufacturing for defence applications.
• People: Recognise that talent is as critical as capital. Building a talent pyramid from fab-ready technicians and process engineers to materials scientists and system architects is treated as a national priority.
• Partnership: Emphasises outcome-linked collaborations with trusted nations. The US, Japan, the European Union, and South Korea are identified as priority partners for accessing critical tools, technology, and supply chain integration.

Where India Must Focus: Strategic Priorities

The roadmap is clear that India cannot and should not try to win every battle in the semiconductor race. Attempting to compete with Taiwan or South Korea in frontier fab manufacturing would require capital and decades of catch-up. Instead, India should play to its strengths.

Advanced Packaging as a National Differentiator

Advanced packaging integrating multiple chips into a single system is one of the growing segments of the global semiconductor value chain. It is less capital-intensive than frontier fabrication but critical to system performance. The roadmap positions India to become a top-three destination for OSAT and advanced packaging by 2035. This is a target given India’s engineering talent base and growing manufacturing infrastructure.

Compound Semiconductors: SiC and GaN

Materials like Silicon Carbide (SiC) and Gallium Nitride (GaN) are essential for electric vehicles, renewable energy systems, 5G/6G networks, and defence electronics. India has the materials potential and technical expertise to emerge as a supplier of wide-bandgap semiconductors. The roadmap calls for compound semiconductor fabs, substrate development, and integration with India’s EV and clean energy industries.

Chip Design and Intellectual Property

India already contributes nearly 20% of the global semiconductor design workforce. The roadmap aims to convert this services-led advantage into IP ownership, targeting over 100 semiconductor design IPs by 2035. This requires sovereign access to Electronic Design Automation (EDA) tools, multi-project wafer shuttles, and national design hubs that bridge silicon design with advanced packaging.

Challenges Are Real

Building a semiconductor ecosystem is hard. The roadmap does not avoid this.

Fab units require four to five years before commencing production. Even after chips are manufactured, processes like yield optimization and reliability testing take several quarters before products reach the market. Building the talent needed to staff these facilities takes longer.

Capital requirements are enormous. A modern advanced-node fab costs over USD 15 billion to construct. Even mature-node analog fabs demand upwards of USD 5 billion. Advanced packaging units still require hundreds of millions in investment to reach quality standards.

Securing acceptance for Made-in-India chips in global supply chains dominated by relationships between East Asian manufacturers and Western design firms will take time and sustained performance.

ISM 2.0 and Road Ahead

The India Semiconductor Mission (ISM), backed by a ₹76,000 crore corpus, has made progress mobilising investments in fabrication, assembly, testing, packaging, and design. India’s first semiconductor fabrication plant is expected to commence production in Dholera, Gujarat by 2028.

ISM 2.0, announced in the Union Budget 2026, marks a transition from ecosystem creation to ecosystem deepening. The focus is on advanced packaging, compound semiconductors, design infrastructure, policy stability, and capital mobilisation.

Conclusion

India’s semiconductor industry stands at the beginning of a consequential industrial transformation. The NITI Aayog roadmap, ISM 2.0 funding, an engineering talent base, and growing domestic demand create a foundation that few nations can match.

The path will not be easy. But with strategic clarity, disciplined execution, and commitment across government, industry, academia, and global partners, India can build a semiconductor ecosystem that converts a strategic vulnerability into economic and technological strength.

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Semiconductor in India FAQs

1: What is India’s projected semiconductor market size by 2035? 

Ans. USD 200 billion.

2: What is the name of India’s national semiconductor initiative? 

Ans. India Semiconductor Mission (ISM).

3: When is India’s first semiconductor fabrication plant expected to begin production? 

Ans. By 2028, in Dholera, Gujarat.

4: Which compound semiconductor materials are prioritised in India’s roadmap? 

Ans. Silicon Carbide (SiC) and Gallium Nitride (GaN).

5: Which countries are identified as India’s priority semiconductor partners? 

Ans. The US, Japan, the European Union, and South Korea.