By Ruben Nag
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| Cover Image Attribute: Image by PublicDomainPictures from Pixabay |
India’s bid to join
the world’s silicon elite is a study in contrasts, dazzling in ambition,
delicate in execution, and haunted by the quiet hum of empty cleanrooms.
When the government
announced that HCL and Foxconn would build an OSAT unit in Uttar Pradesh,
the news ricocheted across the Indian tech ecosystem like a victory drum.
Ministers spoke of “semiconductor sovereignty”, of finally breaking the
global dependence on Taiwan and Korea. Yet behind the jubilant press
conferences and the social-media blitz, a quieter truth persisted: at the time of writing this article, not a
single wafer has rolled out of any Indian fab yet. The rhetoric has arrived
far ahead of the production line.
The government’s official
India Semiconductor Mission, armed with a ₹76,000-crore war chest, was
meant to rewrite history. According to multiple PIB releases and factsheets, the mission’s blueprint was
bold subsidies up to 50 percent for new
fabs, incentives for design houses, and “fast-track” clearances. Yet three
years in, the mission feels like a paradox of modern policy: grand in design,
granular in confusion. Invest India’s own blog admits that while incentive disbursals look
spectacular on paper, India still lacks the dense lattice of materials, gases,
and technicians that turns money into yield.
India’s semiconductor
ambition is trapped between policy theatre and industrial reality. The photo-ops are global-grade; the
production pipelines, provincial. Semicon India,
the government-sponsored summit, exudes Silicon-Valley aesthetics, but every
investor walking out of those halls knows the same thing: subsidies can’t
substitute for ecosystems. Taiwan didn’t build TSMC with tax rebates it built it with trust, logistics, and 30
years of compounding skill.
A CSIS analysis framed it bluntly: India has mistaken fiscal
incentives for industrial strategy. The ₹76,000 crore outlay was necessary, not
sufficient. The supply-chain map still reads like an import catalogue. The
chemicals, wafers, photoresists, and high-purity gases that feed a fab — over
90 percent of them are still imported. ITIF’s report and Nexdigm’s market study converge on the same statistic: India depends
on foreign inputs for nearly every upstream stage of chipmaking. The irony is
almost poetic — Make in India begins with Ship to India.
Even PRS India’s policy brief concedes that while India has design prowess —
a quarter of the world’s chip designers are of Indian origin — it lacks the
“process engineers” who can run, calibrate, and repair fabs. Design is
cerebral; fabrication is visceral. You don’t code a wafer into existence — you
build it, atom by atom, inside a cleanroom that demands precision beyond
imagination. The Brookings Institution’s commentary calls this the “skills deficit that no
subsidy can fill.”
For years, India’s
universities taught chip design software but not the chemistry of yield
optimization. The Carnegie India paper argues that the talent pipeline was designed
backward — policy made by bureaucrats, implemented by consultants, but operated
by no one. A fab isn’t a call center; it’s a living organism that breathes
precision and discipline. India, despite its human capital, has too few people
trained to keep that organism alive.
Meanwhile, the Business Standard points to an even deeper malaise: the dependency
paradox. The very idea of chip sovereignty collapses when Japan, Taiwan, and
South Korea control your raw inputs. One supply-shock in Tokyo or Hsinchu
can freeze an entire Indian fab. It’s a vulnerability that can’t be solved by
tariffs or slogans. Without domestic vendors for gases, wafers, and
photoresists, India’s much-touted fabs risk becoming white elephants — gleaming
shells filled with imported dependency.
A CSIS follow-up brief mapped the ecosystem gap bluntly: Taiwan’s
self-sufficiency in fab materials hovers around 70 percent; India’s, barely 10.
This isn’t an industrial statistic — it’s a sovereignty metric. In the
geopolitics of silicon, dependence is exposure.
The Economic Times captured this tension in its analysis of the
Jefferies report: India’s semiconductor ecosystem is “incentive-rich but
infrastructure-poor.” Power reliability, logistics costs, and water
availability remain chronic constraints. Asia Nikkei chronicled how the slow-motion approval system
— fragmented across MeitY, Heavy Industries, and Commerce — has left investors
caught in bureaucratic loops. Semiconductor manufacturing runs on nanoseconds;
India’s paperwork still runs on calendar months.
The Times of India revealed that 97 percent of the semiconductor
fund has already been committed — yet most projects are still in the approval
or site-preparation phase. The India Briefing update celebrated four new fab announcements, but
half of them remain PowerPoint-level ventures without environmental clearance
or vendor contracts. Money moves; wafers don’t.
To build a fab is to
choreograph a thousand sub-suppliers in synchrony. The ORF research paper reminds us that industrial clusters, not
isolated subsidies, create scale. Taiwan’s Hsinchu Park or South Korea’s
Giheung didn’t happen through auctions between provinces; they emerged through
disciplined central coordination. India, by contrast, has allowed states to
compete rather than collaborate — turning the Semiconductor Mission into a
domestic tender war.
The government’s Press Note promises “ease of doing business,” but some argues that India might be aiming too high, too soon. Instead of chasing 28-nanometer fabs technology, already a generation behind TSMC’s cutting edge, India could focus on compound semiconductors, sensors, and chiplet packaging, where it can actually differentiate. This adds that industrial policy cannot function without coordination between ministries. India’s chip push is currently split among MeitY, Commerce, Heavy Industries, and Science & Technology — each issuing its own notifications, each claiming a share of the mission’s glory. It’s a governance structure better suited for committees than cleanrooms.
Reuters observed that as global chip capacity expands, especially for legacy nodes, India’s late entry could face an oversupplied market by 2027. Timing, not just talent, determines success in this race. This also warns that the world’s semiconductor boom is cyclical: today’s shortages become tomorrow’s glut.Entering at the tail end of a cycle, India risks building capacity for a demand curve that is already flattening. Despite headline announcements, global investors still route their supply chains through the Taiwan–China corridor because, as Bloomberg put it, “execution, not intention, defines credibility.” The September 2024 Bloomberg Opinion piece argued that India’s chip ambitions will only gain traction when it stops chasing symbolic milestones and begins “identifying the spots in the supply chain where India can enter quickly and scale up effectively.” No nation earns strategic depth through press releases; it earns it through delivery, iteration, and trust.
Every few months, new
headlines appear — “Made in India chip near launch,” “India’s fab cluster to
rival Taiwan.” Yet even Mint’s own coverage admits that the first chips produced are
mostly prototypes, not mass-manufactured wafers. The India Briefing overview sees promise in the long term but concedes
that most fabs will remain under construction until at least 2026. The gap
between ambition and assembly is measured not in years but in political cycles.
One Global Scientific Journal study calls India’s semiconductor policy “a tale of
premature celebration.” The author argues that India’s obsession with front-end
fabrication ignores the back-end — packaging, testing, and materials — where
entry barriers are lower and global demand is rising.
The contrast with
global peers is glaring. The U.S. CHIPS Act and Japan’s industrial policy are not just
subsidy schemes — they are long-term coordination mechanisms. Europe, under its own Chips Act, links R&D, procurement, and defense
contracts into one policy spine. India, by contrast, treats semiconductors as a
discrete project rather than an integrated mission. It’s the difference between
orchestration and improvisation.
By 2027 global
capacity for 28- to 90-nanometer nodes will likely saturate. These are
precisely the nodes India’s new fabs are chasing. In economics, entering late
into a commoditized technology is like buying real estate after the boom, you
own the land, but not the leverage.
Inside the
bureaucracy, everyone knows the problem but few will say it aloud. The ISM site boasts of a “fast-track mechanism,” but
officials privately acknowledge that inter-ministerial overlaps remain
unresolved. The result is a cleanroom waiting for power clearance, a substation
waiting for environmental consent, a fund waiting for final signature an
orchestra of delays playing in perfect dissonance.
India Briefing’s investor guide quietly warns foreign investors about
“state-level unpredictability.” In Vietnam, a foreign investor can secure land,
water, and power within six months. In India, even a letter of intent can take
longer. Bureaucracy isn’t the villain here; inertia is. The system still treats
manufacturing as permission, not partnership.
The Nexdigm materials report goes deeper into the chemistry: the specialty
gases and ultra-pure chemicals needed for lithography have almost zero domestic
supply base. Shipping them from Japan or Taiwan adds not just cost but
fragility. During COVID, those same routes choked; India’s fab plans did too.
In semiconductors, logistics is destiny.
Every chip is a story
of convergence physics, finance, and faith in precision. CSIS
calls it “the world’s most complex supply chain.” For India, mastering it demands
not just policy coordination but cultural discipline. Countries that succeeded
Taiwan, South Korea, even Malaysia understood that technology isn’t just built;
it’s cultivated.
Asia Nikkei’s opinion column put it succinctly: “India should not chase
cutting-edge nodes but carve out reliability niches.” Packaging, automotive
chips, power semiconductors these are
sectors where India’s domestic demand aligns with manageable complexity. But
policymaking in Delhi still dreams in nanometers, not realities.
And yet, not all is
bleak. The ISM portal’s press release reveals signs of strategic recalibration collaboration talks with Japan on upstream
materials, exploratory pacts with the EU on trusted nodes, and skill
partnerships with Taiwan’s institutes. If pursued with discipline, these could
evolve into the kind of bilateral pacts that Carnegie India and ORF have long recommended: a hybrid model
of foreign technology, domestic execution, and regional integration.
But ambition without
architecture is noise. The Times of India’s allocation report shows that India has already spent most of its
ammunition on headline projects. What remains is not money but method. What
matters now is whether India can turn this spectacle into structure.
The global window is
closing fast. Reuters and Bloomberg both warn that a glut of mid-range chips
could emerge by 2027 as the U.S., Japan, and Korea ramp up their own reshoring.
If India doesn’t secure its niche now, it will enter the market just as margins
collapse. Timing isn’t everything, but in semiconductors it’s close.
Policy, in the end, is
not poetry. It doesn’t need metaphors; it needs manufacturing. Yet there’s
something poetic about India’s semiconductor saga a country dreaming of atomic
precision while tripping over administrative paperwork. The Financial Times once wrote that “in semiconductors, there is
no shortcut to time.” India is learning that truth the hard way.
To avoid turning the Semiconductor
Mission into a museum exhibit of intentions, India must do three things
urgently: deepen its supply-chain base, reform its engineering education around
fabrication, and create a single empowered semiconductor authority much like the Atomic Energy Commission once
did for nuclear power. Otherwise, the future will remain stuck in customs,
waiting for clearance.
India still has a shot
not to be the next TSMC, but to be the first India : agile in packaging,
trusted in design, and resilient in materials. The pieces are all there money, minds, and markets. What’s missing is
the music. And as any cleanroom engineer will tell you, silence can’t build chips
— precision can.
About the Author:
Ruben Nag is a Strategy Consultant at IBM, Kolkata, specializing in global finance and supply chain strategy. With over nine years of experience, he focuses on solving complex problems, driving results, and creating real value across industries.
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