India approved $18.2 billion for 10 semiconductor projects to build a local chip supply chain

India is pumping $18.2 billion into semiconductors to become a serious player in a space it’s barely been in. The country has signed off on 10 new chip projects, hoping to build everything from scratch (chip design, fabrication, testing, and packaging) even though it currently has no real chip industry.

The investment is part of India’s “Semiconductor Mission,” for building a local supply chain and cutting dependence on foreign chips, which began after the U.S. blocked exports of high-end AI chips to China in 2022, starting a global race to control semiconductor production.

India is one of the world’s biggest electronics buyers, but it’s barely on the map when it comes to making chips. Now, with $18.2 billion committed and two fabrication plants already approved, the government wants to change that. It also greenlit several testing and packaging plants. The idea is to create an end-to-end chip ecosystem right at home.

Stephen Ezell, who serves as vice president for global innovation policy at the Information Technology and Innovation Foundation, said chipmakers don’t just show up for incentives.

“India needs more than a few fabs or ATP facilities – more than a few shiny objects,” he said. He also pointed out that manufacturers weigh up to 500 different things before spending billions (tax policy, labor rules, tech infrastructure, customs regulations) and India still has gaps to fix.

Government launches electronic component support

In May, the Indian government rolled out a new plan to support companies that make electronic parts. Until now, there wasn’t much local demand for chips because India barely made parts like camera modules or screens.

This new policy offers cash support to companies making both active and passive components. That creates local customers who can actually use the chips India wants to make.

Back in 2022, India tried focusing only on advanced chip nodes, 28 nanometers and below, hoping to lure fabs that could serve next-gen markets like AI and quantum computing. But that didn’t help much. So now, the government funds 50% of the costs for any chip project, no matter the node size, and also supports packaging and testing.

Companies from Taiwan, the U.K., South Korea, and the U.S. are showing interest. “The Indian government has doled out generous incentives to attract semiconductor manufacturers to India,” said Stephen, though he made it clear those handouts can’t last forever.

Right now, India’s biggest chip project is being built in Gujarat by Tata Electronics in partnership with Powerchip Semiconductor from Taiwan. It’s worth 910 billion rupees ($11 billion). Tata says the facility will make chips used in AI, cars, computers, and data storage, things like power management ICs, display drivers, and microcontrollers.

In Odisha, U.K.-based Clas-SiC Wafer Fab is teaming up with SiCSem to set up India’s first commercial compound semiconductor plant. The chips made there will be used in solar inverters, electric cars, defense systems, and home appliances, according to the Indian government.

India focuses on fabrication and packaging expansion

Sujay Shetty, managing director of semiconductors at PwC India, said the next 3–4 years are critical. He believes India’s real milestone will be getting fabrication plants operational and overcoming logistical barriers.

Sujay said fabs need specific sites, places without earthquakes, floods, or road access problems. They also need ultra-pure chemicals, which India doesn’t yet supply.

Meanwhile, local interest in chip testing and packaging is growing. These segments are cheaper to enter than fabs and offer better profit margins. Mid-sized companies in India are jumping in.

So are domestic firms. But India’s still nowhere close to producing cutting-edge chips like the 2nm ones. Taiwan Semiconductor will begin mass-producing 2nm chips later this year. Meanwhile, India’s involvement is limited.

Last week, Minister Ashwini Vaishnaw opened ARM’s new office in Bengaluru. ARM plans to design 2nm AI chips there for drones, phones, and servers. But the real chip architecture will still be done in places like the U.S. or Singapore, where intellectual property is better protected.

Jayanth BR, a semiconductor recruiter with over 15 years of experience in India, said the country has had chip design talent since the 1990s. But companies only give India “block-level” design validation. The core design work stays overseas.

Sajai Singh, a partner at JSA Advocates & Solicitors in Mumbai, said India’s intellectual property laws need work. He said the country must improve enforcement and update laws for software and digital content.

“Our competition is with countries like the U.S., Europe, and Taiwan, which not only have strong IP laws, but also a more established ecosystem for chip design,” he said.

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