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India's Chip Strategy: Beyond Foundries
29 May
Summary
- India aims to be a crucial semiconductor ecosystem player, not just a foundry.
- Import dependence poses significant economic and security risks to India.
- Focus on advanced packaging and system integration for chip industry growth.
Geopolitical tensions and fragmented global supply chains necessitate India developing robust domestic chip capabilities, making them a strategic imperative. A NITI Aayog report, "Future of India's Semiconductor Industry," advises India to shift focus from competing in traditional foundry races to becoming an essential ecosystem player.
India's semiconductor manufacturing is nascent, with 90-95% of its consumption met through imports. This reliance poses risks, as India imported nearly $150 billion in semiconductor products between FY17 and FY25. Projections suggest this could escalate to $240 billion annually by 2035, straining foreign exchange reserves and national security, particularly for defence systems.
The report advocates for India to define its own semiconductor pathway, prioritizing leadership in advanced packaging, manufacturing scale, and system-level integration over direct competition in wafer fabrication. This strategic shift aims to build a $120-150 billion semiconductor value chain by 2035.
Securing global trust and ecosystem integration are key challenges, as established East Asian suppliers have decades of trust with global ODMs. Indian manufacturers must meet rigorous quality standards through sustained efforts. The report identifies five pillars for building a competitive ecosystem: pioneering R&D, policy support, production capabilities, skilled workforce development, and strategic partnerships.
Achieving semiconductor self-reliance could also enable broader societal advancements, including expanded 5G/6G connectivity, remote healthcare, and smart agriculture solutions across rural India.
