Where Does India Stand in the Semiconductor Race?

When the world talks about the semiconductor race, the conversation usually gravitates toward Taiwan’s TSMC pushing 2nm boundaries, South Korea’s memory giants, and the United States pouring billions into reshoring chip production. India, by contrast, has often been an afterthought. But that is changing, and the strategy India is pursuing is far more calculated than it appears at first glance.

The 28nm Paradox: Why “Old” Chips Are a Smart Bet

The most common criticism of India’s semiconductor ambitions is that it’s arriving late to a race already won by others, and starting with technology that seems antiquated. India’s first domestically manufactured chips, confirmed by Union IT Minister Ashwini Vaishnaw, are built on 28nm and 90nm process nodes. Apple’s latest chips run on 3nm. TSMC and Intel are already developing 2nm processes. So why is India not chasing the cutting edge?

The answer lies in what economists call the “28nm paradox.” While 3nm chips dominate the headlines, the global economy actually runs on older, mature nodes. Power management chips, automotive controllers, IoT sensors, industrial machinery, budget smartphones, the hardware that keeps everyday life functioning overwhelmingly relies on 28nm and larger chips. These are not museum pieces; they are the workhorses of the global supply chain.

More critically, the economics make sense for a nation building a semiconductor industry from the ground up. Constructing a cutting-edge fab capable of producing 3nm chips costs upward of $20 billion, a barrier so high that only a handful of entities on the planet can clear it. A mature-node facility, by contrast, is significantly more manageable in terms of capital expenditure, and the technology know-how is far more accessible. For a country that, until recently, had no commercial chip fabrication at all, this is not a retreat, it is a pragmatic foundation.

The $20 Billion Import Problem

India currently imports over $20 billion worth of semiconductors annually. That figure is not merely a trade statistic; it represents a structural vulnerability. Every chip imported is a point of dependency on foreign supply chains that can be disrupted by geopolitics, natural disasters, or deliberate economic pressure.

The breakdown of those imports reveals why 28nm matters so much domestically. A significant portion flows into India’s booming automotive sector, consumer electronics, and the infrastructure being built for 5G connectivity. As India races to electrify its vehicle fleet and roll out nationwide 5G networks, the demand for these so-called “legacy” chips is not declining, it is surging.

The automotive sector is especially illustrative. Modern vehicles, whether electric or combustion-powered, are dense with semiconductors. A single mid-range EV can contain hundreds of chips managing everything from battery performance to driver assistance systems. As India’s EV market scales rapidly, the volume of chips required will grow proportionally, and right now, a substantial portion of that supply comes from China.

A Chinese Supply Blockade

This is where the stakes become existential rather than merely economic. China dominates the global market for legacy chips, the precise category India needs most. And China, through initiatives like its “Delete America” policy aimed at replacing foreign components by 2027, is actively pursuing semiconductor self-sufficiency while also aggressively expanding its capacity to serve export markets.

The scenario that Indian policymakers are quietly preparing for is a potential Chinese supply disruption, whether triggered by a Taiwan Strait crisis, targeted economic retaliation, or simply Beijing’s decision to prioritize domestic needs. Should that disruption occur, India’s EV sector, its 5G rollout, and its broader electronics manufacturing ambitions would be left critically exposed.

Building domestic chip capacity is therefore not just an industrial ambition; it is a national security calculation. Reducing reliance on a single supplier, especially one with which India has unresolved border tensions, is a form of strategic insurance.

Turning Gujarat into a Global Chip Hub

The Indian government’s response to this challenge is the India Semiconductor Mission (ISM), backed by a ₹76,000 crore (approximately $10 billion) subsidy program offering up to 50% capital support for eligible projects. The geographic focal point is Gujarat, which is being positioned as the country’s semiconductor heartland.

The flagship project is the Tata-PSMC Semiconductor Fab in Dholera, Gujarat, a joint venture between Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corporation. The facility targets a monthly capacity of up to 50,000 wafers using 28nm to 110nm technologies, with applications spanning automotive, AI, and IoT. Production is slated to begin by late 2026.

Alongside the Tata fab, Micron Technology has committed over $2.75 billion to an assembly, testing, marking, and packaging (ATMP) plant in Sanand, Gujarat, a signal that global majors see India as a serious, long-term bet. AMD has an additional $400 million investment plan in the country. For these companies, India offers a compelling combination: government subsidies, a vast domestic market hungry for chips, and a rapidly growing technical talent pool.

India’s semiconductor market is already projected to reach $63–64 billion by 2026, with long-term forecasts placing it at $100–110 billion by 2030, driven by AI, automotive electrification, and electronics manufacturing.

OSAT Plants and the Talent Pipeline

Perhaps the most underappreciated element of India’s semiconductor strategy is the role of OSAT, Outsourced Semiconductor Assembly and Test, facilities. While wafer fabrication draws the most attention, OSAT plants represent the part of the chip supply chain where India can build capacity fastest and most affordably.

India’s first end-to-end OSAT plant, operated by CG Semi in Gujarat, is already operational. Tata Electronics’ assembly and test plant in Jagiroad, Assam, India’s first indigenous greenfield semiconductor ATMP facility, is targeting production of 48 million chips daily by late 2025 or early 2026.

The strategic value of OSAT goes beyond the chips themselves. These facilities are talent factories. They train engineers, technicians, and process specialists in the precise, rigorous culture of semiconductor manufacturing, a discipline that takes years to develop and cannot be conjured overnight. India already contributes roughly 20% of the world’s chip design workforce, with major design centers in Bengaluru, Hyderabad, and Noida supporting global firms like Qualcomm, Applied Materials, and Cadence. OSAT plants extend that talent base into the physical manufacturing domain, building the human infrastructure that future fabs will depend on.

It is also worth noting that packaging and testing capacity is recession-resilient. Demand for these services tracks closely with overall chip production globally, and as India builds this capability, it creates a foundation that remains valuable regardless of where advanced fabrication ultimately concentrates.

Challenges That Cannot Be Ignored

India’s semiconductor ambitions come with significant headwinds. Several projects are already running behind schedule: Micron’s Gujarat facility has been delayed, Tata’s foundry timeline has slipped from mid-2025 to April 2026 or later. The US think tank ITIF has questioned India’s ability to become a major semiconductor player, citing unpredictable policymaking and the extraordinary complexity of chip manufacturing.

Infrastructure constraints: reliable power, water, and logistics, remain genuine concerns. Streamlining customs and regulatory processes for the highly specialized equipment and materials that fabs require is an ongoing challenge. And the talent question, while India’s engineering base is strong, is a long-term endeavor rather than an immediate solution.

There are also questions about whether India can attract the foreign technology partners essential for advancing beyond 28nm. Moving to 7nm or 3nm will almost certainly require partnerships with American or Asian chipmakers, the domestic ecosystem alone cannot bridge that gap in the near term.

The Long Game

India’s semiconductor story is, fundamentally, a story about strategic patience. The country is not trying to out-TSMC Taiwan or out-spend China. It is trying to secure its supply chains, build a foundational industry, and position itself as a reliable alternative node in a global chip ecosystem that is increasingly anxious about concentration risk.

The 28nm “starting point” is not a ceiling, it is a beachhead. As the Tata fab becomes operational, as OSAT facilities mature, as thousands of engineers gain hands-on manufacturing experience, the conditions for advancing to more sophisticated nodes will organically develop. The government has already signaled that manufacturers are expected to move toward more advanced processes in 2026 and 2027, and 25 semiconductor designs with IP rights held in India are in development.

For a country that missed the first and second waves of chip manufacturing, India’s current push is not about catching up in a sprint, it is about building the infrastructure for a marathon. The 28nm chip may not make headlines in Silicon Valley, but in Dholera, in Sanand, in Bengaluru’s design labs, it represents something more significant: India’s declaration that it will no longer simply consume the future that others build. It intends to manufacture a piece of it.