It is crucial to balance security, efficiency, and innovation to navigate risks of fragmentation and subsidy races, positioning India as a key player in the evolving semiconductor ecosystem by 2030, write Arvind Gupta, Adjunct Professor of Data and Digital Economy, and Aakash Guglani, Senior Policy Manager, Digital India Foundation.
The global semiconductor supply chain is the backbone of modern technology, enabling everything from artificial intelligence and electric vehicles to telecommunications and the Internet of Things. It is a deeply globalized network in which different regions dominate different stages: the United States leads in intellectual property, design, and advanced electronic design automation (EDA) tools; India leads in semiconductor design; Taiwan and South Korea dominate leading-edge fabrication; and other Asian economies control much of the mature-node chip production critical to automotive and consumer electronics. This concentration – particularly Taiwan’s command of over 80% of advanced chips – has created strategic vulnerabilities. Disruptions triggered by COVID-19 and geopolitical tensions have prompted governments to rethink industrial strategies, leading to a surge in “re‑industrialization” and “friend‑shoring” policies worldwide.
For the United States, the driver is a combination of supply chain security, economic strategy, and the need to reduce dependence on geographically concentrated hubs. In 2022, the CHIPS and Science Act allocated $52.7 billion in subsidies and incentives to expand domestic production. While US manufacturing stood at roughly 10–12% of global capacity in 2022, the aim is to reach close to 14% by 2032. Over 130 projects across 28 states, representing $630 billion in private investment, are underway. These include TSMC’s Arizona fabs, now producing 4nm chips with 3nm and 2nm in planning, Intel’s massive build-outs in Ohio and Arizona, and Samsung’s expansions in Texas. Nevertheless, full localization of the supply chain remains economically unfeasible without multi‑trillion‑dollar investments, so the US strategy hinges on a network of trusted partners such as Taiwan, Japan, South Korea, and increasingly India. This approach reduces exposure to strategic chokepoints while reinforcing alliances.
India’s role in the semiconductor value chain has expanded significantly in recent years. The domestic semiconductor market is projected to grow from around $55 billion in 2025 to more than $100 billion by 2030, fueled by demand in AI, EVs, telecom, and industrial electronics. The country already commands approximately 20% of global chip design talent, with over 35,000 engineers engaged in design work for both multinational corporations and a growing base of domestic fabless startups. Government schemes such as the India Semiconductor Mission (ISM), the Production‑Linked Incentive (PLI), and the Design‑Linked Incentive (DLI) offer subsidies and policy support to build fabrication, assembly, and testing capacity. Micron’s ATMP facility in Gujarat, Tata Electronics’ fabrication venture in Dholera in partnership with Taiwan’s PSMC, are notable examples. In May 2025, two advanced semiconductor design centres were inaugurated to focus on next‑generation 3‑nm chip design, a major leap from earlier 7 nm and 5 nm design achievements.
Still, India faces a steep climb in developing full‑stack fabrication capabilities. Building and running a modern fab costs upward of $10–20 billion and requires large, stable supplies of ultrapure water, uninterrupted power, and specialized industrial gases. Skilled fabrication engineers are in short supply globally, and India is competing with both established and emerging manufacturing centres such as Vietnam and Malaysia. There is also the challenge of managing the subsidy race so that industrial policy instruments yield sustainable capabilities rather than short‑lived, incentive‑driven projects.
This is where strategic partnerships are pivotal. The US–India ‘TRUST’ (Transforming the Relationship Utilizing Strategic Technology) initiative prioritizes advanced packaging technologies, joint research, workforce training, and technology transfer. The EU‑India Trade and Technology Council (TTC) expands this cooperation to European partners, creating opportunities for joint R&D, export market access, and resilient supply chain design. Bilateral trade agreements such as the India‑UK, India‑Australia, and India‑UAE include semiconductor collaboration as a strategic component. Japan’s partnership with India focuses on combining Japan’s manufacturing expertise with India’s design capability. Together, these arrangements position India as a “trusted partner” in the evolving semiconductor order.
However, the emerging architecture of friend‑shoring also carries risks. Semiconductor technology partnerships require a long gestation period and stability across political and economic cycles.
Looking toward 2030, three broad scenarios stand out. In a “multipolar balance” outcome, manufacturing and design are diversified across multiple geographies, with India, ASEAN, and the EU emerging as mid‑tier hubs alongside the US and East Asia; resilience is improved, but costs remain higher. In a “fragmentation” scenario, dominant blocs operate largely separate semiconductor ecosystems, and emerging countries are compelled to align with one group or risk losing market access, leading to duplicated investment and slower technological diffusion. A “third pathway” could see countries like India, Vietnam, and Malaysia balancing relationships with multiple partners, specializing in niche capabilities such as mature‑node production, advanced packaging, or design services – an approach that offers flexibility but limits scale in certain market segments.
India will ultimately anchor its collaboration choices in protecting its national interests, ensuring that global partnerships strengthen strategic autonomy and domestic capacity. For India, the way forward is clear. First, focus on high‑value yet less capital‑intensive segments – chip design, assembly, testing, packaging, and semiconductor materials – which build on existing strengths and talent bases. Second, cultivate a highly skilled workforce through expanded STEM education, vocational training, and global talent exchanges, with accelerated pathways for engineers from allied countries. Third, make full use of strategic partnerships not only for technology transfer but also for integration into long‑term supply arrangements. Fourth, build strategic reserves of critical minerals like gallium and rare earths, and diversify sourcing to avoid dependence on any single country. Finally, guard against over‑reliance on subsidies and ensure that state support fosters innovation, competitiveness, and market viability.
