India's ambitious microchip production plans got a second wind with Semiconductor Mission 2.0. At ₹1.28 lakh crore, the sum is nearly twice the allocation in the first phase and extends the mission to a wider ecosystem, from design to fabrication and packaging. Importantly, it will focus on domestic production of chips and related materials, along with the development of Indian intellectual property. The latter is crucial given that over a fifth of the world’s chip design workforce is in India; it will help elevate our standing in the global technology space.
Moreover, if the first phase established the foundational infrastructure for fabrication and assembly, the second shifts focus towards deepening domestic capabilities through indigenous design, specialised materials and industry-led research centres. It means, Semiconductor Mission 2.0 is a humble attempt to shift India from a services-led design base to be a creator and producer of microchips that drive everything from devices to defence equipment.
During phase one, the scheme attracted about four fabrication units, though production is expected to begin only after 2028. Besides, all the planned units will produce chips built on a 28-nanometre process, as against the 3-7 nm range needed by advanced technologies including artificial intelligence and supercomputers. Though the proposed production line is not cutting-edge, domestic production of even 28 nm range will help withstand supply shortages like those seen during the pandemic when global pipelines stalled for a few weeks caused massive losses. Now, the global semiconductor market is witnessing a massive, AI-driven supercycle that is projected to exceed $1-1.5 trillion in size. China, South Korea and Taiwan dominate the production chain at present, operating specialised, capital-intensive foundries, while the Indian market is projected to surge to over $100 billion by 2030.
For a growing market, local production offers security and scale. In particular, India’s critical aerospace and defence industries will benefit as several semiconductor parts for their equipment are currently imported. But as a recent Niti Aayog report noted, our semiconductor ecosystem is not equipped to meet domestic demand and efforts to strengthen local manufacturing need significant capital. Currently, the government is offering over 50 percent subsidy for chip production plants. But besides capital, efforts should be made to ensure policy continuity, timely approvals and regulatory clarity to create a vibrant ecosystem.
