By Amit Kapoor and Kartik
From 17 to 19 September 2026, the global semiconductor industry will have its eyes fixed on New Delhi, as India hosts SEMICON, South Asia’s largest semiconductor manufacturing event. SEMICON 2026, the event’s fifth edition, will feature more than 500 exhibitors, including companies from 240+ International companies involved in Semiconductor Manufacturing. The 2025 event featured around 350 exhibiting companies from India and around the world. That leap in scale says a great deal about how central this industry has become to India’s ambitions. It’s a fitting moment, then, to take stock of where the country stands, where the gaps remain, and what it will take to close them.
The Semiconductor industry has seen significant growth over the last few years. The Global Semiconductor Market has grown annually by more than 6.5% over the past decade and is expected to grow by 8.5% over the next 5 to 10 years, driven largely by next-generation technologies, including the rise of AI and growing demand for computation. In India, growth has been even higher, with Semiconductor demand increasing by nearly 19% annually. However, around 95 % of its demand is met through imports from other markets such as China, Taiwan, South Korea, and Singapore. This heavy dependence on chip imports has resulted in an outflow of nearly $150 billion since FY 2017. With India’s demand expected to reach about $90 billion in chips by 2030, and possibly $200 billion by 2035, these outflows could reach $240 billion by 2035.
The scale of this dependency, and the outflows it was already generating, made the case for action difficult to ignore. Recognising the urgent need to build its own semiconductor manufacturing base, the government launched the India Semiconductor Mission 1.0 in 2021. The mission offers four key schemes to manufacturers. First, the Semiconductor Fabs Scheme provides fiscal support of up to 50% for setting up semiconductor wafer fabrication units. The Display Fabs Scheme offers up to 50% fiscal support to establish AMOLED and LCD display fabrication units in India. The final two schemes provide fiscal support to manufacturers of Compound semiconductors and chip assembly, and support for chip design startups and MSME.
As of December 2025, the mission has approved 10 projects with an overall investment of ₹1.6 lakh crore. The mission’s frontline project is India’s first commercial fabrication facility in Dholera, Gujarat, built by Tata Semiconductor Manufacturing. The facility is expected to produce chips by 2028 with a capacity of producing 50,000 wafer starts per month. Other notable investments are Micron Technology’s assembly, testing and packaging unit in Sanand, TEPL’s semiconductor facility in Assam and CG Power’s manufacturing facility in Gujarat. The Union Budget of 2026-27 has approved ISM 2.0 with an outlay of 1000 crores to emphasise industry-led research and training centres to further India’s progress in the sector.
However, the road ahead for Indian semiconductor manufacturing is even steeper. One key reason India’s progress in the sector could derail is the sheer amount of investment needed to establish fabrication units. A modern Fabrication facility can cost at least 5 billion dollars to build. Also, establishing a 3 nanometre production facility, in line with the most recent developments in the sector, could cost up to $ 15 billion. These figures put India’s capital need over the next decade at around 135 to 180 billion dollars. Gujarat, under its semiconductor policy, has provided additional financial assistance of 40% of the capex expenditure for fab facilities in the state. Additionally, the eligible projects can receive a 75% subsidy on the first 200 acres acquired for a fab facility. Such incentives illustrate the scale of support state and central governments are willing to offer but public investment alone, in no scenario, can fund a major proportion of the capital this sector demands. Hence, the private sector would need to lead investment in the sector, and stable, consistent policy support can go a long way toward ensuring it continues investing in the industry.
Beyond the massive investment, establishing and running a fabrication facility faces many other constraints. A fab needs a constant, uninterrupted power supply to operate lithography tools and maintain cleanroom stability. Newer processes, especially extreme ultraviolet lithography, demand more power. It also needs large amounts of ultra-pure water and filtration systems. Gujarat, for its plant in the Dholera Investment Region, would include a planned 5 GW solar park and a 50 MLD water treatment plant to ensure both resources are adequately available. Additionally, a facility is offered a tariff subsidy of ₹2 per unit of electricity and access to potable water at ₹12 per cubic litre. Replicating this scale of infrastructure, however, demands sustained capital outlay and policy follow-through that not every state can commit to, given wide variation in fiscal capacity, existing grid and water infrastructure, and industrial readiness across India.
In addition, chips are built from a specific set of materials: silicon for wafers, rare earth minerals for magnets and elements like gallium and germanium for high-quality compounds. Hence, a secure supply of critical and rare earth minerals is a key requirement for Chip manufacturing. However, India still relies heavily on imports for key minerals, with 100% import dependence for 10 of 30 critical minerals, indicating that the country cannot guarantee a steady supply to the industry on its own. Beyond physical constraints, human capital is a key limitation. India has many Software and Electronics Engineering graduates, but few trained in process integration, yield engineering, advanced packaging, or materials science. This shortage affects everything from technicians and process engineers to materials scientists working on next-generation substrates and compounds.
As SEMICON 2026 arrives, India is at a critical juncture in its journey to advance the semiconductor industry from ambition to execution. The next phase will depend on whether infrastructure, critical mineral supply, workforce capabilities and capital investment can advance together rather than in isolation. For the semiconductor ecosystem to push beyond one state, sustained coordination between government, industry, and academia and a long-term focus on capacity and self-reliance are essential.
(Amit Kapoor is chair & Kartik, Senior Researcher at Institute for Competitiveness. X: @kautiliya).
The article was published with The Sunday Guardian on August 23, 2026.
