In 1984, India laid the foundation for its semiconductor dream by establishing Semiconductor Complex Limited (SCL) in Chandigarh. This bold move came three years before Taiwan’s TSMC, now a global leader in semiconductor manufacturing, was even founded. With strong engineering talent and a growing electronics market, India seemed poised to become a major player in the semiconductor industry.
However, while TSMC surged ahead to dominate the global market, India’s plans stumbled. Challenges like outdated technology, insufficient funding, poor infrastructure and a devastating fire at SCL in 1989 ruined progress. Meanwhile, Taiwan prioritized strategic investments and industry-friendly policies, allowing TSMC to grow into a giant that powers everything from smartphones to advanced AI systems.
As India works to revive its semiconductor ambitions with new policies and partnerships, the contrast between its journey and TSMC’s success offers important lessons. What held India back and can the country overcome its past mistakes to finally carve a place in the global semiconductor ecosystem?
Tracing the Roots: India’s Semiconductor History
1980s: Beginning of the Journey
India's semiconductor journey began in the 1980s with the establishment of Semiconductor Complex Limited (SCL) in Chandigarh. The goal was to make India self-reliant in semiconductor production and lay the foundation for the country’s electronics industry. However, the initiative faced numerous challenges, including inadequate funding, outdated technology and poor infrastructure, all of which hindered its growth.
Despite some progress, such as moving from a 5-micron to a 0.8-micron process technology, the project suffered a major setback when a devastating fire in 1989 destroyed much of the infrastructure, stalling India's semiconductor ambitions.
1990s: Shift from Manufacturing to Design
While manufacturing faced difficulties, India's IT sector began to flourish in the 1990s, setting the stage for a shift towards semiconductor design rather than production. Leveraging its strong software expertise, companies like Wipro, Infosys and Tata Consultancy Services (TCS) invested in R&D and contributed to the global semiconductor industry.
This period saw India becoming a hub for semiconductor design and embedded systems, although the country remained heavily reliant on imports for semiconductor manufacturing from countries like Taiwan, South Korea and China.
2000s: Rising Design Capabilities and Missed Opportunities
As the new era started, India continued to grow in semiconductor design and embedded systems, but manufacturing remained stagnant. The Indian government did not make significant investments in semiconductor fabrication plants, unlike Taiwan and China, which were establishing state-of-the-art facilities.
India’s policies also struggled to align with global trends, preventing the country from securing a competitive position in semiconductor manufacturing. Although India’s IT and design capabilities expanded, its inability to establish a domestic manufacturing facility kept it behind global semiconductor leaders.
2010s and Beyond: Slow Progress towards Manufacturing
By the 2010s, India’s semiconductor market developed, but challenges in building semiconductor fabs continued. The Electronics System Design and Manufacturing (ESDM) sector grew significantly, from $65 billion in 2011 to $94 billion by 2015, but the manufacturing infrastructure was still weak.
Factors such as a lack of technological infrastructure, insufficient R&D investment and high capital costs for semiconductor fabrication limited progress. Moreover, competition from countries with lower labor costs, like China and Vietnam, further hindered India’s growth.
Despite these challenges, India’s design capabilities continued to improve. The government eventually recognized the strategic importance of semiconductor manufacturing and began implementing financial incentives and policy reforms aimed at boosting domestic production.
While India has faced setbacks, recent efforts signal a renewed focus on building a stronger semiconductor manufacturing ecosystem, which could enable the country to take a more prominent role in the global semiconductor supply chain.
India's semiconductor journey, though marked by missed opportunities and slow progress, now appears poised for a new phase, with increasing investments and policies aimed at closing the gap in semiconductor manufacturing and establishing India as a key player in the global semiconductor market.
Missed Opportunities: Understanding the Failures
India's semiconductor journey has been shaped not only by its progress but also by several missed opportunities that have hindered its growth in the industry. One of the most significant missed opportunities occurred in the 1970s when Fairchild Semiconductor, a leading American tech company, considered establishing a manufacturing facility in India. At the time, India seemed like an attractive market with its large population and growing demand for electronics.
However, governmental delays, slow decision-making and restrictive industrial policies led Fairchild to choose Malaysia instead, which offered a more favourable environment for tech development. This missed opportunity marked a key moment when India lost out on early semiconductor expertise and investment.
In addition to Fairchild, Texas Instruments also considered collaboration with India in the 1980s but chose other countries due to the restrictive regulatory environment. Similarly, India's lack of strong intellectual property protection and outdated policies discouraged many multinational companies from setting up R&D and manufacturing facilities.
Meanwhile, South Korea Taiwan and Malaysia emerged as semiconductor hubs by offering incentives, lower labour costs and more favourable policies. Taiwan's TSMC capitalized on international investments, building a strong domestic semiconductor ecosystem. India, however, lagged behind due to its limited economic policies and lack of support for semiconductor development.
India's focus on self-reliance and the import substitution policy further hindered foreign collaboration, delaying the growth of high-tech sectors like semiconductors. Additionally, the public sector-led development model limited competition and innovation, unlike countries like Taiwan and South Korea, which encouraged private sector growth.
Lessons from the Past: Building a Stronger Foundation
The failures of the past offer valuable insights that are shaping India’s new approach to semiconductors. With the lessons learned from previous setbacks, India is now taking strategic steps to build a more resilient and sustainable semiconductor ecosystem. The country is focusing on four key areas:
Focus on Manufacturing
The most significant lesson learned from the past is that semiconductor manufacturing is essential. While India has traditionally been strong in semiconductor design, the country must now shift its focus toward building strong fabrication plants. In recent years, the Indian government has taken extensive steps for the establishment of semiconductor manufacturing units in the country. This shift is key for India to reduce its dependency on semiconductor imports and to compete in the global market.
Investment in Talent Development
India’s strength lies in its vast population of engineers and skilled professionals. The country has a well-established reputation for producing high-quality software engineers and IT professionals. However, the semiconductor industry requires specialized skills in areas such as chip fabrication, lithography and material sciences. To meet this need, India is focusing on creating a skilled workforce capable of working in semiconductor manufacturing and design. Educational institutions and technical institutes are developing personalized programs to train professionals for the semiconductor sector.
Strategic Global Partnerships
To catch up with global leaders in semiconductor manufacturing, India is now focused on establishing strategic partnerships with countries and companies that have advanced semiconductor technologies. Collaborations with global giants such as Intel, TSMC and Samsung are expected to bring valuable technological expertise and investment to India’s semiconductor ecosystem. These collaborations will help India bridge the technological gap, join into global supply chains and accelerate its transition toward becoming a semiconductor manufacturing hub.
Strengthening the Supply Chain
India’s semiconductor supply chain has historically been slow and limited, with a reliance on imports for raw materials, components and advanced manufacturing equipment. In the future, India must focus on building a self-sustaining semiconductor supply chain that can meet domestic demand and serve global markets. This includes setting up fabrication units, establishing strong supply lines for silicon wafers, packaging and testing and ensuring the availability of the necessary infrastructure.
Current Initiatives by Indian Government
In recent years, India has significantly increased its focus on the semiconductor industry, with the government announcing several initiatives to build a comprehensive ecosystem. Some of the key initiatives include:
Production-Linked Incentive (PLI) Scheme for Semiconductors
Launched in 2020 April, the PLI scheme aims to provide financial incentives to companies that set up semiconductor manufacturing units in India. Under this scheme, the government has promised to cover a significant portion of the capital costs involved in establishing semiconductor fabs, which will make it more attractive for international players to invest in India. This initiative has already attracted interest from companies like Vedanta, Foxconn, Powerchip Semiconductor, CG Power, Renesas and HCL who are looking to build fabs in the country.
Semicon India Program
Launched in 2021 December, the Semicon India Programme is a strategic initiative designed to create a complete semiconductor manufacturing ecosystem in India. The program is focused on three main areas:
Design and Innovation: Encouraging R&D and innovation in semiconductor design.
Manufacturing and Infrastructure: Establishing world-class semiconductor manufacturing facilities in India.
Talent Development: Creating specialized training programs and institutes to develop a skilled workforce.
This program is expected to lay the base for a self-sustaining semiconductor industry in India.
Collaborations with Global Players
India is actively pursuing partnerships with leading semiconductor manufacturers worldwide. These collaborations will allow India to benefit from advanced technologies and best practices in semiconductor production. For instance, India is working with the United States on semiconductor supply chain strengthening, Taiwan on technology transfer and Japan on research and development.
Incentives for Private Investments
Several large domestic multinationals, including Tata Group and Vedanta, have announced major investments in semiconductor manufacturing in India. The government’s incentives, combined with private sector interest, have encouraged a renewed momentum in the country’s semiconductor ambitions.
Final Words
India’s semiconductor journey, though filled with challenges and missed opportunities, is now entering a crucial phase of transformation. The country is laying the foundation to become a key player in the global semiconductor industry.
The key to India’s success lies in its ability to learn from past mistakes, capitalize on its strengths in design and engineering and develop a complete ecosystem that supports both manufacturing and innovation. If India can execute its vision effectively, it may not only become a key player in the global semiconductor supply chain but also pave the way for future technological advancements that will drive the next generation of innovations.
