India is among the foremost nations that are rapidly growing in the semiconductor sector. As an essential component of contemporary technology, semiconductor chips have gained meteoric importance as electronics permeate every aspect of our personal and professional lives. From Industry 4.0 to 5G to AI, semiconductor chips are ubiquitous in wearables, automobiles, home appliances and assembly lines—making India an emerging destination for manufacturing and investments in the semiconductor space.

Factors driving semiconductor investments in India

Growing demand for electronics: The demand for semiconductor components is rising simultaneously with India’s population growth and fast-paced digitalisation. The market for consumer electronics is expanding likewise and the demand for computers, tablets and smartphones is growing rapidly. One must also consider the socio-economic and cultural shifts that the COVID-19 pandemic necessitated. As individuals began working remotely and spending more time at home, the demand for consumer devices like laptops and smartphones rose. Moreover, the pandemic brought into the spotlight the bottleneck and shortages of consumer durables and automobiles, which the absence of domestic manufacturing can cause—resulting in an increased demand for the production and supply of semiconductor chips.

Technological advances in communications and travel: As the 5G rollout in India gains momentum, so does the demand for semiconductor chips, which are essential in network equipment. As the 5G infrastructure expands and adapts, this demand will unlikely hit a ceiling. Another burgeoning demand in the nation is for electric vehicles. Semiconductors play a pivotal role in EVs, more so than in traditional automobiles, whether it be battery management, navigation or safety features. With the sales of electric two-wheelers (e-2W) surging to 571,411 units in 2024-25, the demand for advanced semiconductor solutions for transport and travel is accelerating—offering fertile opportunities for innovative creativity and specialised solutions.  

Government initiatives supporting the industry

1. The India Semiconductor Mission (ISM), with its SEMICON India Programme and a budget outlay of ₹76,000 crore, offer concentrated aid towards the growth and expansion of the country’s semiconductor and display manufacturing ecosystem. Providing up to 50%  financial support for capital expenditures, the ISM — under the aegis of the Ministry of Electronics & Information Technology — boosts the manufacturing of semiconductors and displays by facilitating technological partnerships and offering financial support.
2. The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), meanwhile offers 25% financial incentives on capital expenditures to produce solar photovoltaic (SPV) polysilicon, SPV wafers and solar cells, micro/nano-electronic components, electronic components, e-waste recycling and specialised subassemblies related to the production of these goods.
3. The Production-Linked Incentive (PLI) Scheme for Large-Scale Electronics aims to increase domestic manufacturing and attract investments in the production of mobile phones, including electronic components and semiconductor packaging. The scheme offers a five-year incentive of 3% to 6% on increased sales (over base year) of goods manufactured in India and covered under the target areas, namely mobile phones and specified electronic components. 

Incentives for investors under the PLI Scheme include an incentive for four years, with a budget outlay of ₹40,951 crore that ranges from 4% to 2% of net incremental sales  (over the base year) of products made in India and falling under the target segments comprising laptops, tablets, all-in-one PCs and servers. As of June 30, 2024, incremental investments of ₹8,390 crore have been made under the PLI Scheme, leading to the production of ₹5,14,960 crore. 

Semiconductor startups in India

Here’s how startups in the semiconductor sector are rewriting India’s growth story in this space: 

1. Closing the gaps in supply chains, manufacturing procedures and chip design to lower the nation’s dependency on imported technology. Startups are helping India to become self-sufficient in semiconductor products.
2. Creating semiconductor solutions specific to regional needs, facilitating the entry of larger firms into the sector through diversification. 

With over 100 semiconductor startups operating, the sector contributes significantly to establishing India as a global leader.

Why AI is the key here?

To shape up the future of semiconductors in India, energy-efficient CPUs and system-on-chip (SoC) architectures and semiconductor startups are spearheading innovation with their efforts on AI-focused semiconductor chips. The development of AI and IoT, the drive for smaller process nodes and the growing significance of design-centric innovation are some of the significant themes influencing the sector, leading the charge towards advancements in communication systems, chip design and AI-powered products. 

Future looks bright for semiconductors in India 

Recent reports indicate that India’s semiconductor sector, valued at $23.2 billion, will increase at an incredible 17.1% compound annual growth rate (CAGR) to reach $80.3 billion by 2028. By improving indigenous semiconductor design and manufacturing while reducing reliance on imports, innovative entrepreneurs and savvy investors are paving the path for a self-sufficient ecosystem for both domestic and international markets.

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