ChainMap
Draft map. Not yet reviewed by a human, so treat placements and figures as provisional.

Information Technology

Semiconductors

A chip starts as a design built on licensed EDA software and IP, is etched onto silicon wafers in a fab using imported tools, gases and chemicals, and is then cut, packaged and tested before it goes into phones, cars and industrial electronics. Value pools at the ends of the chain, with the EDA and IP owners, the fabless designers, the toolmakers and the leading-edge fabs, while packaging and device assembly earn thinner margins. India has long been strong in design services and device assembly but has had no commercial fab, and a NITI Aayog roadmap counts nearly $150 billion of semiconductor imports between FY2017 and FY2025. The India Semiconductor Mission is changing that, with 12 approved projects and cumulative investments of around Rs 1.64 lakh crore, most of them packaging units plus Tata Electronics' fab at Dholera.

TechnologyIndia manufacturingSupply chains & geopoliticsOne-page brief
L0

Why now

India was earlier more into chip design and packaging, and imported the chips its electronics industry used, spending nearly $150 billion importing semiconductor products between FY 2017 and FY 2025. After the chip scarcity of the Covid years it decided to go for manufacturing: 12 plants have been approved under the first phase of the India Semiconductor Mission, and the IT minister said in August 2026 that three have already started manufacturing. The second phase, Semicon 2.0, was notified the same month as a Rs 1,27,500 crore programme that reaches beyond fabs to chip design and IP, equipment, materials, advanced packaging, research and talent.

L1

How it works

A chip is a fingernail-sized piece of silicon carrying millions or even billions of tiny switches called transistors, which store, process and transfer information. Engineers design its circuits using electronic design automation (EDA) software. Manufacturing starts with silica-rich sand, which is made into a cylindrical silicon ingot and sliced into bare wafers; a fab then builds the circuitry onto each wafer in roughly 40 to 50 layers, using lithography, etch and deposition machines that India imports. Individual chips are then extracted from the finished wafer and go through assembly, testing, marking and packaging (ATMP), after which they are ready to go into modules, phones, cars and computers.

L2

What drives it

  • structuralConcentrated supply: Taiwan produces over 60 per cent of the world's semiconductors and nearly 90 per cent of the most advanced chips, so the US, the EU, Japan, South Korea and India are all funding domestic capacity
  • structuralGovernment capital support: the first phase offered fiscal support of up to 50 per cent for fabs, packaging units and chip design, and Semicon 2.0 extends support to equipment, materials and research
  • structuralGrowing domestic demand: industry estimates put the Indian semiconductor market at about $38 Bn in 2023, expected to reach $100-$110 Bn by 2030
  • structuralDesign talent and tool access: the Chips to Startup programme gives 397 universities and startups access to the latest EDA tools
  • cyclicalMemory chip shortage: AI data centres are outbidding consumer PC, gaming and smartphone makers for DRAM, raising costs for Indian device makers and data centre builds

Non-obvious insights

  • Building a fab in India still means buying most of it abroad: Fab Economics estimates import dependence of more than 85% of fab project costs and around 50% of wafer manufacturing costs today, falling to roughly 68% and 30% by 2030.
  • Policy is moving its weight away from the silicon fab itself. Under Semicon 2.0 the government provides 40% of eligible capital expenditure for silicon wafer fabs, lower than the 50% offered under the first phase, pays 35% for advanced packaging against 25% for conventional packaging, and now brings equipment and materials makers into scope.
  • The gaps include simple parts, not only advanced machines. Leadframes, copper packaging parts used widely across the OSAT units approved under the mission, are entirely imported: iVP Semi's founder says 100% of leadframes are imported from China and Japan.

L3 to L5The value chain

EDA Tools & IPChip DesignWafers, Gases & ChemicalsFab & Test EquipmentWafer FabricationAssemblyElectronics Manufacturing

Click any part to open that stage. Arrow keys move between stages.

Signals that would change this chain

  • First commercial wafer output from Tata Electronics' Dholera fab
  • Project approvals under Semicon 2.0, notified in August 2026, especially for equipment, materials and advanced packaging
  • Ramp up of commercial shipments from the approved packaging plants in Gujarat and Assam
  • Toolmakers such as Lam Research and Applied Materials starting manufacturing or local parts sourcing in India
  • DLI startups moving from tape-outs to volume chip sales

The debate

How people disagree about where this industry is heading. This is about the industry, not about any company's shares.

Proponents argue
  • Demand is large and rising. NITI Aayog's roadmap expects India's semiconductor market to reach around $200 billion by 2035, driven by AI, telecom, electric mobility, defence and healthcare.
  • India does not need to win the leading-edge race first. Packaging, testing and module integration need significantly lower ecosystem maturity than leading-edge fabrication, and NITI Aayog recommends aiming to be a top-three global destination for OSAT and advanced packaging.
  • Execution has started: plants approved under the first phase are already manufacturing, and Semicon 2.0 now funds the equipment, materials and design layers around them.
Critics argue
  • The chain is built on imported tools and inputs. India cannot yet make the equipment needed to produce chips, and Fab Economics estimates import dependence could still be 55% of fab project costs by 2035.
  • The subsidy bill keeps growing. Fab Economics estimates India needs two more incentive packages aggregating to nearly $40 billion in subsidies by 2030, while other countries offer aggressive incentives of their own.
  • Even the official targets leave most demand imported. NITI Aayog aims for local production to meet 15-25% of domestic demand by 2030, and the annual import bill could swell to nearly $240 billion by 2035 if current trends persist.

Core assumption

That the new fabs and packaging plants reach steady-state yields and a customer base large enough for global toolmakers and materials suppliers to manufacture in India, rather than India remaining a site that assembles imported inputs.

What would change the view

  • Commercial wafer output from Tata Electronics' Dholera fab, and how quickly it reaches steady yields
  • Approvals under Semicon 2.0 for equipment, materials and advanced packaging projects
  • A global toolmaker moving from R&D and engineering in India to manufacturing here
  • Semiconductor import data showing the import bill flattening as local output rises

Read next

  1. 1
    India Semiconductor Mission 2.0: A Rs 1,000 Crore Budget Push towards Semiconductor Self-Reliance
    PIB

    Official overview of the mission, with every approved project, its investment and capacity, and the design scheme's progress

  2. 2
    Semiconductors: Can India have its own Silicon Valley?
    Business Today

    The clearest account of what India still imports, from fab tools and gases to leadframes, with industry views on where India can win first

  3. 3
    India Should Build $120-150 Billion Semiconductor Value Chain By 2035, NITI Aayog Says In New Roadmap
    Swarajya

    Summary of NITI Aayog's 2035 roadmap and why it favours packaging and compound semiconductors over the leading edge

  4. 4
    Semicon 2.0 notified: Rs 1.27 lakh crore scheme widens India's chip ambitions
    Business Today

    Category by category incentives under Semicon 2.0, showing where policy now steers capital

  5. 5
    How semiconductor chips are made: Ashwini Vaishnaw explains journey from sand to chip
    Business Today

    Plain-language walk through the chain from sand to a packaged chip, from the minister leading the mission

The full chain at a glance

  1. 1 EDA Tools & IP

    Design software and licensed building blocks that every chip project starts from.

    Synopsys, Cadence Design Systems, Arm

  2. 2 Chip Design

    Fabless product companies and design service houses that turn specs into tape-outs.

    MosChip Technologies, L&T Semiconductor Technologies, Tessolve, Mindgrove Technologies

  3. 3 Wafers, Gases & Chemicals

    Silicon wafers, ultra high purity gases and specialty chemicals consumed in fabs and packaging.

    INOX Air Products, Linde India, Acutaas Chemicals, Shin-Etsu Chemical

  4. 4 Fab & Test Equipment

    Deposition, etch, lithography and test tools that make and check chips.

    Applied Materials, Lam Research, Tokyo Electron, KASFAB Tools

  5. 5 Wafer Fabrication

    Foundries and fabs that pattern circuits onto silicon and compound semiconductor wafers.

    Tata Electronics, SiCSem, Semi-Conductor Laboratory (SCL), Mohali, Powerchip Semiconductor Manufacturing Corp (PSMC)

  6. 6 Assembly, Test & Packaging (OSAT/ATMP)

    Cutting wafers into chips, packaging them and testing them before shipment.

    Micron Semiconductor Technology India, Tata Electronics, CG Power and Industrial Solutions, Kaynes Technology India

  7. 7 Electronics Manufacturing & End Demand

    Device and board makers that buy chips for phones, appliances, cars and industrial gear.

    Dixon Technologies (India), Syrma SGS Technology, Foxconn (Hon Hai)

Sources