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DHARMASHASTRA NATIONAL LAW UNIVERSITY

JABALPUR (M.P.)

SESSION: 2025-2026
ECONOMICS-I

India as a Semiconductor Hub: Opportunities, Challenges and

Global Implication

SUBMITTED TO: SUBMITTED BY:

Dr. Isha Wadhwa Aditi(BALLB/114/25)
(Assistant Professor, Economics) Wafa Fatma Zaidi(BALLB/109/25)
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ACKNOWLEDGEMENTS

The constant support of teachers and their continuous assistance and direction enable me to
complete this project successfully; thus, I feel greatly thankful to them. Their support inspired
me to investigate, study and develop all along rather than only enable me to complete my job.

I would like to really thank Hon. Vice Chancellor of our institution, Prof. (Dr.) Manoj Kumar
Sinha, for his support and always advancing an open environment wherein pupils could learn
by means of inventive and significant projects. His vision and encouragement have greatly
assisted me in honing my research abilities

I am also especially thankful to Dr. Isha Wadhwa, Assistant professor, Economics

for assigning this project and for his thoughtful guidance at every step. Her insights and
resources made the journey smoother and more enriching.

Thank You,

Aditi (BALLB/114/25), Wafa Fatma Zaidi (BALLB/109/25)

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TABLE OF CONTENT

 Chapter I
Introduction ......................................................................................... 05

 Chapter II
Global Semiconductor Industry: An overview..................................... 07

 Chapter III
India’s Semiconductor Push..................................................................09

 Chapter IV
Opportunities for India..........................................................................10

 Chapter V
Challenges and Roadblocks...................................................................12

 Chapter VI
Future Outlook and Comparative analysis.............................................19

 Chapter VII
Conclusion..............................................................................................20

 Chapter VIII
Bibliography and Reference...................................................................21
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ABSTRACT

Semiconductors are widely regarded as the foundation of the digital economy, driving the
functionality of devices such as cellphones, vehicles, military technology and artificial
[Link] global disruptions, such as the COVID-19 pandemic, the Russia–Ukraine
conflict and rising geopolitical tensions in East Asia, have highlighted the fragility of the
semiconductor supply chain. These concerns have pushed countries to speed up their efforts
to diversify production and reduce dependence on a few key hubs like Taiwan and South
Korea. In this scenario, India has positioned itself as an emerging player in the
semiconductor industry. It examines the potential presented by India's vast domestic market,
talented workforce and strategic geopolitical position, while also tackling persistent issues
like substantial capital needs, technological disparities and infrastructure constraints. This
study examines India's potential to become a semiconductor hub by studying government
policies, investment incentives and industry collaborations, which will be promoted through
programs such as the India Semiconductor Mission and Production Linked Incentive (PLI)
[Link] report takes a comparative look at how countries such as South Korea and
Taiwan built their semiconductor ecosystems which explores the insights India could
potentially integrate into its own framework for semiconductor development.
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CHAPTER 1: INTRODUCION

The semiconductor industry has become one of the most critical foundations of the modern
world economy. Every device that supports human life today from a smartphone to a medical
imaging machine depends on a small electronic chip. These chips power industries such as
communication, automobiles, defense and artificial intelligence. Their importance became
especially clear during the COVID-19 pandemic when the sudden shortage of
semiconductors slowed down car production, smartphone assembly and even defense
equipment manufacturing across the world.

India today stands at an important turning point. The country aims to become self-reliant in
high technology production and reduce its dependence on imports. Semiconductors are
central to this vision. At present, India imports almost all of its semiconductor requirements
which puts a strain on its trade balance and limits technological independence. The
government has therefore launched several initiatives to create a strong semiconductor
ecosystem. These include the India Semiconductor Mission (ISM) started in 2021, the
Production Linked Incentive (PLI) Scheme for Electronics Manufacturing and the Design
Linked Incentive (DLI) Scheme. These programs seek to encourage both global and domestic
investors to build fabrication plants, assembly units and design centres in India1

The global situation also favours India. After the pandemic and the growing tensions between
the United States and China, many multinational companies have started following what is
called the “China plus one” strategy. This means that they are now looking for another
country to manufacture or assemble their products apart from China. India, with its large pool
of engineers, English-speaking workforce and political stability, has emerged as one of the
main alternatives.2

1
In 2023, the American company Micron Technology announced an investment of around
2.75 billion dollars to build a semiconductor assembly and testing unit in Gujarat. This was
the first major international project under the India Semiconductor Mission. The state
government of Gujarat also launched a semiconductor policy to attract more such industries.
Other states such as Karnataka, Tamil Nadu and Telangana have also been competing to host
chip-making plants and design centres.3

1
Ministry of Electronics and Information Technology, Government of India, India Semiconductor Mission, 2021.
2
The Economic Times, “How the China+1 Strategy is Reshaping Global Supply Chains,” July 2023
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Despite these positive developments, India’s path is not simple. Building a semiconductor
fabrication unit, often called a “fab”, requires a very high level of technological skill and
infrastructure. A single fab can cost more than ten billion dollars and needs uninterrupted
power supply, high-quality water and extremely clean manufacturing environments. India
currently lacks this level of infrastructure and technical experience. Moreover, countries like
Taiwan and South Korea have decades of expertise and large networks of supporting
industries which give them a huge advantage.4

Another challenge is the gap between India’s research institutions and its manufacturing
sector. Although India produces a large number of engineers every year, very few have the
specialized training needed in semiconductor physics, nanotechnology and materials
engineering. Unless this gap between education and industry is bridged. India will continue to
depend on foreign technology and talent.5

This project therefore studies India’s efforts to develop as a semiconductor hub and its
chances of success. This analysis looks into worldwide semiconductor trends, the strategies
and investments undertaken by India and the prospects arising from global changes in
manufacturing. The study examines the challenges that India encounters regarding capital,
technology and skilled labor. The study seeks to analyze India’s journey alongside prominent
semiconductor nations to identify the policy measures and reforms needed for India to attain
long-term self-reliance in this vital sector.2

Research Objectives:

To study and analyse India’s role in global semiconductor industry.

To understand the role of global semiconductor industry and its growing importance
geopolitically.

To identify main opportunities and challenges in India’s semiconductor industry.

Research Questions:

23
Government of Gujarat, Gujarat Semiconductor Policy 2022–2027, Industries and Mines Department.
4 .
World Semiconductor Trade Statistics (WSTS), Global Semiconductor Market Report 2024
5
NITI Aayog, Skilling India for the Semiconductor Industry, Policy Brief, 2024.
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What is the role of semiconductors in national economy and technology development?

What are the main government policies and frameworks for this industry?

What are the technological, infrastructural and administrative challenges to India for the
progress in this industry?

What are the lessons learnt/key findings from other countries regarding this semiconductor
industry?

Research Hypothesis:

With strong growing technology, youth potential, government policies and framework, India
can build a leading semiconductor industry globally. Investment in infrastructure, money and
strengthening research and development is still needed to fulfil the aspirations.

CHAPTER 2- GLOBAL SEMICONDUCTOR INDUSTRY: AN OVERVIEW

The semiconductor industry acts as the backbone of global economy. There is use of chips in
every sector including communication, transport,health and defence. This industry started in
the United States during the mid 1990s. After the invention of transistor that marked the start
of digital revolution. Over the years countries including Japan, South Korea and Taiwan built
strong manufacturing industry of these. Whereas the United States remained as the leading
manufacturer among all globally.

In today’s scenario, the semiconductor manufacturing is controlled and dominated by several

major areas globally. Taiwan based company TSMC is in the forefront of global chip
manufacturing. South Korea’s Samsung and SK Hynix have a speciality in memory chips.
The United States have pioneered design and innovation in chips with countries like Intel and
NVIDIA. Asia is emerging as a global hub for this with respect to China investing more to
enhance its local industries.

There were limited number of manufacturers during the covid era, which exposed the dangers
of relying to limited countries and a need to start manufacturing it in India, China and several
countries. The U.S passed CHIPS Act, Europe started Chips initiative and Japan Introduced
fresh subsidies for its local factories. This created a global competition because every country
wanted their own semiconductor industry.
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But setting up a semiconductor manufacturing unit which is fully home grown and is not
dependent on any nation is expensive and very complex. A single plant costs billions of
dollars and requires advance technology which will need a lot of monetary investment and
research and development strengthening. And due to these challenges there is concentration
of industries in few countries and they lead this industry with a strong ecosystem.

Geopolitics tension and competition between US and China has reshaped the patterns of the
industry dynamics. Countries aspiring to have an industry are looking for new and less
complicated locations which are friendly and open for opportunities. Countries like India and
Vietnam are one among those preferrable [Link] are open to tie ups and foreign
investments and to return offering tax benefits, policies and support to investors.

The Semiconductor Industry now not only shapes the global market and technology but also
stands as the major point of transformation of influence globally in fields like trade, security
and national growth which is beyond technological advancement.

CHAPTER 3- INDIA’S SEMICONDUCTOR PUSH

The Indian semiconductor sector started to take shape in 2021 when the government
authorized a ₹76,000 crore plan to help it grow. The India Semiconductor Mission was
created to bring together those who work in manufacturing, design, research and talent
development. Its principal goal is to make India self-sufficient in advanced electronics and
less reliant on imports.

Companies that make parts and chips in India can get help from the Production Linked
Incentive Scheme for Electronics. The Design Linked Incentive Scheme encourages research
and development by enabling small businesses and startups produce their own chip designs.
These plans are all working together to develop a discovered The Indian semiconductor
sector started to take shape in 2021 when the government announced a ₹76,000 crore plan to
help it grow.

The India Semiconductor Mission was created to bring together those who work in
manufacturing, design, research and talent development. Its principal goal is to make India
self-sufficient in advanced electronics and less reliant on imports. The Production Linked
Incentive Scheme for Electronics helps Indian enterprises that make semiconductors and
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other electronic parts. The Design Linked Incentive Scheme helps small businesses and
startups make their own chip designs, which encourages research and development.

These plans are working together to lay the groundwork for long-term growth in this area.
States are now very important to this objective. Gujarat unveiled a semiconductor policy that
includes financial and infrastructure support. Micron Technology's assembly and testing
operation near Sanand came to this strategy, which is expected to produce thousands of
employment.

Karnataka, Tamil Nadu and Telangana are also building semiconductor clusters to draw in
investors from both inside and outside the country. India already has a strong foundation in
designing [Link] at Bengaluru, Hyderabad and Noida work with
companies all around the world to design and test chips.

The next step is to turn this design power into the ability to make things and perform research
in the country. Schools are also changing to keep up. IITs and IIITs are beginning to offer
classes in materials science, semiconductor technology and fabrication. This focus on human
capital will be very crucial in the next few years for closing the skills gap.

There are still problems with things like infrastructure, supply chains and technology transfer.
It costs a lot of money to build semiconductor plants because they need a lot of power, clean
water and high-tech machines. India still needs to import a lot of important materials and
[Link] there is a tremendous desire to go past these problems. If India can keep up policy
backing, enhance coordination and keep investors happy, the semiconductor mission could be
one of the largest successes in its industrial history.

CHAPTER 4- OPPORTUNITIES FOR INDIA

The semiconductor industry offers India an unparalleled opportunity to combine economic

development with technological leadership. The moment is opportune and global conditions
have sufficiently stabilized. The global economy is center stage reassessing their supply
chains and many firms are ready to do business in trusted and stable economies. India is one
of the most surprising and promising options of the most colossal population, sustained
democracy and educated and skilled labor.
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India's first and primary strategic advantage is its human capital. India produces millions of
engineers and scientists every year and many work at global design companies that work in
the chip industry - that brings India unparalleled experience and exposure. The workforce,
with the right training and expanding incentives, can be tapped to create an indigenous
semiconductor industry.

The second country advantage is India's sheer domestic marketplace - the advent of
smartphones, EVs, digital systems and components have generated a billion-dollar natural
additivism for chips. Any portion of that can be produced in country to alleviate tens of
billions of dollars in imports (estimated a total of $70 billion in total foreign currency) and
build Indigenous Industries in the dynamic new segments of the marketplace.

With the Make in India and Digital India programs, it's clear and evident the Government has
taken positive action to encourage domestic manufacturing of more products, technologies
and services by simplifying the manufacturing laws and policies to make manufacturing more
desirable. The semiconductor mission is building upon these earlier undertakings to advance
and expedite similar goals, with strong and enduring emphasis on very leading-edge
technology and research. This is a value generating high salary job opportunity and venture
that could generate India's export opportunity set in perpetuity and enhance India's overall
global competitiveness.

CHAPTER 5: CHALLENGES AND ROADBLOCKS

1. Economic Constraints: High Capital Intensity and Opportunity Costs

● The very cost structure of the production of semiconductors becomes the prime entry
barrier for a rising economy such as India.

● It Costs Billions of Dollars to Set Up Fabs Construction of a sophisticated semiconductor

manufacturing plant or fab, requires a capital investment of about $5 billion to $10 billion.
The high - ticket requirement exerts intense strain on national investment spending, requiring
years of sustained, continuous funding.

● Extremely High Opportunity Cost for India's Economy- Directing so much national savings
and taxpayer money into a single, very risky industry creates a trade-off. These funds would
otherwise be directed toward basic, contemporary needs like the healthcare or education
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sectors or overall physical infrastructure (ports, roads and electrical distribution) and so an
economic outcry over priorities arises.

2. Infrastructural and Supply Chain Gaps

● It needs world - class, round - the - clock utility and logistics infrastructure, something
India does not possess at the moment.

● Critical Utility Failures (The Infrastructural Gap): Fabs require an absolute and a
continuous supply of high - quality power and colossal volumes of ultra - pure water for
washing wafers. Critical issues include load shedding, frequent power outages and water
stress in many areas. Inadequate infrastructure presents an existential risk since a single
utility outage can destroy a whole batch of wafers, costing millions of dollars in losses and
seriously harming India's standing as a dependable manufacturing destination.

● Shortage of Ancillary Ecosystem and Raw Material Base: There exists a severe shortage of
indigenous availability of vital raw materials, such as high purity silicon wafers, process gas
and special chemicals. The import dependence not only enhances the country's exposure to
international supply chain disruption, but also escalates the total cost of production.

● Nascent Service and Assembly Infrastructure- India has no mature Outsourced

Semiconductor Assembly and Test (OSAT) infrastructure for back-end functions such as
packaging and testing. In addition, an underdeveloped local ‘services layer’ for specialized
equipment engineering, ongoing maintenance and sophisticated tool support is adverse to the
long - term operating efficiency and competitiveness of any new fab.

3. Microeconomic and Policy Issues

● Micro-level issues like labor and bureaucracy increases the cost of transactions and
operations for producers

● Shortage in Skilled Labour- Although India has an extensive pool of talent in chip design, it
critically lacks highly technical engineers and technicians qualified in the
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detailed operating and maintenance technology of fab manufacturing as well as advanced

packaging. The shortage pushes the wages for the scarcity of specialized talent, thereby
increasing the production cost directly.

● Bureaucracy and Policy Delays: Project clearance, land acquisition, environmental permits
and obtaining the promised government incentives are frequently difficult and time-
consuming processes. Large international corporations have previously been put off by a
history of policy hesitancy and bureaucratic red tape. Attracting high-capital, long-gestation
investments is significantly hampered by these slow approvals and frequent policy changes,
which also raise transaction costs and create a great deal of regulatory uncertainty.

● Slow Clearances and Red Tape- Examples of delayed policies and implementation risk give
the impression of uncertainty. When governments take their time in releasing promised
incentives or delivering land and clearances, it leads to a direct delay in project schedules,
incurring higher expenditure and lower returns on investment by the private sector.

4. Global Market Factors and Competition

The very character of the world semiconductor industry itself poses daunting barriers to entry.

Dominance by Incumbent Oligopolies- The individual home markets of the USA (Intel,
Samsung, TSMC), South Korea (Samsung) and Taiwan (TSMC) dominate the world's wafers
and design markets, representing over 80% market share. India, as a late entrant, has a severe
comparative disadvantage in the form of technology expertise availability, process refinement
and trust by the customers. Entry Barriers in an Oligopoly: The international semiconductor
market is not a free market, but an oligopoly that is shaped by geopolitical interests and
control over intellectual properties (example - EUV lithograph). Market entry in India has
high barriers involving acquisition of the most contemporary technologies and the formation
of long, trust-based relationships with current leaders in the market.

CHAPTER 6- FUTURE OUTLOOK AND COMAPRITIVE ANALYSIS

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1. Government Push and Fiscal Incentives

● The mission feasibility is based upon the consistency and implementation of the strategic
government policies designed to mitigate the high capital barriers.

● Production Linked Incentive (PLI) Scheme in Electronics- This flagship initiative, in

combination with the ₹76,000 crores (>$10 billion) outlay for the India Semiconductor
Mission (ISM), offers up to 50% of the fiscal assistance in the establishment of fabs and other
units. The massive financial support substantially boosts aggregate investment by both the
indigenous and foreign companies, acting as a strong multiplier in the GDP in the form of
generating employment as well as development of ancillary industry.

● Creating a Domestic Supply Chain (Aggregate Supply Boost): The ISM aims to support the
entire value chain- from chip design (Design Linked Incentive - DLI) to fabrication (Fabs
Scheme) and assembly/packaging (ATMP/OSAT Schemes). This holistic approach seeks to
create a robust domestic supply chain, which, when successful, will boost aggregate supply
by making high-value components readily available within the country.

2. Increase in Domestic Demand and Derived Markets

● The large and fast - digitizing economy of India provides an anchor demand unsurpassed
by most other emerging economies.

● Expanding Electronics, EV and 5G Industries: The swift build-out of 5G infrastructure, the

explosive increase in smartphone and consumer electronics penetration and the government's
thrust towards Electric Vehicles (EVs) are all heavily chip-intensive. The combination creates
an increasingly expanding derived demand for semiconductors (power management,
controllers, memory, sensors).

● Incentive for Domestic Manufacturing (Demand - Supply Theory)- Since the demand for
chipsets hugely exceeds domestic production, the gap creates a natural market opportunity.
Based on demand-supply theory, the continuous and increasing consumption base in the
country creates a great incentive for international as well as local companies to invest in local
manufacturing units in order to reduce logistics cost as well as reach the market directly.

3. Investment Opportunities and Technology Transfer

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● The geopolitically motivated thrust for a ‘China Plus One’ strategy is prompting big foreign
capital and technology to shift towards India.

● Increase in Foreign Direct Investment (FDI) Inflows- Global giants like Micron
(Memory/ATMP) and Indian business leaders like Tata Electronics (partnering with Taiwan's
PSMC for Fabs and making ATMP) have made multi-billion-dollar pledges. These pledges
are essential, as Foreign Direct Investment (FDI) inflows are increased by them and India's
potential is reaffirmed.

● Positive Contribution to Job and Technology Transfer- These ventures will generate
thousands of high - tech jobs (processing, equipment engineering) and, more significantly,
facilitate the technology and process expertise of advanced manufacturing being transferred,
which India is not proficient in at the moment.

4. Macroeconomic Effects and Long - term Perspective Perspective

● A successful semiconductor ecosystem promises deep, structural benefits for the national
economy.

● Strengthen the Rupee and Lessen Import Dependency- Today, India depends almost
entirely on importing chips and electronics. Success in domestic manufacturing would

strengthen the Rupee by reducing the electronics import bill, the largest cause of the trade
deficit, thereby strengthening the country's balance of payment.

● Shift from Importer to Net Exporter (2030-35)- With sustained policy consistency,
successful skill development (training programs for specialized fab workers) and continued
private investment, the long-term vision is for India to shift from being a major importer of
chips to a net exporter of semiconductor products and services by 2030-2035, securing its
position in the global supply chain.

5. Comparative Analysis
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● India’s semiconductor strategy and economics with other global powers (US, China,
Taiwan, South Korea).

Parameter India Taiwan South China USA

Korea

Industry Emerging Mature Advanced Rapidly Advanced

Stage (Strong (TSMC (Samsung Growing (IP/Equipme
Design, Leader in Leader in (State- nt Leader,
Nascent Foundry) Memory/Fo directed) R&D)
Fab) undry)

Govt. Strong Strategic Tech-driven Massive CHIPS Act

Support (PLI, ISM: Long-term (R&D Tax Subsidies ($52B
Direct (Historical Credits) (Local Subsidies +
Capital State Content R&D)
Subsidies) Planning) Mandates)

R&D Low (Focus High Very High Moderate Very High

Investment on (Process (Memory/A (Catch-up (IP,
attracting Technology) dvanced focus) Equipment,
Mfgr) Node) Materials)

Skilled Developing Specialized Specialized Abundant Highly

Workforce (Strong (Deep (High- (Massive Trained
Design, Process Volume Engineering (Research/D
Expertise) Manufactur Base) esign)
ing)

Shortage in
Fab Ops)

Energy & Improving Efficient Strong Adequate Advanced

Infra (Major (Decades-
Challenge old, Reliable
for Fabs) Ecosystem)
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Economic Import Export Innovation Self Tech

Focus Substitution Leadership
& Supply & & global sufficiency Sovereignty
Chain Geopolitical market &
Resilience Leverage (domestic
share geopolitical
content)
de-risking

Comparative Analysis and Strategic Positioning

1. Strategic Model (India vs. China): India is following a protectionist-cum-developmental

model, using high subsidies and incentives to attract initial capital and build a domestic base,
similar to early-stage China, but with a greater emphasis on attracting foreign partners.

○ China's model is focused on achieving self-sufficiency at almost any cost, driven by

massive, state-directed subsidies to domestic firms (SMIC), creating trade friction with the
US and EU. India's approach is more aligned with global supply chain diversification.

2. Comparative Edge (Macro): India's biggest macro edge is its large and protected
domestic demand (consumer, auto, defence) and the significant, explicit government
support provided through the ISM. This provides investors with a guaranteed market anchor,
unlike many pure-export hubs.

3. Major Challenges (Micro): The major micro challenge is inefficiency and the high initial
cost of production compared to mature hubs like Taiwan, which benefit from immense
economies of scale, deeply ingrained supply chains and decades of process learning. Indian
fabs will face a significant competitive disadvantage in the short term.

4. Path to Advantage: ○ India's path to achieving a comparative advantage requires a dual

focus:
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■ Micro-level efficiency: Through sustained skill development (to reduce operational

errors/costs) and lower taxes on inputs (to decrease transaction costs).

■ Macro-level stability: By maintaining policy consistency and dramatically increasing

R&D investment to transition from mature-node manufacturing to cutting-edge design and
specialized packaging, thereby creating a globally unique value proposition.

CHAPTER VII- CONCLUSION

India's semiconductor revolution is a step towards technological self reliance, golbal

representation and financial growth . With the Government of India initiatives such as ISM
and PLI schemes, India is trying to build a strong manufacturing base and decrease its
dependency on imports. But high capital cost, limited infrastructure and global competition
are major challenges yet.

The huge Indian domestic market, the skilled manpower and policy support together create a
near-unbeatable combination in the future, despite some challenges. These efforts, if pursued
consistently, can find a place for India as a vital part of the global semiconductor value chain
and ensure deeper involvement in the digital economy.

CHAPTER VIII- BIBLIOGRAPHY AND REFERENCE

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[Link] of Electronics and Information Technology (MeitY), India Semiconductor Mission

Reports, Government of India, 2023–2024.

2. Invest India, Semicon India Programme Overview, 2024.

3. NITI Aayog, India’s Electronics Manufacturing and Semiconductor Ecosystem, Policy

Paper, 2023.

4. World Semiconductor Trade Statistics (WSTS), Global Semiconductor Market Forecast,

2024.

5. McKinsey & Company, The Semiconductor Decade: A Trillion-Dollar Industry, Global

Report, 2022.

6. Deloitte, Semiconductor Industry Outlook 2024, Global Insights Report.

7. Economic Times, India’s Chip Mission Gains Momentum with Global Investments, 2024.

8. Business Standard, PLI Scheme and India’s Semiconductor Opportunity, 2023.

9. The Hindu BusinessLine, Semicon India: Building a Future-Ready Economy, 2024.

10. Statista, Semiconductor Industry Data and Market Share Analysis, 2023.