The report, titled “Future of India’s Semiconductor Industry,” indicates that geopolitical tensions, technological competition, and fragmented global supply chains are reshaping the semiconductor sector, making domestic chip capabilities a strategic necessity for India.
It further stated that India’s semiconductor manufacturing ecosystem is still in its infancy, resulting in a significant reliance on imports to meet domestic demand. Currently, 90-95% of India’s semiconductor consumption is fulfilled via imports.
Economic and security risks of import reliance
NITI Aayog reported that India imported semiconductor products valued at nearly $150 billion cumulatively between FY17 and FY25, with imports increasing at a compound annual growth rate of 23% during this period.
The report cautioned that if current trends persist, India’s annual semiconductor import expenses could surge to almost $240 billion by 2035, amplifying pressure on foreign exchange reserves.
In addition to economic implications, the report raised concerns about national security, linking dependence on foreign-made semiconductor components in aerospace and defense systems to potential vulnerabilities. It warned that using externally sourced chips in critical defense infrastructure could expose India to strategic risks.
Establishing India’s own semiconductor path
The report contended that India should refrain from direct competition with established global leaders in traditional wafer fabrication and focus instead on becoming indispensable in the “More-than-Moore” era.
As advanced packaging, manufacturing scale, and system-level integration become increasingly crucial alongside transistor-node advancement, the report emphasized the need for India to focus on leadership and purpose rather than mere participation.
NITI Aayog proposed that India aim to establish a $120-150 billion semiconductor value chain by 2035, prioritizing strategic self-sufficiency, ecosystem strength, and global significance, rather than solely pursuing the global wafer fabrication race.
| Year | Global Semiconductor Market (USD Bn) |
|---|---|
| 2024 | 631 |
| 2030P | 1,029 |
| 2035P | 1,547 |
Source: Semiconductor Industry Association
Challenges in global acceptance and ecosystem integration
The report also pointed out the challenges associated with achieving global acceptance for “Made-in-India” semiconductor products.
It noted the highly specialized nature of the global semiconductor supply chain, where original design manufacturers (ODMs), particularly from the US, heavily depend on well-established manufacturing and packaging ecosystems in East Asia.
According to the report, suppliers in East Asian countries have fostered deep trust with global ODMs over decades through consistent technical performance, scale, and reliability, establishing entrenched supply-chain relationships that are challenging to disrupt rapidly.
As a result, Indian semiconductor manufacturers will require sustained efforts to meet stringent global quality and performance standards in order to secure a lasting position within the global ecosystem.
Identifying five strategic pillars
To cultivate a competitive semiconductor ecosystem, the report delineated five strategic pillars, known as the “5Ps.”
- Pioneering
- Policy and investment
- Production
- People
- Partnership
These encompass pioneering investments in materials research, R&D, and agentic AI for semiconductor engineering; policy and investment support aimed at building trust and facilitating growth; production capabilities in fabs and advanced packaging; workforce development and skilling initiatives for semiconductor talent; and fostering partnerships to enhance ecosystem integration and intellectual property development.
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The report also underscored the broader societal benefits of semiconductor self-reliance, highlighting that affordable India-made chips could facilitate the expansion of 5G and 6G connectivity, enhance remote healthcare access, and promote smart agriculture solutions across rural India.
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