India accelerates its ambition in the semiconductor industry: a new giant in the making

India is making a determined move to become a key player in the global semiconductor industry, a sector that has gained enormous relevance on the world stage. Traditionally, this market has been dominated by countries such as the United States, South Korea, Taiwan and Japan. However, recent geopolitical tensions, the effects of the pandemic and government initiatives have pushed India to position itself as a viable option for the development of this strategic industry.

The Indian government has recognised the economic and geopolitical importance of semiconductors, which are critical to the manufacturing of electronic products from smartphones to electric cars. With a young and highly skilled population as well as a vast domestic market, India has embarked on an ambitious mission to create a robust and self-reliant industry in this field. Through its India Semiconductor Mission (ISM), launched in 2021, the country has begun rolling out a series of incentives and policies designed to attract major global players in the sector.

One of the key elements of this strategy is the financial support that the government is offering to companies wishing to set up operations in India. Up to 50% capital support has been promised to new entrants in various fields related to semiconductor production, sparking significant interest globally. One example is the state of Gujarat, which has offered an additional 25% support for capital expenditure, further enhancing the country’s attractiveness as a destination for chip production.

This incentive framework has begun to bear fruit. Companies such as Larsen & Toubro Ltd. (L&T), an Indian conglomerate, has announced significant investments in building a local semiconductor industry. While its initial investment of more than $300 million is modest compared to giants such as Nvidia or Advanced Micro Devices, it represents a crucial step toward diversifying the global supply chain. The company is focused on designing products such as power chips and radio frequency semiconductors, which positions it for high-growth sectors such as automotive, industrial and energy.

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Tensions between China and the United States have also been a catalyst in the growth of interest in India. As technology companies look to reduce their dependence on China and diversify their supply chains, India has emerged as an attractive destination. The trade war between Washington and Beijing has created uncertainty and led manufacturers to look for more stable alternatives. India, with its political stability and vast domestic market, presents itself as an option that is not only strategic, but also economic.

Apart from domestic investment, the international community has also begun to notice India’s potential in the semiconductor sector. Israel, for example, has shown interest in collaborating with India. Tower Semiconductor, an Israeli company specializing in integrated circuit manufacturing, is expected to make significant investments in the country. This collaboration could further strengthen India’s capabilities in chip production and lay the foundation for a globally competitive industry.

Another notable development is Tata Group’s decision to build the first major chip factory in India. This initiative is part of the government’s $10 billion program aimed at attracting semiconductor manufacturers and their suppliers to the country. Additionally, Micron Technology, a US-based memory manufacturer, has announced plans to set up a $2.75 billion assembly plant in Gujarat. These investments will not only strengthen local infrastructure but also reduce India’s dependence on costly semiconductor imports, which will have a significant impact on the country’s trade balance.