India’s effort to build a domestic semiconductor ecosystem is gaining momentum, but China’s experience shows that becoming a major chip power requires more than large investments. Beijing has spent heavily to strengthen manufacturing, attract talent and reduce dependence on foreign technology, yet it still struggles with the world’s most advanced chips.
For India, the key lesson is to build its strategy carefully. Chip design, assembly, testing, packaging and legacy semiconductor manufacturing may offer a more practical route than immediately competing in cutting-edge fabrication.
China Is Both a Model and a Warning
China’s semiconductor journey offers lessons because of the scale and persistence behind its strategy. The country has invested tens of billions of dollars in manufacturing, equipment, materials, research and talent development while trying to reduce dependence on foreign suppliers.
At the same time, China still faces restrictions involving advanced chipmaking technology and specialised equipment. This shows that even massive spending cannot quickly overcome the barriers involved in advanced semiconductor manufacturing.
India Should Strengthen Chip Design
India already has a strong base in semiconductor design, with thousands of engineers working for global chip and technology companies.
India could move beyond lower-end design services and develop advanced chip design, semiconductor intellectual property and fabless companies. Artificial intelligence is also expected to change how chips are designed, making it important for India to keep its workforce competitive.
Advanced Manufacturing Remains Difficult
Building cutting-edge chips is among the most capital-intensive and technologically demanding activities in modern industry. Fabrication plants require huge investment, specialised equipment, advanced materials, experienced engineers and constant upgrades.
Semiconductor technology evolves rapidly. A plant planned today may take years to become operational, by which time the technology frontier may have moved further ahead. India therefore needs to be cautious before committing large amounts of public money without a clear long-term roadmap.
Legacy Chips and Packaging Offer Opportunities
Instead of immediately trying to manufacture the most advanced processors, India could focus on legacy chips. These remain essential for automobiles, industrial machinery, consumer electronics, communication systems and defence equipment.
India could support domestic production through incentives, tariffs, government procurement and partnerships with industries such as automobiles and electronics. Building a competitive manufacturing base could take 10, 15 or even 20 years.
Assembly, testing and packaging could provide another practical entry point. These stages are less capital-intensive than advanced wafer fabrication and could benefit from India’s technical workforce.
Chip Security and Friend-Shoring
Semiconductors are strategic assets because modern economies and defence systems depend heavily on them. Aircraft, communication equipment, automobiles, satellites, data centres and AI platforms all rely on chips.
India therefore needs reliable access to critical semiconductors. But chip security does not necessarily mean manufacturing every chip domestically. Supplies can also be secured through alliances, long-term contracts, investments and trusted partnerships.
Friend-shoring offers another option. India could specialise in design, packaging or testing while partner countries focus on manufacturing, equipment or materials. This could reduce the burden of building every part of the ecosystem at home.
Global Foundries and Domestic Value
Attracting major semiconductor manufacturers could help India develop supply chains, skills and manufacturing expertise. However, fabrication plants require enormous subsidies and infrastructure investment.
Policymakers need to compare incentives with the benefits received. This makes prioritisation and long-term execution as important as funding itself.
India’s smartphone manufacturing experience offers a useful lesson. The country has become a major assembly and export centre, but many high-value components and technologies are still developed elsewhere.
For semiconductors, manufacturing numbers alone do not show how much value remains within the country. India should focus on design, intellectual property, specialised manufacturing, advanced packaging and local supplier networks.
Long-Term Policy Stability Is Essential
Semiconductor development requires patience. Countries that became major chip powers spent decades investing in education, research, manufacturing, subsidies and technology development. India therefore needs policy consistency across governments and economic cycles.
India also needs measurable goals, including production targets, manufacturing milestones, export goals and local value addition. Clear benchmarks would help determine the required investment, workforce, infrastructure and technology partnerships. If targets are missed, the strategy should be reviewed.
Artificial intelligence is also driving chip demand. Advanced AI systems require high-performance processors, creating investment in data centres, energy infrastructure and chip manufacturing.
India Should Invest, But Carefully
India has strong reasons to invest in semiconductors. The country needs chips for economic growth, national security, automobiles, electronics, defence systems, telecommunications and artificial intelligence.
However, the most effective strategy may not be to compete immediately with global leaders in every part of the industry. A balanced approach could focus on strengthening chip design, developing AI-ready talent, expanding packaging and testing, building legacy chip capacity and securing reliable international partnerships.
China’s experience shows both the advantages of persistence and the limits of investment alone. For India, long-term success will depend on policy consistency, careful use of public money, global partnerships and a realistic understanding of where the country can build lasting advantages.
