India’s Semiconductor Moment Is Here, But Is This Just About Optics?

With the launch of ISRO’s Vikram 32-bit processor this week at the Semicon India 2025 event, India now has its first indigenous space-grade computer chip for rockets. 

Designed to withstand the extreme conditions of space launches, Indian Prime Minister Narendra Modi touted Vikram as the ‘digital diamond’. However, it must be noted that Vikram is designed for niche operations in satellites and rockets, and is not the kind of chip that powers smartphones or laptops. 

There were other big announcements too at Semicon India 2025, and more than a dozen MoUs were signed as international companies partnered with Indian enterprises for the semiconductor push that India needs. 

For instance, Tata Electronics announced plans to jointly develop capabilities in semiconductor materials with German tech major Merck. And Kaynes Semicon partnered with Infineon to develop India’s first MEMs Microphone chips, which can be used to make indigenous wireless earphones in India, as well as a partneship for advanced semiconductor packages. 

But beyond the big headlines, lie some uncomfortable questions. Is this just about optics? And is India truly ready to become a semiconductor manufacturing hub like many want it to? 

Even though the country has cleared ten projects worth over $18 Bn (INR 1.5 Lakh Cr) under its semiconductor mission since 2021, we are hardly on par with nations like Taiwan and South Korea that are miles ahead in manufacturing depth, advanced R&D and even basic infrastructure.

While efforts are afoot when it comes to giving a push to the Indian semiconductor industry — with fabs, packaging plants and silicon carbide facilities already a work in progress at places like Gujarat’s Dholera and Assam’s Jagiroad and companies like Tata Electronics spearheading the show — could we have done anything differently?

“Before embracing a manufacturing infrastructure, a nation should first build societal infrastructure,” a senior official of Taiwan Semiconductor Manufacturing Company (TSMC) told Inc42 on the sidelines of Semicon India. 

An ideal societal infrastructure comprises functional hospitals, schools, and roads and connectivity. These are crucial for any market or industry to thrive, the official said, adding that some regions like Dholera currently are not really the embodiment of a semiconductor-ready ecosystem.  In their opinion, India would needs another decade to build these support systems before we can seriously compete with existing semiconductor manufacturing economies. 

Despite the odds, Tata Electronics has taken a bold step to build India’s first AI-enabled semiconductor fabrication plant (fab) here. The INR 91,000 Cr (about $11 Bn) project is expected to produce up to 50,000 wafers per month by the end of 2026. 

Adding insult to injury is the regulatory maze that companies have to go through, which does no one any favours when it comes to accelerating development. Of course, there are several nuances at play here and regulatory compliance is necessary, but often it comes as red tape and barrier for new players. 

“Setting up large-scale manufacturing units is not easy in India. There are a plethora of regulations in the country and little hand-holding and clarity,” said Allen Nejah, the chief innovation officer of Polymatech, a semiconductor manufacturing company.

Stacking Up The Chips

While ISRO’s Vikram processor serves as a beacon for the country to shift from design and services to actual chip production, the Semicon India event saw a flurry of project approvals, signalling that it was now India’s semiconductor moment.

The most talked-about initiative was the Tata Group’s fabrication plant in Dholera. The facility is focussed on making 28nm–110nm chips for automobiles, industrial systems and electronics devices.

Alongside, global players like Micron are setting up assembly and testing units in Gujarat. Several outsourced semiconductor assembly and test (OSAT) and assembly, testing, marking and packaging (ATMP) projects have also been approved. These are critical to building downstream capacity that turns wafers into finished, tested components.

Presently, the focus is on manufacturing chips that can handle industrial applications and other large electronics, which India currently imports from other countries. The country imported INR 1.71 Lakh Cr (about $20 Bn) worth of these chips in FY24 alone. So naturally this will unlock a lot of new jobs and value for India, but there was one glaring omission among all these announcements: AI. 

At the moment, India is not ready to make AI-grade chips, which would be the bedrock of any sovereign AI models and large language models. When we think of semiconductors in 2025, this seems to be the biggest hurdle for India in its bid to create homegrown AI.

The AI & Compute Conundrum

There is little doubt that India today needs to start developing AI-grade chips, and we’re still years away from making this a reality. Industry stakeholders second this claim and several founders we have spoken to say the problem is not that India does not have the talent to make indigenous AI models, but the dependency on global tech giants for compute and infrastructure.

At Semicon India 2025, we couldn’t help but ask IT minister Ashwini Vaishnaw about India’s progress in this regard, and whether the country is on track for reported date of 2027 to produce AI-grade semiconductors that can be deployed in GPUs.   

“We’re collaborating with several institutes, and the conversations are going on,” the minister said, without going into specifics. 

There’s no reason to doubt that India cannot make these semiconductors, but so far there is no indication that could give us strong conviction. Here, we are referring to powerful GPUs and custom application-specific integrated circuits (ASICs), that are essential for modern AI models and training systems. 

These are designed specifically for such tasks and have some of the most complicated manufacturing processes in the world. Chips need to be paired with very high-speed memory via cutting-edge packaging methods.

To make such chips at scale, three things are essential — access to the advanced chipmaking tools and processes, packaging technology on par with CoWoS (chip on wafer on substrate) and a steady local supply of high-bandwidth memory (HBM), and skilled suppliers, engineers and technicians. But within these too, there are various layers that are essential, such as clean rooms and testing labs that are on par with the best in the world. 

India currently lacks all three. Here’s a detailed look:

Access To Advanced Tech: The first and biggest gap is in lithography, the process used to carve transistors on silicon. India’s big upcoming fabs will work at the 28 nm level and nearby nodes. These are perfectly fine for many products, but they are several generations behind the advanced 5 nanometer (nm) and 3 nm technologies used in AI-grade chips. Investment in electronics systems design is essential to build focus among manufacturers on smaller chips that can be deployed in large volumes.  

Steady Local Supply Of HBM: The second barrier is packaging and memory. Modern chips do not just depend on small transistors, they need huge amounts of HBM or high bandwidth memory, stacked close to the chip and connected with ultra-fast links. 

They also rely on advanced packaging like CoWoS, which can combine multiple large chips with several HBM stacks into one module. But global capacity for CoWoS and HBM is already tight, with only a few suppliers controlling most of the market, and orders stretching well into the future. 

Setting up such facilities in India would need not only expensive cleanrooms and machines but also years of trial, learning, and well-established supply chains for specialised materials. 

A Thriving Ecosystem Of Suppliers And Talent: The third challenge lies in the broader ecosystem. To run advanced fabs and packaging lines, you need a dense network of local suppliers who can deliver chemicals, photoresists, substrates, ultra-pure water, precision gases and maintenance support. 

You also need reliable power, waste treatment and, above all, a large pool of highly trained engineers and technicians. It is only when suppliers, fabs and engineers are clustered together that a country can quickly improve chip yields or develop new packaging processes. 

Taiwan, China and South Korea have taken decades to reach where they stand today in terms of semiconductor manufacturing. India is only at the starting line, and to get on par with the incumbents, we are dependent on their technology expertise or even capital.

One has to understand the Vikram launch in the context of geopolitics and the global race to build sovereignty in tech. In that regard, it’s a major moment for India, but it’s absolutely critical to not let this become a game of optics.

Edited by Shishir Parasher