India's Semiconductor Mission at a Crossroads: Opportunities and Challenges Amid Global Supply Chain Restructuring

The global semiconductor supply chain is undergoing its most significant restructuring since the end of the Cold War. U.S.–China technological competition, the chip shortage during the global pandemic, and major economies' anxiety over "semiconductor sovereignty" are pushing chip manufacturing away from an efficiency-first global division of labor and toward a security-first, diversified layout. Against this backdrop, India—a country with global influence in software services—has officially launched its "Semiconductor Mission," attempting to replicate its successful experience in the IT services sector and build new national competitiveness in hardware and chip manufacturing.

This article is based on a paper published by ORF (Observer Research Foundation) in December 2025. It reviews the evolution of the global supply chain landscape, analyzes the chokepoints and breakthrough opportunities facing India's semiconductor strategy across the three dimensions of technology pathways, supply chain segments, and geopolitics, and explores the possible long-term impact on the global semiconductor competitive landscape.

Background: Why Semiconductors Have Become the Core of Great-Power Competition

Since integrated circuit technology was established in 1963, semiconductors have gradually secured their position as the core of modern electronic technology. Almost all modern computing, communications, defense, and artificial intelligence systems depend on continued advances in silicon-based chips. Yet semiconductor manufacturing is a highly complex, capital-intensive, and extremely difficult-to-replicate industry, spanning hundreds of steps from design to packaging. The supply chain has formed a highly specialized geographical division of labor worldwide: the United States controls EDA and core chip design, Taiwan and South Korea master advanced manufacturing, while Japan and Europe hold advantages in equipment and materials.

This highly fragmented model worked well in an era of peace and efficiency, but exposed its fragility under geopolitical tension and pandemic shocks. From the 2020s onward, the United States has treated China as a strategic competitor and attempted to cut off China's access to advanced semiconductor technology through export controls, entity lists, and investment restrictions. At the same time, China has accelerated its push for domestic self-sufficiency, increasing investment in mature process nodes and domestic equipment. Chips have thus become an "infrastructure-level weapon" in great-power technological warfare. It is in this broad environment that India—the world's sixth-largest economy and seventh-largest IT exporter—has begun to reassess its role in the semiconductor supply chain.

India's Foundation: The Hardware Achilles' Heel of a Software EmpireIndia’s economic growth over the past three decades has been inseparable from software and information technology services. According to data cited by ORF, India’s IT industry revenue reached $283 billion in 2024, accounting for about 7.3% of its GDP. Of this, chip design, software development, and engineering services constitute India’s existing capabilities that are indirectly connected to the global semiconductor industry. Many international chip companies, including Intel, Qualcomm, and NVIDIA, have R&D centers in India. Yet this “technological accumulation” is concentrated in intangible assets and design verification, and has not translated into domestic manufacturing and packaging capabilities. India has almost no mature wafer fabs and cannot provide a hardware safety net for its domestic IT industry. Facing national-level policy responses such as the U.S. CHIPS and Science Act, the EU Chips Act, and Japan’s semiconductor revival plan, India launched the India Semiconductor Mission in 2021 and offered fiscal incentives to attract investment, attempting to build end-to-end manufacturing capabilities from scratch.

As the global semiconductor supply chain shifts from “hyper-concentration” to “second sourcing,” India’s entry comes at a window of opportunity. But being a “second source” is not the same as taking over the industrial chain; India must confront three core issues: technology node selection, industrial-chain ecosystem coordination, and geopolitical red lines and licensing.

Technology Impact: Mature Process or Advanced Process?

Semiconductor manufacturing technology roadmaps are usually measured by line-width nodes. 28nm and above are called mature process nodes, widely used in power management, automotive electronics, and the Internet of Things; 7nm and below are regarded as advanced process nodes, serving smartphones, PCs, and AI accelerators. Like most latecomer countries in semiconductors, India lacks historical accumulation in advanced processes and has no possibility of joining the extreme ultraviolet lithography (EUV) club. Therefore, a pragmatic technology roadmap almost inevitably means first entering through mature processes and specialty technologies.Technology barriers are not limited to lithography. High-purity silicon wafers, photoresists, specialty gases, and CMP polishing materials used in manufacturing also depend heavily on specific countries and companies. If India builds wafer fabs locally, its early stage will likely just be "copying" a combination of Taiwanese or Korean equipment onto Indian soil, but the transfer of process know-how is the biggest bottleneck. Without a group of process engineers with real-world experience, even a brand-new fab will struggle to achieve competitive yields. India's more pragmatic choice at present may be to focus simultaneously on "volume production at mature nodes" and "advanced packaging" as two areas of differentiated competition. Advanced packaging no longer relies on advanced linewidths; instead, it improves system performance through stacking and heterogeneous integration. It is an important increment for AI and high-performance computing, and its technical barriers are relatively dispersed, leaving more opportunities for latecomers.

Supply Chain Impact: Who Benefits? Who Bears the Pressure?

Once India truly launches wafer manufacturing, the impact will spread outward from India itself. Looking at the industry chain, upstream equipment and materials giants (such as ASML, Applied Materials, Lam Research, KLA, etc.) will be direct beneficiaries—India's fab construction means more equipment orders and after-sales revenue. However, most of these companies are from the United States or subject to U.S. export controls, so deliveries to India still depend on geopolitical winds.

In the midstream manufacturing landscape, TSMC, Samsung, and Intel are already expanding capacity globally, and their capacity plans largely reflect the demands of major powers. India's emergence will not threaten the three giants' dominance in advanced process nodes in the short term. But in mature nodes, especially special process scenarios such as analog chips, power devices, and embedded memory, India may compete head-on with mainland China, Malaysia, and Southeast Asia. And these are precisely the areas where mainland China has expanded fastest over the past few years.

For global chip customers, India represents a "backup option." For automotive and industrial equipment companies seeking to diversify risk, Indian fabs could become a beneficiary node in "China+1" and "Taiwan+1" strategies. However, the trap of the "+1" strategy is that customers need to see an entire local supply chain—from wafers and chemicals to packaging and testing—respond quickly, and India currently lacks these supporting capabilities. Without simultaneously building a "mini cluster," a single wafer fab cannot easily achieve a balance between cost and efficiency. On the other hand, India's entry into manufacturing will also reshape its own IT services ecosystem. In the past, Indian companies held a "low-cost outsourcing" position in the global chip design chain. If local wafer fabs can generate more system-level design demand, India may upgrade from purely exporting services to product creation, profoundly changing its cooperative relationship with global technology companies.

Competitive Landscape: India's Position on the Global ChessboardFrom the perspective of the global competitive landscape, regional competition in the semiconductor industry has evolved into a subsidy race among nation-states. The United States, Europe, Japan, South Korea, and mainland China are all courting leading manufacturers with budgets in the tens of billions of dollars. If India relies only on its domestic market, it cannot attract top-tier players to build cutting-edge production capacity. It must embed itself in some geopolitical camp, or at least make multiple parties regard it as a “reliable hinterland not subject to export controls.”

In fact, India’s science and technology partnership with the United States has continued to warm in recent years, including policy dialogues and supply-chain initiatives in the semiconductor field. This gives India a natural advantage over mainland China in obtaining U.S. approvals for equipment and technology. At the same time, India also maintains traditional ties with Russia, allowing it to maneuver between China and the United States with a relatively independent diplomatic posture. But this “strategic autonomy” may also prevent it from receiving the same depth of technology sharing as the United States, Japan, and South Korea, because any advanced technology carries the risk of being diverted to an uncontrollable third party.

Within the region, India’s direct competitors are not limited to the traditional semiconductor powers. Malaysia, Vietnam, and Singapore all have solid foundations in packaging and testing as well as mature-process manufacturing; Thailand and Indonesia are also attracting secondary links in the chip supply chain. India, despite having a larger pool of design talent and an English-language advantage, has shortcomings in logistics, infrastructure, and the quality of industrial workers that will not be easy to remedy within a few years. In terms of competitive strategy, India is unlikely to challenge TSMC or Samsung in the short to medium term. Rather, it needs to cooperate with second- and third-tier manufacturers from Japan, South Korea, and Taiwan, or with IDM companies seeking a “second base”—for example, first using low costs and the domestic market as entry points to build global credibility in electronics manufacturing services (EMS) and packaging and testing.

Regional Implications: Regional Variables of India’s Rise

From the perspective of industrial geography, India is located in South Asia, faces the Indian Ocean, and is closely connected to maritime trade routes with the Middle East, Africa, and Europe. If India can become a link in the global semiconductor supply chain, it can effectively mitigate the global impact of risks in the East Asian straits. For the U.S. alliance system, a democratic India serving as a manufacturing node enjoys far greater strategic trust than mainland China.

But India’s problem lies precisely in its institutional environment and bureaucratic efficiency. Semiconductor production requires stable and continuous electricity, ultrapure water in very large volumes, and logistics with rapid customs clearance—these “low-tech” infrastructure indicators constitute a threshold even harder to cross than the technology itself. Moreover, although India’s tax system and labor laws are being reformed, cross-border companies still face cumbersome land-approval procedures and the risk of legal disputes. Compared with the mature free-port mechanisms of Singapore and Malaysia, India still needs extensive supporting arrangements at the institutional level.From a technical security perspective, India has abundant technical talent, but many top engineers prefer software over manufacturing. Semiconductor manufacturing requires a highly disciplined factory culture that takes long-term cultural cultivation to develop and cannot be fostered by short-term subsidies. If India brings in several large foreign-funded wafer fabs, it may create an "enclave economy"—the factories may be located in India, but the equipment, materials, and key engineers all come from overseas, with limited interaction with the local economy. This will greatly weaken the industrial spillover effect.

Investment Perspective: Will Capital Pay for India's Long-Term Story?

Capital markets tend to view India's semiconductor industry within the grand narrative of the "shift of emerging manufacturing." In terms of trends, India is undergoing an electronics manufacturing renaissance; the southward migration of Apple's supply chain has already cultivated a number of local precision manufacturing companies. The investment logic for semiconductors is structurally similar—government subsidies, a large market, low labor costs, and policy certainty are all key factors in attracting capital.

But capital will also scrutinize the payback period of India's semiconductor projects. Unlike consumer electronics assembly, wafer fabs' heavy assets, long cycles, and cyclical fluctuations demand extreme patience from investors. India's domestic demand for chips is currently met mainly by imports. Whether sufficient orders can be secured once production capacity is opened up is an open question. Unless India can promise "domestic market protection" or sign long-term capacity agreements with global OEMs, the internal rate of return for wafer fab projects will find it difficult to support the massive capital expenditure.

Therefore, a more realistic investment path is "packaging and testing first, then manufacturing." Packaging and testing require smaller investment, stay close to customer demand, and can generate revenue quickly, making them suitable as a springboard for India's semiconductor industry to go from zero to one. Many international analytical institutions also point out that while India's "neutrality" in geopolitics provides flexibility, capital markets care more about which camp it is willing to align with—because equipment supply and long-term export markets are both affected by this.

Long-Term Outlook: The Possibilities in Three, Five, and Ten Years

In the long run, India's semiconductor industry faces at least three scenarios. Within three years, the most likely outcome is the completion of several packaging, testing, and assembly plants, along with the start of trial production at one mature-process wafer fab. At this stage, since equipment and engineering talent still rely on imports, factory yields and operational efficiency may fall short of expectations, and the industrial ecosystem will not yet be able to form a self-sustaining cycle.

Within five years, if India can maintain policy continuity and a foreign-investor-friendly attitude, it may build production capacity in mature processes, analog chips, and specialty packaging sufficient to serve the automotive and industrial markets. Combined with growing global demand for "trusted supply chains," India is expected to become a regional supply center in these fields. At that point, however, it will also face fierce price competition from countries with lower labor costs, such as Malaysia and Vietnam.Ten years later, if India completes its technology ramp-up from packaging and testing to manufacturing and builds a second-tier supplier network covering specialty gases, sputtering targets, and test equipment, it may truly “recreate a supply chain node.” This outcome will reshape the Asia-Pacific semiconductor landscape: global manufacturing will no longer be concentrated along the coastlines of East Asia, and South Asia and Southeast Asia will form a decentralized, multi-center manufacturing network. But if India fails to resolve its engineer gap and institutional frictions, its semiconductor mission may stop at low-end packaging, testing, and assembly, becoming yet another “unfinished miracle” in geopolitical narratives.

Industry Chain Analysis: India’s Upstream, Midstream, and Downstream

The upstream mainly includes EDA tools, semiconductor IP, equipment, and materials, concentrated in the U.S., Japan, and Europe. India has almost no indigenous EDA or lithography capability and can only rely on imports in the short term. However, India can develop local substitutes in materials segments such as high-purity chemicals and specialty gases, because these segments are sensitive to transportation costs and local supply. In addition, India has strong chemical engineering capabilities; if it becomes embedded in global supply chains, it has the potential to achieve a breakthrough on the materials side.

The midstream includes wafer manufacturing, packaging, and testing, and is the core of India’s semiconductor mission. In wafer manufacturing, constrained by equipment and market realities, India’s more realistic entry point is to focus on mature process nodes and power semiconductors. In packaging and testing, India can leverage its labor and market to quickly become an OSAT outsourcing destination for international IDMs. Notably, the technological evolution of advanced packaging is raising the value of the packaging and testing segment. If India invests in Chiplet and 2.5D/3D packaging from day one, it may be able to avoid latecomer disadvantages and enter next-generation system integration technologies directly.

The downstream includes consumer electronics, automotive electronics, industrial equipment, and communications infrastructure. India has in recent years become the world’s second-largest mobile device manufacturing base, with strong domestic demand for telecom equipment and automotive electronics. The existence of a downstream market is an important bargaining chip for India in negotiations, but the drawback is that terminal brands generally treat the supply chain as a global commodity and will not easily pay a premium for “Made in India.” To make the downstream genuinely drive the upstream, demand must be “locked” into the local manufacturing environment through tariffs and industrial policy, which again tests the Indian government’s governance wisdom.

Conclusion: What India Needs Most Is an Industrial Ecosystem, Not a Single Fab

The evolution of the global semiconductor supply chain no longer follows purely economic-efficiency logic; geopolitical security, export controls, and industrial resilience have become new variables. India’s decision to launch its semiconductor mission at this moment is undoubtedly a bet that the world needs more diversified supply chain nodes. But semiconductor manufacturing has never been an island project; it requires design, materials, equipment, customers, and the policy environment to co-evolve. If India merely attracts a few isolated fabs without forming a complete education, supply, and innovation ecosystem, it will be difficult for it to secure an advantageous position in the post-pandemic global competition.India's real opportunity may not lie in catching up with TSMC's process technology, but rather in leveraging its software talent and engineering mathematics capabilities to accumulate irreplaceable strengths in "intermediate zones" such as chip design services, functional safety verification, and advanced packaging design, before gradually extending into manufacturing. This requires a more patient and systematic national strategy than a "Semiconductor Mission."

For the global semiconductor industry, whether India can rise is not merely the success or failure of a single country. It determines whether the "second logic" of global chip manufacturing can truly take hold over the next decade, and whether the technology supply chain will have sufficient redundancy and resilience when facing the next round of shocks.