Don't copy Taiwan: NITI Aayog says India needs a new semiconductor strategy
The report, “Future of India’s Semiconductor Industry” said that the geopolitical tensions, technology competition and the fragmentation of global supply chains are reshaping the semiconductor industry and making domestic chip capabilities a strategic necessity for India.
India should move away from trying to catch up in the global semiconductor foundry race ; instead, it should shift gears and target becoming the ecosystem player that the global semiconductor industry cannot run without, according to a report released by NITI Aayog.
The report, “Future of India’s Semiconductor Industry” said that the geopolitical tensions, technology competition and the fragmentation of global supply chains are reshaping the semiconductor industry and making domestic chip capabilities a strategic necessity for India.
Import dependence poses economic and security risks
NITI Aayog said India imported semiconductor products worth nearly $150 billion cumulatively between FY17 and FY25, with imports growing at a compound annual growth rate of 23% during the period.
The report warned that if the current trajectory continues, India’s annual semiconductor import bill could rise to nearly $240 billion by 2035, increasing pressure on foreign exchange reserves.
Apart from economic concerns, the report flagged national security risks arising from dependence on foreign-made semiconductor components used in aerospace and defence systems. It said the deployment of externally sourced chips in critical defence infrastructure could expose India to strategic vulnerabilities.
India should define its own semiconductor pathway
The report argued that India should avoid competing directly with established global leaders in the traditional wafer fabrication race and instead focus on becoming indispensable in the “More-than-Moore” era.
It said advanced packaging, manufacturing scale and system-level integration are emerging as equally important drivers alongside transistor-node advancement in the evolving semiconductor ecosystem.
“Winning the semiconductor race will not be easy if India continues to run the existing race,” the report said, adding that India should focus on leadership and purpose over participation.
NITI Aayog said India should target building a $120-150 billion semiconductor value chain by 2035 by focusing on strategic self-sufficiency, ecosystem strength and global indispensability, instead of merely chasing the global wafer fabrication race.
Source: Semiconductor Industry Association
Global trust and ecosystem integration remain key challenges
The report also highlighted the difficulty of securing global acceptance for “Made-in-India” semiconductor products.
It noted that the global semiconductor supply chain remains highly specialised, with original design manufacturers (ODMs), especially from the US, relying on long-established manufacturing and packaging ecosystems in East Asia.
According to the report, suppliers in East Asian countries have built deep trust with global ODMs over decades through consistent technical performance, scale and reliability, creating entrenched supply-chain relationships that will be difficult to displace quickly.
The report said Indian semiconductor manufacturers will need sustained efforts to meet rigorous global quality and performance standards before they can secure a durable position in the global ecosystem.
Five strategic pillars identified
To build a competitive semiconductor ecosystem, the report outlined five strategic pillars, referred to as the “5Ps”.
These include pioneering investments in materials research, R&D and agentic AI for semiconductor engineering; policy and investment support to build trust and enable growth; production capabilities in fabs and advanced packaging; people and skilling initiatives to create semiconductor talent; and partnerships to strengthen ecosystem integration and intellectual property development.
Also Read: Intel, Odisha government to set up $3.3 billion semiconductor materials facility in India
The report also highlighted the broader societal impact of semiconductor self-reliance, saying affordable India-made chips could support the expansion of 5G and 6G connectivity, remote healthcare access and smart agriculture solutions across rural India.
Also Read: IndiGo clocks Q4 loss of ₹2,536 crore on turbulence from forex losses, exceptional items
The report, “Future of India’s Semiconductor Industry” said that the geopolitical tensions, technology competition and the fragmentation of global supply chains are reshaping the semiconductor industry and making domestic chip capabilities a strategic necessity for India.
It added that India’s semiconductor manufacturing ecosystem is still at a nascent stage, resulting in heavy dependence on imports to meet domestic demand. It noted that 90-95% of India’s semiconductor consumption is currently met through imports.
Import dependence poses economic and security risks
NITI Aayog said India imported semiconductor products worth nearly $150 billion cumulatively between FY17 and FY25, with imports growing at a compound annual growth rate of 23% during the period.
The report warned that if the current trajectory continues, India’s annual semiconductor import bill could rise to nearly $240 billion by 2035, increasing pressure on foreign exchange reserves.
Apart from economic concerns, the report flagged national security risks arising from dependence on foreign-made semiconductor components used in aerospace and defence systems. It said the deployment of externally sourced chips in critical defence infrastructure could expose India to strategic vulnerabilities.
India should define its own semiconductor pathway
The report argued that India should avoid competing directly with established global leaders in the traditional wafer fabrication race and instead focus on becoming indispensable in the “More-than-Moore” era.
It said advanced packaging, manufacturing scale and system-level integration are emerging as equally important drivers alongside transistor-node advancement in the evolving semiconductor ecosystem.
“Winning the semiconductor race will not be easy if India continues to run the existing race,” the report said, adding that India should focus on leadership and purpose over participation.
NITI Aayog said India should target building a $120-150 billion semiconductor value chain by 2035 by focusing on strategic self-sufficiency, ecosystem strength and global indispensability, instead of merely chasing the global wafer fabrication race.
| Year | Global Semiconductor Market (USD Bn) |
|---|---|
| 2024 | 631 |
| 2030P | 1,029 |
| 2035P | 1,547 |
Source: Semiconductor Industry Association
Global trust and ecosystem integration remain key challenges
The report also highlighted the difficulty of securing global acceptance for “Made-in-India” semiconductor products.
It noted that the global semiconductor supply chain remains highly specialised, with original design manufacturers (ODMs), especially from the US, relying on long-established manufacturing and packaging ecosystems in East Asia.
According to the report, suppliers in East Asian countries have built deep trust with global ODMs over decades through consistent technical performance, scale and reliability, creating entrenched supply-chain relationships that will be difficult to displace quickly.
The report said Indian semiconductor manufacturers will need sustained efforts to meet rigorous global quality and performance standards before they can secure a durable position in the global ecosystem.
Five strategic pillars identified
To build a competitive semiconductor ecosystem, the report outlined five strategic pillars, referred to as the “5Ps”.
- Pioneering
- Policy and investment
- Production
- People
- Partnership
These include pioneering investments in materials research, R&D and agentic AI for semiconductor engineering; policy and investment support to build trust and enable growth; production capabilities in fabs and advanced packaging; people and skilling initiatives to create semiconductor talent; and partnerships to strengthen ecosystem integration and intellectual property development.
Also Read: Intel, Odisha government to set up $3.3 billion semiconductor materials facility in India
The report also highlighted the broader societal impact of semiconductor self-reliance, saying affordable India-made chips could support the expansion of 5G and 6G connectivity, remote healthcare access and smart agriculture solutions across rural India.
Also Read: IndiGo clocks Q4 loss of ₹2,536 crore on turbulence from forex losses, exceptional items
(Edited by : Prashant)
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