<p>Semiconductors are the kind of things most countries ignored, but no longer. They sit invisibly inside phones, cars, missiles, MRI machines and power grids. When supply chains function, nobody notices them. When they break, factories stop, prices spike and national security planners start using words like “strategic vulnerability.” The pandemic did for chips what wars often do for oil – it revealed how dangerous dependence can be. For decades, India lived comfortably outside the semiconductor factory business. It designed software but imported the chips. Building fabs was capital-intensive and it seemed far easier to let Taiwan, South Korea and the United States get on with it. What changed was risk perception.</p><p>Over the past few years, the Modi government has made a thoughtful decision to enter this difficult terrain, not as an operator, but as an underwriter of first loss. The logic is obvious – no private company will build a semiconductor factory in a new geography without the state absorbing part of the financial and execution risk. So the government has chosen to step in early. The centrepiece of this effort is the India Semiconductor Mission, backed by a Rs 76,000-crore support package. The intent is not to compete with Taiwan on cutting- edge stuff, but to create an ecosystem that involves fabrication, packaging, testing, design, talent and downstream demand, all in one place. In semiconductors, adjacency matters. The most visible result so far is Gujarat. In Sanand, Micron is setting up an advanced assembly, testing and packaging facility, a segment of the chip value chain that is less glamorous than wafer fabrication but no less strategic. Packaging is where chips are integrated into usable systems and control over it matters deeply in defence, automotive and industrial electronics.</p><p>Nearby, the Tata Group is backing a full-scale fabrication project at Dholera, in partnership with Taiwan’s PSMC. It is an audacious move. Chip fabs are among the most complex industrial facilities ever built, demanding ultra-clean environments, uninterrupted power, water measured in millions of litres and a workforce trained to operate machines that cost more than commercial aircrafts. This is not an experiment but a statement of intent. The government’s role here is carefully calibrated. It is not running the factories but offering capital support and policy stability over a long horizon. Equally important are the firms that don’t make chips, but make the ecosystem work. Packaging units, materials suppliers, equipment servicing companies and chip-design start-ups are beginning to cluster around these anchor investments. India already produces tens of thousands of chip designers each year, the missing piece was domestic manufacturing that could absorb and retain that talent.</p><p>This is not India’s first attempt at semiconductors and scepticism is reasonable. Previous efforts failed under the weight of technological ambition and policy drift. What is different this time is sequencing. The government has started with achievable segments, partnered with experienced global players and backed its intent with real money rather than press conferences. None of this guarantees success. Semiconductor cycles are vicious, technology moves ceaselessly and geopolitical winds can shift quickly. But something fundamental has changed. Chips are no longer seen as an afterthought, rather they are treated as strategic infrastructure.</p><p>In time, this may prove to be one of the most consequential industrial bets India has made since liberalisation, not because it promises quick wins, but because it accepts that some capabilities are too important to outsource indefinitely.</p>
<p>Semiconductors are the kind of things most countries ignored, but no longer. They sit invisibly inside phones, cars, missiles, MRI machines and power grids. When supply chains function, nobody notices them. When they break, factories stop, prices spike and national security planners start using words like “strategic vulnerability.” The pandemic did for chips what wars often do for oil – it revealed how dangerous dependence can be. For decades, India lived comfortably outside the semiconductor factory business. It designed software but imported the chips. Building fabs was capital-intensive and it seemed far easier to let Taiwan, South Korea and the United States get on with it. What changed was risk perception.</p><p>Over the past few years, the Modi government has made a thoughtful decision to enter this difficult terrain, not as an operator, but as an underwriter of first loss. The logic is obvious – no private company will build a semiconductor factory in a new geography without the state absorbing part of the financial and execution risk. So the government has chosen to step in early. The centrepiece of this effort is the India Semiconductor Mission, backed by a Rs 76,000-crore support package. The intent is not to compete with Taiwan on cutting- edge stuff, but to create an ecosystem that involves fabrication, packaging, testing, design, talent and downstream demand, all in one place. In semiconductors, adjacency matters. The most visible result so far is Gujarat. In Sanand, Micron is setting up an advanced assembly, testing and packaging facility, a segment of the chip value chain that is less glamorous than wafer fabrication but no less strategic. Packaging is where chips are integrated into usable systems and control over it matters deeply in defence, automotive and industrial electronics.</p><p>Nearby, the Tata Group is backing a full-scale fabrication project at Dholera, in partnership with Taiwan’s PSMC. It is an audacious move. Chip fabs are among the most complex industrial facilities ever built, demanding ultra-clean environments, uninterrupted power, water measured in millions of litres and a workforce trained to operate machines that cost more than commercial aircrafts. This is not an experiment but a statement of intent. The government’s role here is carefully calibrated. It is not running the factories but offering capital support and policy stability over a long horizon. Equally important are the firms that don’t make chips, but make the ecosystem work. Packaging units, materials suppliers, equipment servicing companies and chip-design start-ups are beginning to cluster around these anchor investments. India already produces tens of thousands of chip designers each year, the missing piece was domestic manufacturing that could absorb and retain that talent.</p><p>This is not India’s first attempt at semiconductors and scepticism is reasonable. Previous efforts failed under the weight of technological ambition and policy drift. What is different this time is sequencing. The government has started with achievable segments, partnered with experienced global players and backed its intent with real money rather than press conferences. None of this guarantees success. Semiconductor cycles are vicious, technology moves ceaselessly and geopolitical winds can shift quickly. But something fundamental has changed. Chips are no longer seen as an afterthought, rather they are treated as strategic infrastructure.</p><p>In time, this may prove to be one of the most consequential industrial bets India has made since liberalisation, not because it promises quick wins, but because it accepts that some capabilities are too important to outsource indefinitely.</p>
