India is taking a key step on the road to semiconductor independence. As the deadline for the delivery of the first domestically packaged semiconductor chip approaches, the challenges facing India in terms of technology, capital and talent are becoming increasingly prominent. China Exportsemi will try to deeply analyze the current situation and future of India's semiconductor industry, and discuss its role and positioning in the global semiconductor industry chain.
1. Kaynes Semicon's breakthrough: from pilot to mass production
Kaynes Semicon, a subsidiary of Indian-listed Kaynes Technology, has announced that it will deliver India's first domestically packaged semiconductor chip in July 2025. This project marks substantial progress in the field of semiconductor packaging and testing (OSAT) in India. In February 2024, Kaynes Semicon invested 33 billion rupees (about 2.804 billion yuan) in Sanand, Gujarat, to build an outsourced semiconductor packaging and testing plant with a designed daily production capacity of 6 million chips, mainly for automobiles, consumer electronics, communication equipment and mobile phones.
The first chips will be supplied to U.S. customer Alpha Omega Semiconductors under a multi-year agreement, with the initial phase of the collaboration absorbing 60% of the plant's capacity. This cooperation has not only instilled confidence in India's semiconductor industry, but also earned it a place in the global market. However, India still needs to overcome challenges such as technology maturity and supply chain stability from pilot to mass production.
Pictured: Kaynes Semicon's shop floor focused on semiconductor manufacturing and packaging technology
2. India's Semiconductor Initiative (ISM): A Policy-Driven Industry Rise
The Indian government launched the India Semiconductor Initiative (ISM) in December 2021 and set up an incentive fund of 760 billion rupees (about 84.6 billion yuan) to promote the construction of local semiconductor manufacturing and packaging capabilities. As of March 2025, ISM has approved several semiconductor projects, including four chip packaging fabs and one wafer fabrication fab, which are expected to be operational between 2025 and 2027.
In addition, the Indian government is further promoting the development of the industry through cooperation with global semiconductor giants. For example, Tata Group has partnered with Taiwan's Power Semiconductor Manufacturing Company (PSMC) to build a 12-inch wafer fab in Dholera, Gujarat, with an investment of 910 billion rupees (about 101.5 billion yuan), which is expected to achieve mass production in 2026. Micron Technology is also investing $2.75 billion in Sanand, Gujarat, to build a chip packaging plant, which is expected to be operational by the end of 2024.
The Indian Electronics and Semiconductor Association predicts that by 2030, India's semiconductor market will reach $85 billion to $100 billion in the global market, becoming an important growth pole for the global semiconductor industry. However, over-reliance on international partners can lead to technological dependence and insufficient industrial autonomy.
3. Technology shortcomings: The long journey from packaging to manufacturing
Although India has about 20% of the world's design engineers in the field of semiconductor design, its manufacturing capabilities are still in their infancy. At present, India's semiconductor value chain is mainly focused on design and packaging and testing, while wafer manufacturing is still a shortcoming. Most fabs are still under construction and are not expected to move into volume production until the next five years.
India's breakthrough in the field of packaging and testing has benefited from the restructuring of the global semiconductor industry chain. As Moore's Law slows down, advanced packaging has become a key technology to improve chip performance. Yole, a market research firm, predicts that the advanced packaging market will grow at a CAGR of 10.6% between 2022 and 2028 to reach $78.6 billion. However, India's technology accumulation in the field of wafer manufacturing is still insufficient, and it is difficult to shake the position of giants such as TSMC and Samsung in the short term.
4. Capital dilemma: high costs and policy dependence
The Indian government has attracted investment from a number of companies, including Micron and Tata, through the Production Linked Incentive (PLI) scheme. However, such high-cost policies could put pressure on finances in the long run. For example, Micron Technology's investment incentive in India has increased from 35% to 50%, demonstrating the high cost of attracting foreign investment by the Indian government.
In addition, India's infrastructure and supply chain still need to be improved. The immaturity of raw material supply, equipment transportation and industrial environment has made the operating costs of semiconductor companies in India significantly higher than in other regions. These problems not only affect the willingness of enterprises to invest, but also restrict the sustainable development of India's semiconductor industry.
5. Talent shortage: The twin challenges of technology and labor
India has about 20% of the world's talent in semiconductor design, but still faces a severe talent shortage in manufacturing. According to a report by the Semicon India Future Skills Talent Council, India's semiconductor-related industries will need a workforce of 1.2 million by 2032.
The Indian government is working with universities and companies to train engineers involved in semiconductor manufacturing. For example, Lam Research, a U.S. chip equipment manufacturer, plans to invest more than $1 billion in India to enhance the semiconductor ecosystem and partner with local universities to develop courses to help students learn at semiconductor foundries. However, this kind of talent development program takes time, and it is difficult to fill the talent gap in the short term.
6. Looking Ahead: The Long Journey from Packaging to Manufacturing
The delivery of India's first indigenously packaged semiconductor chip is a significant milestone, but it is only the beginning of a long journey. From packaging and testing to wafer manufacturing, India still needs to overcome multiple challenges in terms of technology, capital and talent. To truly achieve industrial independence, India needs to continue to make efforts in the following areas:
Boosting local supply chains: Currently, semiconductor manufacturing in India is highly dependent on imported raw materials and equipment. The government needs to accelerate the cultivation of local semiconductor equipment and material suppliers, such as chemicals, photoresists, silicon wafers and other key materials to produce their own production capacity. This will reduce dependence on external supply chains and improve the stability of the industry.
Expand talent training: In the short term, India can introduce advanced manufacturing experience by cooperating with international companies, such as sending engineers to TSMC, Samsung and other companies for internships, and at the same time accelerate the collaborative training model between universities and industry. For example, the "industry-academia cooperation model" in Taiwan has proven to be highly efficient in terms of talent development, and India can learn from it.
Strengthening Wafer Manufacturing Capabilities: While companies such as Tata Group, PSMC and Micron have established a presence in India, India still lacks the mass production capacity of 12-inch fabs. The government can consider setting up a dedicated semiconductor fund to attract more companies to enter the wafer manufacturing field, and promote local enterprises to extend upstream to build a complete manufacturing chain.
Optimised investment incentives: While the Indian government's PLI program and ISM programs provide substantial subsidies for industrial development, high subsidies are not sustainable in the long run. India should gradually adjust its incentives over the next 5-10 years, reducing direct fiscal subsidies and shifting to long-term policies such as tax incentives and infrastructure support to reduce the fiscal burden and enhance the market competitiveness of firms.
Equal emphasis on international cooperation and local innovation: India needs to acquire key technologies through international cooperation in the short term, while promoting local innovation. The government can set up more semiconductor research centers and cooperate with enterprises and universities to encourage local technological breakthroughs. For example, the success of South Korea's semiconductor industry is largely due to the government's continued investment in technology research and development, and India can adopt a similar strategy to support local R&D institutions.
7. Conclusion: The Reality and Ambitions of India's Semiconductor Industry
India's semiconductor industry is at a critical stage of development. Kaynes Semicon's breakthrough has undoubtedly instilled confidence in India's Manufacturing 2025 initiative, but the real challenge has only just begun. From packaging and testing to wafer manufacturing, India still needs more than 10 years to improve its industrial chain.
The global semiconductor industry is accelerating towards multipolarization, and if India wants to rise in this wave of opportunities, it needs to continue to make efforts in many aspects such as technology accumulation, supply chain improvement, talent training and policy adjustment. In the short term, India may not be able to challenge leading manufacturers such as TSMC and Samsung, but it may still occupy a place in the areas of mid-range packaging, power semiconductors, and market-specific design.
In the next five years, the development of India's semiconductor industry will be an important observation point for changes in the global semiconductor landscape. If India can successfully overcome the triple hurdle of capital, technology and talent, its "Make in India 2025" plan will occupy a more important position in the global semiconductor industry map.
