India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India? Mention the salient features of the India Semiconductor Mission.

Challenges Faced by the Semiconductor Industry in India

India's aspiration to establish itself as a semiconductor manufacturing hub encounters several formidable challenges, primarily due to the capital-intensive and technologically complex nature of the industry.

• High Capital Investment: Setting up semiconductor fabrication (fab) units requires enormous upfront investment, often exceeding several billion dollars. For instance, building a new fab can cost over a billion US dollars. This necessitates substantial financial commitments and long gestation periods.
• Lack of Developed Infrastructure: Semiconductor fabs demand highly specialized and uninterrupted infrastructure, including reliable power supply (24x7, zero-fluctuation), ultra-pure water in large quantities, and extensive land parcels. India's existing infrastructure, while improving, still faces challenges in consistently meeting these stringent requirements. Logistical challenges related to customs clearance and proximity to airports for importing and exporting components also exist.
• Technological Gaps and Complexity: The semiconductor industry is characterized by rapid technological evolution and extreme precision. India currently lacks advanced manufacturing capabilities, particularly for cutting-edge technology nodes (below 10 nanometers), which are dominated by countries like Taiwan and South Korea. Developing indigenous intellectual property (IP) and acquiring critical technologies remain a significant hurdle.
• Underdeveloped Supply Chain: India's semiconductor supply chain is largely nascent and heavily reliant on imports for critical raw materials like silicon wafers, high-purity gases, specialty chemicals, and manufacturing equipment. While India has a developed chemical sector, it needs to enhance capabilities to produce semiconductor-grade materials.
• Skilled Workforce Shortage: Despite a large pool of design engineers, there is a severe shortage of specialized talent with expertise in device physics, process technology, and advanced manufacturing processes essential for chip fabrication and packaging. The global semiconductor industry itself is projected to face a shortage of at least 700,000 skilled workers by 2030.
• Intense Global Competition and Geopolitical Dynamics: India faces stiff competition from established manufacturing hubs and countries with mature ecosystems. The industry is also influenced by complex geopolitical rivalries, trade protectionism, and control over critical technologies and raw materials, as seen with restrictions on equipment sales and export controls on inputs like gallium and germanium.
• Policy Continuity and Incentive Sustainability: While significant incentives are being offered, the long-term sustainability and consistency of these policies are crucial for attracting and retaining large-scale investments in an industry with such a long investment horizon.

Salient Features of the India Semiconductor Mission (ISM)

Launched in December 2021 with a substantial financial outlay of INR 76,000 crore (approximately $10 billion), the India Semiconductor Mission (ISM) acts as the nodal agency under the Ministry of Electronics and Information Technology (MeitY). Its primary objective is to build a vibrant semiconductor and display ecosystem, positioning India as a global hub for electronics manufacturing and design. ISM has all administrative and financial powers to catalyze the Indian semiconductor ecosystem.

The ISM encompasses a comprehensive program with the following key components:

• Fiscal Support for Manufacturing:
  • Scheme for Setting up Semiconductor Fabs in India: Provides fiscal support of up to 50% of the project cost on a pari-passu basis for setting up silicon semiconductor fabs across all technology nodes.
  • Scheme for Setting up Display Fabs in India: Offers similar fiscal support (up to 50% of project cost) for establishing display manufacturing units.
  • Scheme for Setting up Compound Semiconductors/Silicon Photonics/Sensors Fab and Semiconductor ATMP/OSAT Facilities: Extends fiscal support of up to 50% of the capital expenditure for setting up units for compound semiconductors, silicon photonics, sensors, and Assembly, Testing, Marking, and Packaging (ATMP) or Outsourced Semiconductor Assembly and Test (OSAT) facilities.
• Design Linked Incentive (DLI) Scheme: This scheme provides financial incentives and design infrastructure support across various stages of development and deployment of semiconductor designs for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores, and semiconductor-linked designs. It aims to nurture indigenous chip design capabilities.
• Talent Development: ISM emphasizes skilling and reskilling the workforce through collaborations with academic institutions and training centers to create a pool of specialized engineers and technicians for the semiconductor industry. The "Chips to Startup" program, for instance, aims to train 85,000 engineers in VLSI and embedded system design over five years.
• Promotion of Research and Development (R&D): The mission encourages innovation by fostering significant investments in semiconductor-related R&D, including advanced materials and manufacturing processes.
• Strategic Partnerships and Global Integration: ISM seeks to attract global players and facilitate technology transfer through international collaborations, aiming to integrate India into critical global supply chains for semiconductor manufacturing.
• Nodal Agency Role: ISM acts as an independent business division within the Digital India Corporation, tasked with vetting and screening investments and implementing semiconductor schemes efficiently. As of late 2025, 10 projects have been approved across six states under ISM, with total investments exceeding INR 1.6 trillion (approx. US$18–19 billion).