India plans $15 billion second push for chipmaking. Here’s what to know

The government has approved four semiconductor manufacturing projects that will cost almost Rs 1.5 lakh crore. Chipmaking is a vital industry, but very costly to get into — and India is late in the field.

India currently has virtually no footprint in manufacturing semiconductor chips. The bulk of the global chip production happens in countries like Taiwan and the United States. (Via Canva)

The government plans to increase the funding outlay for the second phase of its chip manufacturing incentive policy to $15 billion from the $10 billion it had committed for the first phase.

Tata is building India’s first commercial fabrication plant along with its Taiwanese partner Powerchip Semiconductor Manufacturing Corporation (PSMC) for a cost of more than Rs 91,000 crore. The government has also approved three assembly and testing plants, which are called ATMP and OSAT in chip parlance.

The assembly and testing plants are less complex than the semiconductor fabrication plant. The first of these three plants was approved in June 2023, and is being built by US-based Micron Technology. Tata is building an assembly plant in Assam to cater to specific clients. The third facility is being built by C G Power and Industrial Solutions of the Murugappa Group, in partnership with Renesas Electronics of Japan.

The govt’s commitment of money

The four projects will together cost more than Rs 1.48 lakh crore, and the central government will spend almost Rs 59,000 crore in capex subsidies. Here is a breakdown of how much each plant will cost, and the subsidy commitments made by the central government. State governments have sought to sweeten the deal by offering land and electricity to the plants at cheaper rates.

Scheme	Applicant	Total Project Cost (₹ cr)	Eligibile Project Cost (₹ cr)	Incentive Approved (₹ cr)
Modified scheme for setting up of semicon fabs in India	TEPL (fab)	91,526	67,956	33,978
Modified scheme for setting up of compound semicon/silicon photonics/sensors fab and semicon/ATMP/OSAT facilities in India	Micron Techonology Inc. (ATMP)	22,516	22,516	11,258
	TEPL (OSAT)	27,120	20,449	10,225
	CG Power & Industrial Solutions Ltd. (ATMP	7,584	7,002	3,501
TOTAL		1,48,746	1,17,923	58,962
(Source: Government’s internal documents)

Why chipmaking prowess matters

India currently has virtually no footprint in manufacturing semiconductor chips. The bulk of the global chip production happens in countries like Taiwan and the United States. The US has a chip incentive scheme with an outlay of around $50 billion, several times that of India’s. The European Union too is wooing chip manufacturers and has announced an incentive scheme of size similar to that of the US’s.

Domestic fabrication plants will boost India’s economic and strategic imperatives, given that chips are used in practically all downstream industries from rockets to power steering in cars to kitchen toasters.

Explained | How India’s first semiconductor fabrication plant can help plug in to global value chain

In a global climate of geopolitical tensions, with the relationship between the US and China, two of the world’s most influential countries in the technology value chain, at an all-time low, India hopes to seek out opportunities to boost the local industry with help from government-funded schemes.

It is important to take a realistic view

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It is important to note that the Tata-PSMC fab will not produce cutting-edge nodes, which requires a level of technology that is not available with either of these companies.

The entry barriers to chip manufacturing are quite high, as China, which has poured a lot of money into its Semiconductor Manufacturing International Corporation (SMIC), has discovered. An enormous amount of technological innovation is needed to manufacture chips of smaller node sizes, which is an area in which companies such as the Taiwan Semiconductor Manufacturing Company Ltd (TSMC) have a massive advantage.

Soumyarendra Barik

Soumyarendra Barik is a Special Correspondent with The Indian Express, specializing in the complex and evolving intersection of technology, policy, and society. With over five years of newsroom experience, he is a key voice in documenting how digital transformations impact the daily lives of Indian citizens. Expertise & Focus Areas Barik’s reporting delves into the regulatory and human aspects of the tech world. His core areas of focus include: The Gig Economy: He extensively covers the rights and working conditions of gig workers in India. Tech Policy & Regulation: Analysis of policy interventions that impact Big Tech companies and the broader digital ecosystem. Digital Rights: Reporting on data privacy, internet freedom, and India's prevalent digital divide. Authoritativeness & On-Ground Reporting: Barik is known for his immersive and data-driven approach to journalism. A notable example of his commitment to authentic storytelling involves him tailing a food delivery worker for over 12 hours. This investigative piece quantified the meager earnings and physical toll involved in the profession, providing a verified, ground-level perspective often missing in tech reporting. Personal Interests Outside of the newsroom, Soumyarendra is a self-confessed nerd about horology (watches), follows Formula 1 racing closely, and is an avid football fan. Find all stories by Soumyarendra Barik here. ... Read More