India advances its chip ambitions

  • Commercial production of 28nm chips is slated to begin in 2026
  • The aim is for ‘Made in India’ chips to be viable alternatives to those from China, Japan, South Korea, Taiwan and the US 
  • A massive Indian government subsidy programme is vital to kick-starting chip design, development and fabrication
  • Five chip facilities are under development in Gujarat and there is talk of 25 domestic chip designs in the pipeline

For several years now, India has been pushing hard to realise its national ambition of becoming a world-leading semiconductor designer and manufacturer in its own right. Later this year, in August or September, the fruits of those efforts will start to be revealed as the first ‘Made in India’ chip will be produced, according to the country’s minister for railways, communications, electronics and information technology, Ashwini Vaishnaw. 

Talking to Bloomberg at last week’s World Economic Forum in Davos, Switzerland, Vaishnaw said India’s first major semiconductor fabrication factory will begin commercial chip production in 2026 and that there are 25 domestic chip designs in development.

The development is part of a broader economic plan that has technology at its heart. In recent years, the Indian economy has been the fastest-growing in the world but its burgeoning gross domestic product (GDP) numbers dipped in the second half of 2024 to a seven-quarter low of 5.4%, considerably below the Reserve Bank of India’s (RBI) forecast of 6.8%. Various Indian industry sectors, investors and market analysts are also twitchy about possible ramifications that could follow on from the national annual Union Budget announcement for 2025-26 that will be presented to the Indian parliament on 1 February.

However, despite what is being presented by government ministers as no more than a ‘blip’ – a short-lived and shallow economic slowdown – it is generally expected that the growth of the Indian economy will indeed prove to be robust in comparison to those of most developed nations. India’s banks and financial institutions are strong and solvent, foreign exchange reserves are high, national income from taxes is steady and stable, and government programmes to alleviate “extreme poverty” in both urban and rural India are working and, as a result, disposable income is rising.

Simultaneously, the nation is intent on growing its high-tech industries as quickly as possible and a particular focus is on the development of an independent, Indian semiconductor industry as a viable and secure alternative to those produced in Taiwan, South Korea, the US, China and Japan, whose exports to international markets could be disturbed or even curtailed completely by geopolitical tensions, tariffs and trade sanctions.

Early incentives appear to be working

To that end, the India government has created a $10bn subsidy programme to boost the nation’s nascent independent semiconductor industry after research showed that specifically targeted measures, similar to tax breaks already available to other industry sectors, would be needed to kick-start the development of highly capital-intensive chip design, fabrication plants and manufacturing facilities. 

This is the Production Linked Incentive (PLI) scheme that comes under the aegis of the India Semiconductor Mission (ISM), a specialised and independent business division within the Digital India Corporation whose purpose is to build an independent semiconductor and display ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design.

PLI applies across 14 sectors of the Indian economy but is the first strategic national programme specifically to target the semiconductor industry. PLI was launched back in December 2021 and, at the start, set aside the equivalent of $10bn to boost chip research, design and manufacture. It was the biggest sum ever committed to any Indian industrial sector. 

The PLI scheme for semiconductors is focused on various manufacturing capabilities, including chip foundries and assembly and test facilities. It provides up-front financial support in several successive instalments to cover 50% of the costs of the establishment of some (but not all) manufacturing facilities. Some individual Indian states also offer additional local and regional financial incentives.

Another initiative, the Design Linked Incentive Scheme (DILS), which supports semiconductor and electronics design, was launched in 2022. With offers to reimburse up to 50% of the expenses involved in establishing chip design facilities, the programme has been successful but, given that the gestation period between chip design and the commercial availability of new semiconductors is so long, plans are in hand to continue the scheme until 1 January 2035. Furthermore, stakeholders and analysts are lobbying the government to give the DLI scheme increased impetus by allocating a further $20bn to the scheme to enable additional R&D in semiconductors, artificial intelligence, internet of things (IoT), 5G and autonomous systems.

Currently, five PLI semiconductor initiatives are underway in India and in receipt of subsidies from both the national and state governments. All are partnerships and joint ventures with overseas companies from Taiwan, Japan and the US, and all five facilities will be sited in the state of Gujarat. The companies involved are Kaynes Semicon, Tata Electronics, CG Power, Suchi Semicon and Micron Technology.

Back in Davos, Vaishnaw said the “most sophisticated” chips that India will initially be able to produce will be built on 28 nanometre (nm) and “fatter” processes. 28nm is a globally popular, comparatively inexpensive and easily marketable chip size, ideal for use in networking, tablet devices and a wide range of mobile consumer products, though other markets already have production processes for much more advanced chips, with 7nm chips having been produced for years and leading companies, such as Taiwan’s TSMC, close to the mass production of 2nm products.  

The minister said he expects Indian fabs to be able to move into more advanced chipmaking techniques by about 2027 and so meet the government’s policy that India develops its own system-on-chip (SoC) integrated circuits for servers, mobile devices, automotive applications, IoT and microcontrollers.

Martyn Warwick, Editor in Chief, TelecomTV

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