Semicon Surge: India’s Race To Build A Full-Stack Semiconductor Ecosystem

Bengaluru: India today processes nearly 1 billion digital transactions a day. Just three months ago, UPI alone was handling 640 million transactions daily, making it the largest single digital payments platform in the world. With 46% of global digital transactions happening in India, the country has emerged as a digital powerhouse. In the last decade, the cost of data has plunged from ₹270 per GB in 2014 to just ₹7 today—a testament to how rapidly India is advancing on the digital front.” Stated by Dr Veerappan V., Co-Founder and President, Tessolve Semiconductor, as a keynote speaker in the session “Semiconductor Manufacturing and Ecosystem Development” at the Bengaluru Tech Summit-2025 in Bengaluru today.

Dr Veerappan further said that India today has a strong and mature digital-transaction infrastructure, but at the core of everything lies a chip, an integrated circuit without which nothing functions. While India does not yet manufacture commercial chips and imports almost all of them, the landscape has shifted significantly in the last three years. Until recently, India’s presence in the global semiconductor industry was minimal, with only 0.04% PCB manufacturing happening domestically. However, with the launch of the India Semiconductor Mission (ISM), the country has made remarkable progress. India’s first commercial chip is expected by 2027, even as we continue to import most passive components. The government is now actively encouraging global and domestic players to build in India, shaping policies to drive growth in the semiconductor ecosystem. India already contributes to 30% of global chip design, hosting some of the world’s largest design centres. The momentum is strong: the $30-billion semiconductor market in India is projected to reach $100 billion by 2030, while the electronics market is expected to grow from $150 billion today to $400 billion by 2030, he noted.

The session featured Vyshali Sagar, Government Relations, Policy and Public Affairs Lead at Micron India, and Paul Ilanghovan T., Head of Operations at Kaynes Semicon Pvt. Ltd. The discussion was moderated by Ashok Chandak, President of IESA.

Bengaluru Tech Summit 2025 (ETV Bharat)

Paul Ilanghovan T. noted that setting up a semiconductor unit in India remains challenging due to the absence of capital equipment manufacturers and the limited availability of consumables and raw materials. Since the launch of ISM, however, a few raw-material companies have begun establishing operations in India. He added that the country still lacks sufficiently skilled talent for semiconductor manufacturing, prompting companies to source expertise from across the globe. Over the next three to five years, several companies are set to establish equipment manufacturing units in India, a strong positive sign for the sector. Many global players have already opened offices in the country. While full readiness may not be immediate, the ecosystem is expected to mature significantly within this 3–5-year horizon, he added.

The panellists emphasised that in the next few years, India will also build a strong talent pool. Vyshali Sagar highlighted four critical elements required to build a strong semiconductor manufacturing ecosystem. First, robust policy support is essential, involving coordinated action from both central and state governments. Second, India must plan capacity beyond the current scale to meet future demand. Third, cost competitiveness and talent development are vital, with the skilling ecosystem needing to keep pace with industry requirements. Finally, she stressed the importance of deep collaboration across infrastructure, policy, demand, and supply chains. She added that all these efforts must ultimately be delivered with, and enabled by, AI.

Dr Veerappan V., in an interview with ETV Bharat at the Bengaluru Tech Summit 2025, discussed semiconductor and ecosystem development.

Dr Veerappan, speaking at the event. (ETV Bharat)

Critical Gaps For India's Semiconductor Ecosystem

When asked about the most critical technology and supply chain gaps India must address to build a competitive semiconductor manufacturing ecosystem over the next Decade, Dr Veerappan clearly identifies the core challenge for India in building a competitive semiconductor manufacturing ecosystem as the lack of a robust supply chain and ancillary industries.

He said that the most critical gaps India must address over the next decade are:

1. Raw Material Supply: India lacks a domestic supply of semiconductor-grade raw materials. Establishing this is cited as an essential priority that the country has begun promoting.
2. Ancillary Ecosystem: A functional fabrication unit (fab) requires a "200-plus ecosystem partners". The government must actively drive the creation of this ecosystem, particularly by pushing the manufacturing of essential consumables like chemicals and speciality gases. This support network is vital for a successful manufacturing setup.
3. High-End Component Manufacturing: India needs to initiate high-volume production of complex components, specifically PCB manufacturing for high-layer computers.

He said that the competitive gap is not just the fab itself, but the entire support network for raw materials and high-value components.

Talking about the strategies countries adopt to ensure resilience against geopolitical disruptions in the semiconductor supply chain, Dr Veerappan noted that while major powers like the US, China, Taiwan, and Europe are pursuing strategies to build resilience against geopolitical disruptions in the semiconductor supply chain, the sector has not yet seen severe sanctions. India’s position as one of the world’s largest markets, importing $30 billion in semiconductors and $150 billion in electronics, gives it significant leverage.

He said that India’s massive consumer base acts as a strong counterbalance: every major country needs access to the Indian market. As a result, global powers are compelled to engage with India as a strategic partner to secure market access and advance their own diversification and resilience objectives.

Responding to the question of how the semiconductor mission and AI can work together to build India’s full-stack Deep Tech ecosystem, Dr Veerappan emphasised that the ISM is already effectively collaborating with the AI ecosystem to build India's full-stack Deep Tech capabilities. He said that the ISM, launched in 2021 (with the scheme announced in late 2021/early 2022), and India's strong AI/IT foundation create a powerful feedback loop. The massive growth of AI, Machine Learning (ML), High-Performance Computing (HPC), and hyper-scalers (like those with design centres in Bengaluru) creates intense demand for advanced semiconductor chips (GPUs, TPUs, specialised AI accelerators). This demand justifies the need for local fabrication, assembly, and testing. He further said that AI is the core driver for innovation. The ISM and its associated incentives are laying the critical hardware foundation for AI growth. The policies, including the Design Linked Incentive (DLI) Scheme and capital subsidies for manufacturing (e.g., Fabs and ATMP units), directly encourage the domestic design and production of chips optimised for AI and specialised computing tasks.

Dr Veerappan further said that the presence of over 130 design centres in places like Bengaluru, which design for major global hyper-scalers, demonstrates that India already possesses a strong chip design capability, the crucial first step in the DeepTech stack. The combined policy support from the Central Government (ISM, PLI) and State Governments ensures a conducive environment, attracting foreign direct investment (FDI) and fostering local entrepreneurship in both hardware and software. India's strength in AI software and chip design (the 'top' of the stack) is being leveraged by the ISM's push for local manufacturing and packaging (the 'bottom' of the stack), moving India from a mere chip consumer to a significant player across the entire semiconductor and DeepTech value chain.

It is pertinent to mention that the 28th edition of BTS, organised by the Department of Electronics, IT and BT, and the Software Technology Parks of India (STPI), was inaugurated by Chief Minister Siddaramaiah in the presence of Deputy Chief Minister D.K. Shivakumar on November 18. Themed 'Futurise', the three-day summit is bringing together notable speakers, including ISRO Chairman V Narayanan, Amardeep Singh Bhatia, Secretary of DPIIT, and Abhishek Singh, Additional Secretary of MeitY.