India's High-Stakes Chip Bet: The Promise and Perils of the Semiconductor Mission

What constitutes the mission's major expansion?

The mission's expanded phase was solidified in February 2024 with the Union Cabinet's approval of three new semiconductor projects with a total investment of ₹1.26 lakh crore. The centrepiece is India's first commercial semiconductor fab, to be established in Dholera, Gujarat, by Tata Electronics in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corp. (PSMC). This facility, with an investment of ₹91,000 crore, will produce 28-nanometer chips. The other two approved projects are ATMP units: one by Tata Semiconductor Assembly and Test in Morigaon, Assam (₹27,000 crore), and another by CG Power in Sanand, Gujarat, in partnership with Japan's Renesas Electronics (₹7,600 crore). The government is providing a 50% capital subsidy for the fab and ATMP units under the original ISM framework.

What is the government's rationale for this massive investment?

The government's stated objective is to establish India as a strategic and reliable destination in the global electronics value chain. This ambition is rooted in two primary concerns: economic security and geopolitical strategy. The COVID-19 pandemic exposed the acute vulnerability of global supply chains, with chip shortages crippling industries from automotive to consumer electronics. By building domestic capacity, the government aims to mitigate such supply chain shocks and capture a share of a market projected to reach $1 trillion by 2030 (Source: McKinsey & Company). Furthermore, in a tense geopolitical environment, possessing semiconductor manufacturing is seen as a source of strategic leverage. MeitY has consistently argued that self-reliance in semiconductors is critical for national security, as these components are integral to modern defence and critical infrastructure.

What are the key challenges and criticisms?