India has unveiled a $13 billion second phase of its semiconductor mission to expand local chip manufacturing. The government aims to reduce the current 90-95% import dependence, with domestic demand projected to exceed $200 billion by 2035. Investors are now watching the progress of key projects as the industry moves from basic assembly to complex wafer fabrication.
The Indian government has initiated the second phase of its semiconductor mission with an approved investment of approximately $13 billion. This expansion is designed to build a complete domestic semiconductor ecosystem that covers everything from chip design and testing to full-scale manufacturing. The policy push comes as India faces a significant challenge in its supply chain, relying on imports for nearly 90-95% of its semiconductor requirements across sectors like automotive, consumer electronics, and artificial intelligence.
Current Project Status and Milestones
India has already approved 12 semiconductor projects across six states. The current focus is a mix of assembly, testing, and packaging, often referred to as ATMP or OSAT, and the more complex wafer fabrication. Companies like Micron, Kaynes Semicon, and CG Semi have already begun commercial production, primarily focusing on assembly and testing. While these are critical steps, they are downstream from the actual creation of the chip, known as wafer fabrication.
The most closely watched project is the partnership between Tata Electronics and Taiwan-based Powerchip (PSMC) in Dholera, Gujarat. This facility is currently targeting its first chip output by December 2026. For investors, this project is a major benchmark, as it represents one of India’s most significant attempts to establish advanced wafer fabrication capacity on home soil. The facility will initially focus on mature nodes, which are standard chip sizes used in a wide range of electronic devices.
The $200 Billion Demand Opportunity
Domestic demand for semiconductors is projected to exceed $200 billion by 2035. This massive growth projection is the primary driver behind the government’s push to localize the supply chain. By offering support of up to 50% of eligible project costs, the government is attempting to lower the high entry barrier for global and domestic companies. State governments are also providing additional incentives to attract these capital-intensive facilities.
However, money is only one piece of the puzzle. The industry requires a specific workforce, including process engineers and specialized fab-floor operators, which India currently lacks in sufficient numbers. The government has prioritized this by aiming to develop 100,000 semiconductor engineers, with 85,000 having already completed training programs as of September 2026. This talent pipeline is essential, as the global industry faces a projected shortage of about 1 million workers by 2032.
Execution and Long-term Challenges
The long-term viability of these projects will depend on more than just government funding. Successful semiconductor manufacturing requires high production yields, reliable utility infrastructure, and stable technology partnerships. Transitioning from simple packaging to complex fabrication is an execution-heavy process. Investors will likely track whether these approved plants can achieve commercial scale on schedule and whether they can effectively compete with established global manufacturing hubs. Any delays in the Dholera facility or other fabrication projects could slow the goal of reducing import dependence, maintaining the country's exposure to global supply chain volatility.