Every time an Indian company shows off a new chip design, social media declares that India has “stunned” the global giants. The reality is less dramatic and more worth understanding. India is building a chip industry almost from scratch, and the progress over the last few years is real, but it is a long game measured in decades, not headlines.
So what is India actually doing in semiconductors, where do 5G and AI chips fit in, and what should investors, engineers and founders take from it?
Why chips suddenly matter so much to India
Almost everything we buy now has a chip in it: phones, cars, TVs, payment terminals, telecom towers, even washing machines. India imports nearly all of them. The chip shortage during the pandemic showed how risky that is. Car makers had waiting lists for months simply because a few cheap controllers were stuck in a queue somewhere in East Asia.
There is also a strategic angle. 5G networks, defence systems and AI data centres all run on advanced chips. Depending entirely on other countries for them is a vulnerability no large economy wants.
What has actually happened so far
The India Semiconductor Mission
The government set up the India Semiconductor Mission (ISM) with a large incentive package to attract chip manufacturing, packaging and design. Instead of trying to build everything at once, the approach has been to bring in partners and subsidise a big share of project costs.
Fabs and packaging plants
The headline projects include a Tata Electronics fab in Dholera, Gujarat, built with Taiwan’s PSMC, and assembly, testing and packaging units from companies such as Micron in Sanand, Tata in Assam and others including CG Power and Kaynes. Packaging plants matter more than people think: they are faster to build, create jobs quickly and teach the supply chain how to work at scale.
Design, India’s real strength
India already hosts design centres for most of the world’s big chip companies, and a large share of global chip design engineers work here. The Design Linked Incentive scheme is trying to turn that talent into Indian-owned products, and a growing set of startups now design chips for IoT, power management, telecom and AI workloads.
Where 5G and AI chips fit in
Most of the chatter about “5G-AI chips” is really about two things:
- Telecom silicon. India rolled out 5G very quickly, and there is a push to use more domestically designed equipment in networks. Chips for radios and base stations are a natural target because the local market is huge.
- AI accelerators. Training large AI models needs high-end GPUs, which India currently imports. Building competitive AI chips is extremely hard and capital-intensive, so for now the more realistic opportunity is in smaller AI chips that run on devices, cameras and sensors.
Designing a chip and manufacturing it at the cutting edge are two very different things. The most advanced chips are made at a handful of factories in the world, mostly in Taiwan and South Korea. India’s first fabs will focus on mature process nodes, which still cover a large part of what cars, appliances and industrial equipment need.
The hard parts nobody should ignore
- It is expensive. A modern fab costs billions of dollars and takes years to become profitable.
- It needs perfect infrastructure. Fabs need uninterrupted power, huge volumes of ultra-pure water and specialised gases.
- Skills take time. Running a fab needs thousands of experienced process engineers. Training them is a multi-year effort.
- Competition is fierce. The US, Europe, Japan and others are all spending heavily to bring chipmaking home.
What this means for you
If you are a student or engineer, VLSI design, verification, embedded systems and semiconductor process engineering are among the most promising skills to build in India right now.
If you are a founder, chip design startups and companies serving the ecosystem (testing, equipment, materials, software tools) have more support than ever, from government schemes to dedicated investors.
If you are an investor, be careful with hype. Listed companies that announce a chip project are not the same as companies already earning from chips. Look at actual revenue, partners and execution before you buy the story.
The bottom line
India has not overtaken anyone in chips, and it does not need to in order to succeed. Getting packaging plants running, getting the first fab producing reliably and turning its design talent into Indian products would already be a huge shift. That is the story to follow, and it is far more meaningful than any single viral chip announcement.
