India’s semiconductor push a strategic imperative

India must accelerate efforts to build a domestic semiconductor ecosystem, with self-reliance in chips emerging as central to economic resilience, national security and societal upliftment, according to a new report by NITI Aayog.

- CORRESPONDENT

While government initiatives like the India Semiconductor Mission are driving transformation and the country’s first fabrication plant in Gujarat’s Dholera is expected to commence production by 2028, the report warns that India’s semiconductor manufacturing remains nascent and the window to act is narrowing as global supply chains realign.

“With chips becoming the foundation of everything from smartphones to defence systems, countries are racing globally to build semiconductor self-sufficiency,” the report states. For India, the urgency is compounded by four factors: significant import dependence, national security risk, drain on forex, and the need for societal upliftment.

India’s local ecosystem meets just 5-10 per cent of domestic demand, with 90-95 per cent of consumption fulfilled through imports. Global supply is concentrated in a handful of countries, and disruptions in Taiwan or China could trigger shortages as seen during Covid-19, exposing automobiles, consumer electronics, healthcare and defence to “untoward disruptions in the global supply chain.” As electronic content rises, “the economic cost of such disruptions will only intensify,” the report notes.

“Chips have become increasingly important to national security and defence programmes. The proposed trade arrangement between India and the United States faces long odds of advancing in its present form, with senior RSS-linked figures arguing that unless Washington drops its demands on dairy access, agriculture and data exclusivity provisions, the negotiations cannot meaningfully progress.

The assessment comes even as a US trade delegation is expected in India from June 1 to 4 for negotiations aimed at advancing an interim arrangement under the broader Bilateral Trade Agreement framework, the latest in months of sustained engagement between the two sides.