India’s Semiconductor Vulnerabilities Exposed in Chip War

As escalating geopolitical friction between the United States and China reshapes the global semiconductor landscape, India finds itself pressed to accelerate domestic technology capabilities and secure resilient supply chains. Speaking at a panel discussion titled ‘The Chip War: Technology, Geopolitics and India’s Challenges’ during the Semiconductor Summit 2026 in Chennai, prominent industry leaders warned that structural gaps in raw materials, manufacturing expertise, and specialized labor threaten the country’s technological ambitions.

While global powers scramble to control critical hardware components, manufacturing capacity, and advanced nodes, experts at the summit emphasized that India can no longer rely purely on consumer market size to attract foreign fabrication investments. Addressing these vulnerabilities requires a pragmatic strategy that balances local manufacturing goals with international partnerships and robust risk management across the entire electronics ecosystem.

The Ground Realities of India’s Chip Manufacturing Push

The panel discussion brought sharp focus to the ground realities of India’s nascent semiconductor push. Sharat Kaul, India representative of the International Electronics Manufacturing Initiative (iNEMI), argued against dismissing outsourced semiconductor assembly and testing (OSAT) initiatives. Given the immense capital, infrastructure, and technical requirements needed for full-scale fabrication, Kaul noted that the country must adopt a developmental progression. “We have to crawl before we walk. We have to walk before we run,” he remarked.

Sandeep Garg, chief executive officer of Indichip Semiconductors, provided concrete figures regarding domestic value addition. Indichip is committing over ₹15,000 crore to establish an integrated device manufacturing facility spanning fabrication, assembly, and testing. The firm targets silicon carbide power devices crucial for electric mobility, defense, and data centers—a market projected to expand from roughly ₹13,000 crore in 2030 to ₹1 lakh crore by 2035. However, Dr. Garg cautioned that out of 37 specialized gases required for silicon carbide fabrication, India currently produces only four, while the vast majority of 42 essential chemicals must be imported.

The Science of Chemical Bottlenecks in Fabrication

To understand why domestic material shortages present such a severe bottleneck, one must examine the physics and chemistry of semiconductor fabrication. Silicon wafer processing involves hundreds of highly sequential steps, including photolithography, chemical vapor deposition (CVD), atomic layer deposition (ALD), and wet etching. Each step requires ultra-high-purity (UHP) gases and reagent-grade chemicals where impurities are measured in parts per trillion (ppt).

For instance, silicon carbide (SiC) power devices—which operate at higher voltages, temperatures, and frequencies than traditional silicon counterparts—demand specialized precursor gases such as silane, germane, and high-purity hydrogen, alongside dopants like nitrogen and trimethylaluminum. If local chemical synthesis plants fail to achieve these stringent purity grades, microscopic particulate contamination ruins entire wafer batches, causing yield rates to plummet to economically unviable levels. Engineering cleanroom environments requires specialized air handling units capable of maintaining Class 1 cleanroom standards, where air is filtered continuously through ultra-low penetration air (ULPA) filters to ensure fewer than one particle larger than 0.1 micrometers exists per cubic foot of air.

To mitigate these complex engineering constraints, industry pioneers advocate for localized chemical purification hubs alongside closed-loop recycling loops that capture and re-refine spent process chemicals. Without these upstream chemical infrastructures, any local wafer fabrication facility (fab) remains tethered to foreign shipping lanes, rendering it vulnerable to international trade restrictions and geopolitical export bans.

Market Realities and Economic Margins

The global semiconductor market operates on thin margins, immense capital expenditure (CapEx), and extreme economies of scale. Major global foundries like TSMC, Intel, and Samsung invest tens of billions of dollars annually in leading-edge lithography equipment, such as extreme ultraviolet (EUV) systems manufactured by ASML. By comparison, India’s initial capital outlays under government incentive schemes, while substantial, represent a fraction of global capital deployment.

Consequently, competing directly in leading-edge sub-nanometer logic nodes is currently economically impractical. Instead, domestic market players are targeting mature nodes (28nm and above) and compound semiconductors like gallium nitride (GaN) and silicon carbide (SiC). These technologies power automotive inverters, renewable energy systems, and high-frequency 5G telecommunications infrastructure—sectors experiencing surging domestic demand due to India’s massive infrastructure expansion.

However, enterprise consumers and industrial OEMs face severe supply chain exposure. Without local component availability, Indian automotive and electronics manufacturers must absorb high logistics costs and prolonged lead times. Industry stakeholders at the summit urged the central and state governments to grant official industry status to the semiconductor sector, which would unlock lower-cost institutional credit, streamline environmental clearances, and reduce the goods and services tax (GST) burden on domestic equipment and chemical vendors.

A Look at Historical Milestones and the Future Timeline

India’s modern semiconductor ambitions have evolved across multiple distinct phases, beginning with early public-sector investments in government research labs during the late 20th century, such as the Semiconductor Complex Limited (SCL) in Chandigarh. Although SCL laid foundational groundwork, a devastating fire in 1989 severely hampered its commercial trajectory, delaying India’s entry into high-volume commercial chip manufacturing.

Decades later, the launch of the India Semiconductor Mission (ISM) in 2021 marked a renewed policy commitment, backed by a $10 billion fiscal incentive program designed to attract multinational joint ventures and domestic manufacturing proposals. Between 2022 and 2024, the government approved multiple packaging and fabrication units, including partnerships involving Micron, Tata Electronics, and CG Power.

Looking forward, the projected milestones span critical phases:

• 2026–2027: Commissioning of the first wave of outsourced semiconductor assembly and test (OSAT) facilities, establishing baseline domestic packaging capabilities.
• 2028–2030: Initial commercial tape-outs and wafer rollouts from mature-node fabrication plants, alongside early-stage domestic production of specialized industrial gases and precursor chemicals.
• 2031–2035: Scaling of compound semiconductor manufacturing (SiC and GaN) to support India’s electric vehicle and renewable energy transition, aiming for localized supply chain self-sufficiency exceeding 40%.

Frequently Asked Questions

What are India’s primary vulnerabilities in semiconductor manufacturing?

India faces severe gaps in domestic raw materials, producing only a fraction of the specialized gases and chemicals required for fabrication. Additionally, the ecosystem lacks deep manufacturing expertise, cleanroom infrastructure operators, and specialized talent across assembly and testing.

Why is advanced packaging considered a strategic opportunity for India?

Advanced packaging integrates multiple chips on a single substrate using 2.5D and 3D technologies. This allows India to enter the high-value semiconductor manufacturing market without immediately needing to master ultra-complex foundational lithography nodes.

How is the private sector responding to these semiconductor challenges?

Companies like Indichip Semiconductors are investing over ₹15,000 crore in integrated device manufacturing facilities focusing on silicon carbide power devices for electric vehicles, defense, and energy sectors, while advocating for favorable government policy and tax reforms.

What specific industrial chemical dependencies threaten domestic fabrication?

Fabrication plants rely heavily on 37 specialized industrial gases and over 40 high-purity chemical inputs such as hydrofluoric acid, hydrogen peroxide, and various dopant gases. Because domestic production currently supplies only a tiny fraction of these inputs, fabs remain heavily dependent on imports from specialized chemical producers in East Asia, Europe, and the United States.

Sources and further reading

Primary reporting and insights sourced from The Hindu.