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India has seen many challenges since its Independence in driving industrialisation, not to mention the antiquated License Raj, which thwarted our growth while China zoomed past. We finally saw twilight in the late 90s in some conventional domains of industrialisation like automobiles, pharma, oil & gas. India received reasonable express of interest in semiconductors from leading companies to set up manufacturing in India based on invaluable engineering talent and ease of language. As destiny played out, our socialistic policies and equally bureaucratic approach did not create the necessary conducive environment. India missed out on the golden opportunity to harness its immense potential to make its mark early in the game. This also let to the famous’ brain drain’ that has been a challenging hole to plug, not to mention the resulting reputation damage to an entire industry in India that we are still working towards repairing.
These past events have increased the gap between India and other countries as we cobbled together an ecosystem to encourage the semiconductor chip manufacturing industry in the country. Another force rose to capture our imagination and talent during this time. The IT Industry saw exponential growth. However, this unprecedented boom in information technology masked a critical vulnerability: our growing dependence on our prowess in the IT services sector, so much so that it compromised resilience across strategic sectors. We simply stopped looking beyond IT services.
While the IT sector’s meteoric rise commanded attention, it inadvertently diverted focus from establishing sovereign capabilities in semiconductor manufacturing–a shortcoming whose implications now reverberate across defense systems, critical infrastructure, and emerging technologies.
Historical lessons serve as critical guideposts for strategic realignment. India’s recent policy initiatives, handsome capital subsidies complimented by state-level incentives, have captured domestic corporations’ attention toward semiconductor manufacturing—an industry previously perceived as viable only in Western nations. However, the persistent challenge lies in the underdeveloped ecosystem, creating investment hesitancy among potential stakeholders.
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This is where a paradox emerges: major players want to wait till a robust local ecosystem is in place before committing to FAB investments, while ecosystem development inherently depends on the presence of operational FABs. This cyclical impasse can be resolved through targeted government intervention to address ecosystem gaps rapidly. Time is of the essence.
India possesses a vibrant ecosystem of first-generation entrepreneurs with demonstrable risk appetite and innovation potential. However, limited exposure to adjacent opportunities has fostered a cautious approach in the semiconductor sector. The key catalyst for transformation lies in strategic partnerships with established players from global semiconductor hubs—including the US, Taiwan, South Korea, Germany, Japan, Singapore, and Malaysia. When properly structured, this collaboration framework has the potential to become a powerful engine for skilled employment generation, extending beyond metropolitan centres to emerging industrial clusters in the small towns of India. Consider the overall implication of the crumbling infrastructure in our cities.
A critical factor in this initiative is the involvement of seasoned professionals who understand the unique challenges MSMEs face in emerging technologies. Fortunately, India has a deep talent pool of accomplished semiconductor industry veterans who can effectively identify and mentor promising first-generation entrepreneurs, bridging the expertise gap in this strategic sector.
India’s existing bilateral agreements with semiconductor-advanced nations present strategic opportunities for ecosystem development. This is the time to take advantage of the goodwill we have amassed over the decades. A systematic approach would involve benchmarking successful MSME models in these partner countries to identify parallel opportunities within India. This targeted analysis could help identify approximately 100 high-potential entrepreneurs from established engineering clusters like Bengaluru, Hyderabad, Pune, and Coimbatore. These selected entrepreneurs should undergo an immersive three-month programme in global semiconductor manufacturing hubs, partnering with analogous MSMEs to gain practical industry insights. They could be tasked with developing comprehensive business plans, potentially incorporating international partnerships that leverage complementary expertise. This deep-rooted technical expertise can provide a winning edge to our industry.
Projects demonstrating a 50 percent or higher probability of success could qualify for preferential government financing through dedicated channels. This initiative could acknowledge that not all participants may pursue semiconductor ventures post-immersion, ensuring a natural selection of committed entrepreneurs with viable business models.
Per my estimate, this initiative would call for a total direct expenditure of Rs25 crore and additional overheads of Rs12.5 crore for managing this project. Let’s assume only 50 companies out of the 100 companies sponsored for such exposure in other semiconductor manufacturing hubs initiate new business. Further, considering the 50 percent success rate amongst these passionate entrepreneurs, we can expect 25 such companies to establish business and scale it to a $100 million annual business in the next 5 years. This would create a $2.5 billion industry out of India, which does not exist today. Imagine the potential.
The existing “Connect with Suppliers” initiatives, currently conducted as single-day events by major semiconductor equipment manufacturers and fabrication companies with Indian sourcing offices, can be expanded into a comprehensive engagement platform. Industry associations across India should collectively amplify these programmes to effectively communicate the sector’s immediate opportunities and long-term potential to prospective ecosystem participants. These introductory sessions should be followed by intensive week-long workshops, where promising entrepreneurs receive detailed exposure to the complete value chain–from engineering design to subsystem and equipment manufacturing. Such capacity-building programmes can be effectively designed and delivered by established semiconductor equipment manufacturers and fabrication companies with an Indian presence, as they firsthand understand local ecosystem challenges and requirements.
I am putting this idea out there for all the associations to read for their next event. Steal it.
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The fiscal framework being developed by India Semiconductor Mission (ISM) for the Ministry of Electronics and Information Technology (MEITY)—encompassing incentives for speciality gases, high-purity chemicals, engineering materials, and equipment manufacturers—represents a strategic catalyst for ecosystem development. This policy initiative is expected to create a cascading effect, attracting diverse players across the semiconductor value chain. The resulting multiplier effect will strengthen the ecosystem’s fundamentals, creating a compelling environment for new investments and establishing semiconductors as a key driver of India’s economic growth. This comprehensive approach will enhance national security capabilities while ensuring long-term technological self-reliance. It’s a version of India I am eager to be a part of, and these initiatives will go a long way towards creating it.
The best time to have started this initiative was 20 years ago. The next best time is now.
The writer is a managing director of KAS Group of Companies.