Why India’s Chip Ambition is a Trillion-Dollar Gamble

Imagine, if you will, being one of the world’s absolute best engine designers. You craft the blueprints for the most powerful, most efficient engines on the planet. But there’s this rather significant catch: you have no factory. To actually build the very cars your engines are designed for, you have to send your meticulously drawn blueprints halfway across the world and, well, just hope someone else can build them for you. This isn’t some far-fetched hypothetical scenario, mind you. This is, in a nutshell, India’s trillion-dollar paradox. Right now, thousands of engineers in cities like Bangalore, Hyderabad, and Noida are diligently designing the next generation of chips for global giants such as Intel, Nvidia, and Qualcomm. India, you see, is undeniably a design superpower. It’s home to nearly 20% of the entire world’s semiconductor design workforce, a talent pool of over 125,000 engineers who are, quite literally, the architects of our digital age. But when it comes to actually making those chips? India’s share of global manufacturing is, to put it mildly, virtually zero. Less than 0.1% of the world’s silicon wafers are fabricated there. For decades, the country that designs the chips has been almost completely dependent on other nations—primarily Taiwan, South Korea, and China—to actually produce them. This has, understandably, created a massive strategic vulnerability. But now, India is making a monumental gamble to change that. With a $10 billion war chest and some powerful new friends, it’s on a mission to do in one decade what took its rivals three: build a complete semiconductor industry from scratch. So, how, exactly, is a nation of designers trying to become a nation of builders? And why is this high-stakes race not just about phones and cars, but about, perhaps, redrawing the entire geopolitical map of the 21st century?

The Curious Case of India’s Chip Paradox: Brains Over Bricks

The core paradox here isn’t just about a missing industry; it’s, in many ways, a reflection of India’s entire economic model since its liberalization in the 1990s. The country’s growth story has been overwhelmingly led by its world-class IT and software services sector. This industry, you see, thrived by leveraging India’s vast pool of skilled, English-speaking engineers to provide high-value services at a competitive cost. It was a capital-light model, one that didn’t really require massive investments in heavy machinery or physical infrastructure. Chip design, it fits perfectly into this paradigm. It is, after all, a high-value, knowledge-based service that relies heavily on intellectual capital. Global firms like Intel and Nvidia recognized this early on, setting up sprawling R&D centers across India to tap into this talent pool. This allowed them to innovate around the clock while benefiting from India’s human capital advantages. It made a lot of sense, really, for everyone involved.

Chip fabrication, however, is the polar opposite. It is, without exaggeration, one of the most capital-intensive and complex manufacturing processes on Earth. A single factory, or “fab” as they call it, costs billions of dollars and demands immense, flawless infrastructure—we’re talking uninterrupted power, billions of liters of ultra-pure water, and a hyper-specialized physical supply chain. These are precisely the areas where India has historically faced significant challenges. Therefore, the current situation—where India excels in the design phase, which, by the way, constitutes a hefty 50% of the global value chain, but is almost entirely absent from the front-end fabrication that adds another 24%—is not some random accident. It is, in fact, the logical outcome of an economic development path that, for a very long time, prioritized brains over bricks, software over hardware. The decision to now aggressively pursue manufacturing represents a conscious, top-down strategic pivot. It is a state-driven effort to break from the past, fueled by the stark realization that true strategic autonomy in the 21st century depends on controlling the physical means of technological production, not just the intellectual property. It’s a national project, really, to evolve from being the world’s “knowledge back-office” to becoming a “global factory.”

• India is a global leader in semiconductor chip design, with 20% of the world’s design workforce (over 125,000 engineers).
• Despite design strength, India’s share in global chip manufacturing is virtually zero (<0.1% of silicon wafers fabricated).
• This paradox stems from India’s economic model prioritizing capital-light IT and software services over capital-intensive hardware manufacturing.
• Chip fabrication requires billions of dollars in investment and flawless infrastructure (power, ultra-pure water, specialized supply chains) – areas where India historically faced challenges.
• The current push for manufacturing is a conscious, state-driven strategic pivot towards technological production autonomy.

Semiconductors: The New Oil of the 21st Century

To truly grasp the scale of India’s ambition, we first need to understand the prize. Semiconductors are not just, you know, mere components; they are the foundational layer of the modern world. They are the silicon heartbeats in everything from your smartphone and car to the vast data centers powering artificial intelligence and the sophisticated guidance systems found in military hardware. The global semiconductor industry is, quite frankly, a behemoth, with sales reaching over $588 billion in 2024 and projected to become a trillion-dollar industry by 2030. This single industry underpins an estimated $7 trillion in global economic activity annually. In this new era, controlling the supply of chips is, I suppose, akin to controlling the supply of oil in the 20th century. It grants immense economic leverage, technological dominance, and, perhaps most critically, national security. This is why semiconductors are, without exaggeration, often referred to as the “new oil.” The stakes, as you can see, are incredibly high.

• Semiconductors are foundational to all modern technology, from consumer electronics to military hardware.
• The global semiconductor industry is projected to grow from $588 billion in 2024 to $1 trillion by 2030.
• This industry underpins an estimated $7 trillion in global economic activity annually.
• Controlling chip supply is crucial for economic leverage, technological dominance, and national security, making semiconductors the “new oil.”

A Trail of Missed Opportunities: The Haunting Past

India has, it’s worth noting, had chances to get into this game before. And it has, unfortunately, fumbled them, repeatedly. The history of India’s semiconductor aspirations is, in a way, a series of missed opportunities that continue to haunt the country’s policymakers to this very day. Consider this: in 1957, Fairchild Semiconductor, the legendary company that would effectively give birth to Intel and the rest of Silicon Valley, actually came to India. They were looking for a location to set up a simple packaging unit—one of the less complex parts of the chipmaking process. But India, in a different economic era, well, they chased them away. That facility eventually went to another part of Asia, becoming a cornerstone of that region’s now-dominant semiconductor ecosystem. It’s a rather stark example of what might have been.

The missed opportunities, they just continued. In the late 1980s, India’s domestic semiconductor technology was, remarkably, just two years behind the global cutting edge. Today? It lags by about 12 generations. Over the decades, multiple attempts to launch a domestic industry were announced, but they all, sadly, fell short. They were plagued by a lack of proactive policy, bureaucratic inertia, and a failure in consistent implementation. It seems, perhaps, that the political will or the systemic capacity just wasn’t there to sustain such a demanding endeavor. This long history of starts and stops makes the current push all the more intriguing, doesn’t it?

• India missed an early opportunity in 1957 when Fairchild Semiconductor was deterred from setting up a packaging unit.
• In the late 1980s, India’s semiconductor technology was only two years behind the global standard, but today it lags by about 12 generations.
• Past attempts to build a domestic industry failed due to a lack of proactive policy, bureaucratic hurdles, and inconsistent implementation.

The Tipping Point: Global Shocks as Catalysts

So what changed? Why, after decades of inaction, is India suddenly making this massive US$10 billion push? The answer, it seems, lies in two profound global shocks that fundamentally altered the strategic calculus for both India and, indeed, the entire world. The first was the COVID-19 pandemic. As the world went into lockdown, the intricate, hyper-efficient global supply chains that had been built over decades suddenly, and quite dramatically, snapped. The most acute pain, perhaps predictably, was felt in semiconductors. Automakers had to halt production lines, electronics companies delayed product launches, and prices for everything with a chip inside soared—all for want of tiny pieces of silicon. The world, quite abruptly, woke up to a stark reality: over 80% of all chips, and a staggering 90% of the most advanced ones, were manufactured in just a handful of locations in East Asia, primarily Taiwan. This extreme concentration was no longer seen as merely efficient; it was, now, seen as a critical vulnerability. It was a wake-up call, to put it mildly.

The second, and perhaps more enduring, catalyst was the escalating technology rivalry between the United States and China. Starting in 2019, the U.S. began imposing sweeping export controls designed to cut off China’s access to advanced semiconductor technology and equipment. This effectively fired the starting gun on a new era of technological competition, forcing a global scramble for supply chain diversification. Major corporations and entire countries began actively pursuing a “China plus one” strategy—a search for a new, reliable, and geopolitically stable hub for high-tech manufacturing. These two events, happening in quick succession, created a once-in-a-generation window of opportunity. For the first time in decades, the world wasn’t just open to a new player in the semiconductor game; it was actively looking for one. And India, with its democratic credentials and vast potential, well, it saw its moment. This context, I think, reveals that India’s current semiconductor mission is not a purely proactive, visionary economic plan conceived in a vacuum. It is, at its core, a reactive strategy, born out of a convergence of external crises and an internal recognition of past policy failures. The core domestic problems that held India back for so long—inadequate infrastructure, bureaucratic red tape, and a lack of patient capital—did not simply vanish. Rather, the external shocks of the pandemic and the U.S.-China tech war became so powerful that they created an imperative to finally overcome this inertia. This dependency on external factors means that India’s window of opportunity is not entirely within its own control. A significant thaw in U.S.-China relations or a global economic shift that weakens the “China+1” imperative could reduce the urgency for global firms to invest in a high-risk, unproven location like India. This makes the mission a frantic race against time—to use the current geopolitical tailwinds to build “sticky” industrial ecosystems before those winds have a chance to change direction. It’s a high-stakes race, indeed.

• The COVID-19 pandemic exposed vulnerabilities in global supply chains, particularly the over-reliance on a few East Asian locations (e.g., Taiwan) for chip manufacturing.
• The escalating U.S.-China technology rivalry led to U.S. export controls on China, prompting a global “China plus one” strategy for supply chain diversification.
• These two shocks created a unique window of opportunity, making the world actively seek new semiconductor manufacturing hubs.
• India’s current semiconductor push is largely a reactive strategy, driven by external crises and a recognition of past domestic policy failures.
• The mission is a race against time, as its success depends partly on maintaining current geopolitical tailwinds.

India’s Bold Gamble: The India Semiconductor Mission

In December 2021, the Indian government officially entered the race, putting its money squarely on the table with the announcement of the India Semiconductor Mission (ISM). The headline figure was a massive ₹76,000 crore, or about US$10 billion, in incentives designed to kickstart a domestic ecosystem from the ground up. This wasn’t just a vague promise; it was a detailed, multi-pronged strategy targeting the entire value chain. The core of the plan is a Production-Linked Incentive (PLI) scheme. For the most capital-intensive projects—semiconductor and display fabrication plants, or “fabs”—the government offered to cover up to 50% of the project cost. This direct capital support is designed to de-risk the enormous upfront investment, which can run into many billions of dollars for a single facility. It’s a significant sweetener, to say the least.

For other crucial parts of the supply chain, such as Outsourced Semiconductor Assembly and Test (OSAT) facilities—also known as Assembly, Testing, Marking, and Packaging (ATMP)—the scheme provides a fiscal support of 30% of the capital expenditure. And to connect India’s existing design strength to this new manufacturing push, a separate Design-Linked Incentive (DLI) scheme was launched. This program offers to support up to 100 domestic companies by covering up to 50% of their eligible development expenditure, with further incentives linked to product sales. The goal is explicit and audacious: to achieve in a single decade what countries like China have struggled to do in 25 or 30 years. The government has set a target of expanding India’s domestic semiconductor market to US$110 billion and securing 10% of the global market by 2030. It’s a truly ambitious vision, one that aims to fundamentally transform India’s role in the global tech landscape.

• The India Semiconductor Mission (ISM) was launched in December 2021 with US$10 billion in incentives.
• The Production-Linked Incentive (PLI) scheme offers up to 50% project cost coverage for fabs and 30% for OSAT/ATMP facilities.
• The Design-Linked Incentive (DLI) scheme supports up to 100 domestic companies with 50% development expenditure coverage and sales-linked incentives.
• The mission aims to expand India’s domestic semiconductor market to US$110 billion and secure 10% of the global market by 2030.

Laying the Foundations: The First Approved Projects

By early 2024, after a period of evaluation, the first concrete pieces were placed on the chessboard. The Indian government approved three landmark projects, which together form the initial pillars of its national manufacturing strategy. As of mid-2025, construction on these sites is, reportedly, well underway. The centerpiece of the entire mission is India’s first major, modern semiconductor fab. This project is being spearheaded by the Tata Group, one of India’s largest and oldest conglomerates, through its subsidiary Tata Electronics. For this ambitious venture, Tata has partnered with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), a seasoned player that will provide crucial technology and execution support. They are building a massive ₹91,000 crore (US$11 billion) facility in Dholera, a newly developed Special Investment Region in the state of Gujarat. This will be a pure-play foundry, meaning it will operate on the model perfected by TSMC, manufacturing chips that are designed by other companies for a global customer base. Its planned manufacturing capacity is up to 50,000 wafers per month. The fab will focus on mature and legacy process nodes—specifically, 28nm, 40nm, 55nm, 90nm, and 110nm chips. While these are not the most advanced, cutting-edge chips used in high-end smartphones or AI accelerators, they are, crucially, the workhorses of the global economy. They are essential for applications in automotive, power management ICs, display drivers, microcontrollers, and Internet of Things (IoT) sensors. According to government ministers, the first “Made in India” chips from this facility are expected to roll out by December 2026. It’s a significant step, indeed.

But making the silicon wafer is, as they say, only half the battle. The individual chips on that wafer must then be cut, assembled into protective casings, tested, and packaged for use in electronic devices. This crucial backend process is known as ATMP or OSAT. To build capacity in this segment, Tata is simultaneously building a second, ₹27,000 crore (US$3.6 billion) facility in Jagiroad, Assam, located in India’s northeast. This plant, operating under the name Tata Semiconductor Assembly and Test (TSAT), will focus exclusively on packaging. The choice of location is strategic. Assam is geographically closer to the established semiconductor packaging hubs of East and Southeast Asia, such as Taiwan, Vietnam, and Malaysia, which could help streamline logistics and integrate the plant into existing supply chains. When it becomes operational, which is slated for mid-2025, the facility is projected to have a massive capacity of 48 million chips per day and is expected to generate over 27,000 direct and indirect jobs in the region. That’s a lot of jobs, if you ask me.

The third pillar is another large-scale OSAT facility, this time located in Sanand, Gujarat, creating a western hub for backend manufacturing. This project is structured as a joint venture led by Indian engineering conglomerate CG Power (part of the Murugappa Group), with Japan’s Renesas Electronics and Thailand’s Stars Microelectronics as key international partners. With an investment of ₹7,600 crore (US$915 million), this plant will also focus on packaging chips for the automotive, industrial, and consumer electronics sectors. Its planned capacity will ramp up to 15 million units per day. The direct involvement of Renesas, a leading global supplier of automotive chips, is a crucial vote of confidence and provides a clear potential customer base for the facility’s output. Even before these three domestic-led projects were formally approved, a major American player placed a significant bet on India, providing powerful validation for the government’s strategy. In June 2023, U.S. memory giant Micron Technology announced it would build a US$2.75 billion ATMP facility, also in Sanand, Gujarat. This was the first investment from a global top-tier semiconductor leader under the new policy, and it acted as a powerful signal to the rest of the industry that India was a serious destination. Construction, managed by Tata Projects, began swiftly and is on an aggressive timeline, with the facility expected to be completed by the end of 2025 and the first chips scheduled to roll out sometime that same year. This foundational investment is being further supported by crucial players from the equipment side of the ecosystem. Companies like Applied Materials and Lam Research, which build the sophisticated machinery used inside fabs, are also expanding their engineering and R&D footprints in India, helping to build out the broader technical capabilities required to sustain a manufacturing push. It’s truly a multi-faceted effort.

• Three landmark projects approved in early 2024, with construction underway by mid-2025.
• Tata-PSMC Fab (Dholera, Gujarat): US$11 billion investment, pure-play foundry for mature nodes (28nm-110nm), 50,000 wafers/month capacity, expected by Dec 2026.
• Tata Semiconductor Assembly and Test (TSAT) (Jagiroad, Assam): US$3.6 billion, focusing on packaging (OSAT/ATMP), 48 million chips/day capacity, expected mid-2025.
• CG Power Joint Venture (Sanand, Gujarat): US$915 million, OSAT facility with Japan’s Renesas and Thailand’s Stars Microelectronics, 15 million units/day capacity.
• Micron Technology ATMP (Sanand, Gujarat): US$2.75 billion investment, first top-tier global player, expected completion by end of 2025.
• Supporting players like Applied Materials and Lam Research are expanding R&D in India.

The Mountain of Challenges: Infrastructure, Supply Chain, and Talent

A US$10 billion plan and a handful of groundbreaking ceremonies are, without a doubt, a powerful start. But building a chip industry from zero is, quite frankly, one of the hardest industrial endeavors a country can undertake. India faces a veritable mountain of challenges, and the three biggest and most interconnected are infrastructure, the supply chain, and talent. Semiconductor fabrication is an industry of extremes, and nowhere is this more apparent than in its demands for basic utilities. Semiconductor fabs are incredibly power-hungry, consuming vast amounts of electricity. But more than the sheer quantity, they are incredibly power-sensitive. They require a constant, ultra-stable supply of electricity, 24 hours a day, 365 days a year. Even a millisecond of voltage fluctuation or a brief outage can disrupt the delicate photolithography process, ruining entire batches of wafers worth millions of dollars. The industry standard is often referred to as “nine-nines reliability,” meaning an uptime of 99.9999999%, with virtually zero tolerance for deviation. Now consider India’s power infrastructure. While the national grid has expanded significantly, it has historically been characterized by instability and losses. In the 2022-23 fiscal year, aggregate transmission and distribution (T&D) losses stood at over 17%. Gujarat, the state chosen as the primary hub for the new fabs, is a national leader in renewable energy and has a more robust grid than many other states. However, it still faces challenges with grid stability, particularly due to high agricultural loads and long feeder lines that can cause voltage drops. To meet the fabs’ needs, the state is developing dedicated power infrastructure, including new transmission schemes and substations specifically for industrial zones like the Dholera Special Investment Region (SIR). The Dholera SIR plan includes a massive 4,400 MW solar park and promises 24/7 reliable power through underground networks and smart grid technology. However, delivering the kind of uninterrupted, high-quality power a fab demands remains a monumental engineering and operational challenge. It’s a very tall order.

The second infrastructure challenge is even more fundamental: water. A single large fab can consume millions of gallons of water every single day—some estimates for a large facility are as high as 5 million gallons daily. And it cannot be just any water. It must be processed into Ultra-Pure Water (UPW), a substance thousands of times cleaner than drinking water, stripped of nearly all minerals, particles, and microorganisms. The process of creating UPW is itself water-intensive. To produce 1,000 gallons of UPW, a facility might need to start with 1,500 gallons of municipal-grade water. This places an immense strain on local water resources. Herein lies the problem: Gujarat is a historically water-scarce state. With 5% of India’s population, it has access to only 2% of the country’s water resources. Its industrial water demand is already projected to nearly triple by 2050. The state is heavily reliant on water transferred from the Narmada River via a massive canal system, and this allocation is already stretched thin between agricultural, domestic, and industrial users. The government’s solution is a massive bet on new infrastructure. The Gujarat Semiconductor Policy offers subsidized water at a fixed rate for ten years and provides a 50% capital subsidy for companies to build their own desalination plants. In Dholera, plans include a 50 MLD (million liters per day) water treatment plant, a 20 MLD common effluent treatment plant for recycling, and tapping the Narmada canal as the primary source. This makes the success of the fabs entirely dependent on the timely and flawless execution of these large-scale, complex water projects in a region where water is already a precious and contested resource. It’s a delicate balance, to be sure.

A semiconductor fab, you see, does not exist in a vacuum. It sits at the center of a complex, deeply integrated ecosystem of hundreds of suppliers providing hyper-specialized materials. This includes over 150 different high-purity chemicals and more than 30 specialty gases used in various stages of production. These range from bulk gases like ultra-high purity nitrogen and argon for creating inert environments, to highly toxic and specialized gases like phosphine and arsine for doping, and corrosive gases for etching. The supply chain also includes photoresists, polishing slurries, and, most critically, the raw silicon wafers themselves. Today, India has almost none of this domestic ecosystem. According to Siddharth Jain, Managing Director of INOX Air Products, a major industrial gas supplier, India currently produces only about 5 of the 50 or so semiconductor-grade gases required, which is just 10% of the need. The rest, along with most specialty chemicals and all silicon wafers, must be imported, primarily from established hubs in Japan, Germany, the US, and Taiwan. This creates a huge strategic dependency and increases operational costs and logistical complexity. While India has a strong and growing chemical industry, particularly in regions like Dahej in Gujarat, upgrading production to meet the “semiconductor-grade” standard of ultra-high purity is a massive technological and financial challenge in itself. Global leaders in this space, such as Germany’s Merck and Linde, are reportedly planning to set up facilities in India to support the new fabs. Domestic players like INOX Air Products are also investing, having recently commissioned India’s first plant for electronic-grade nitrous oxide. However, building this entire supplier ecosystem from the ground up to support multiple large-scale fabs will take years and significant investment. It’s not an overnight task.

This brings us back to the mission’s central paradox. India has an army of an estimated 125,000 world-class chip designers, a testament to the strength of its engineering education in theoretical and software-based disciplines. But it faces a critical shortage of skilled manufacturing talent—the process engineers, equipment technicians, and fab operators who physically run the multi-billion-dollar cleanroom facilities. The numbers are stark. India produces approximately 600,000 engineering graduates in electronics-related fields each year. However, according to the Ministry of Electronics and Information Technology, some estimates suggest that only about 1%, or 6,000 graduates annually, are equipped to contribute to fab operations without extensive, specialized on-the-job training. The country’s education system has long prioritized software and design over hands-on manufacturing, leading to a “brain drain” where even those with relevant skills often move abroad for lack of domestic opportunities in fabrication. The government is acutely aware of this gap and is trying to bridge it with the “Chips to Startup” (C2S) program. This initiative aims to train 85,000 engineers in VLSI (Very Large-Scale Integration) and embedded system design by 2027, working with over 100 universities to update curricula. Global companies are also stepping in to fill the void. Lam Research, a major equipment manufacturer, has partnered with the Indian government to help train up to 60,000 engineers over the next decade, leveraging its “Semiverse” virtual nanofabrication environment to provide hands-on experience without needing physical access to a fab. But the fundamental question remains: can India create a world-class manufacturing workforce fast enough to run the very factories it is now building?

These three core challenges—infrastructure, supply chain, and talent—are not independent problems; they are deeply interconnected, creating a classic “chicken-and-egg” dilemma. You cannot attract and retain top manufacturing talent without world-class factories to employ them. You cannot run those factories efficiently without a local, responsive supply chain. And you cannot convince suppliers to invest hundreds of millions in specialty chemical or gas plants without the guaranteed, large-scale demand from anchor customers like a major fab. India’s strategy is to break this vicious cycle with a massive, state-funded “big bang” approach. It is not waiting for the ecosystem to grow organically. Instead, it is using its US$10 billion incentive package to subsidize the anchor customers—the fabs and OSATs—so heavily that they become magnets with enough industrial gravity to pull the entire supplier ecosystem into orbit around them. The announcements from Micron and Tata are intended to signal to the market that the demand is coming, which in turn should spur investment in the supply chain and create attractive jobs for the talent being trained. It is an attempt to use immense public investment to simultaneously create the supply (factories) and the demand (for talent and local materials) needed to bootstrap an entire ecosystem into existence at once. This makes the strategy incredibly high-risk, as a failure in one critical area, like the provision of stable power or water, could trigger a cascade failure across all the others. It’s a very complex dance.

• Infrastructure Challenges:
  • Power: Fabs require “nine-nines reliability” (99.9999999% uptime) and stable power, which is a challenge given India’s historical grid instability (17% T&D losses). Gujarat is investing in dedicated infrastructure, solar parks, and smart grids.
  • Water: Fabs consume millions of gallons of Ultra-Pure Water (UPW) daily. Gujarat, a water-scarce state, relies on Narmada River transfers and plans for desalination plants and recycling.
• Supply Chain Dependency: India imports over 90% of semiconductor-grade gases, specialty chemicals, and all silicon wafers. Upgrading domestic chemical production to meet purity standards is a significant challenge.
• Talent Gap: Despite 125,000 chip designers, there’s a critical shortage of manufacturing talent (process engineers, technicians). Only ~1% of electronics graduates are fab-ready.
• Solutions for Talent: “Chips to Startup” (C2S) program aims to train 85,000 engineers, and Lam Research is partnering to train 60,000 using virtual environments.
• Interconnected Challenges: Infrastructure, supply chain, and talent are interdependent, creating a “chicken-and-egg” dilemma. India’s strategy is a “big bang” approach using subsidies to attract anchor customers and pull the ecosystem into place.

Skepticism and the Compounding Risks

This is a bold, ambitious plan, backed by immense political will and capital. But there are, I think, compelling reasons to be skeptical. Building a globally competitive industry from a near-zero base is a high-risk, high-reward national project, and there are, unfortunately, many ways it could falter or fail. The single biggest question hovering over the entire mission is execution. India has a well-documented history of announcing ambitious, large-scale plans that get bogged down in bureaucratic delays, red tape, and implementation hurdles. While the government touts swift approvals for the initial projects—claiming, for instance, that Tata’s fab was approved within 24 hours—some reports from the ground suggest that progress has been slower than projected, with initial deadlines for plant operations already looking uncertain. A recent cautionary tale is the high-profile collapse of the proposed Vedanta-Foxconn joint venture in 2023. The $19.5 billion project was one of the first major announcements under the ISM but was ultimately scrapped after the venture struggled for over a year to secure a suitable technology partner with experience in manufacturing advanced chips. This highlights a critical vulnerability: even with government money on the table, accessing the tightly-held intellectual property and technical know-how required to run a fab is a major challenge for new entrants. It’s not just about money; it’s about deep, proprietary knowledge.

The entire strategy is built on a foundation of massive government subsidies. The central government is offering to pay for 50% of a fab’s project cost, with state governments like Gujarat adding another 20%, bringing the total public support to a staggering 70%. But India is not the only country throwing money at this problem. The United States has its US$52 billion CHIPS and Science Act, the European Union has its own €43 billion European Chips Act, and established players like Japan and South Korea are all pouring billions into subsidizing their domestic industries. This has ignited a global subsidy race. The risk, as some analysts and organizations like the Observer Research Foundation have warned, is that this rush to build capacity could lead to a global glut of chip manufacturing, especially in the mature process nodes that India is targeting. If global supply outstrips demand, chip prices could fall, making it very difficult for India’s new, high-cost fabs to compete without permanent government support. This raises a critical question: is India building a globally competitive industry, or is it just building a permanently subsidized one that can’t survive on its own? It’s a valid concern, I think.

India’s first fab, the Tata-PSMC venture, will produce chips at 28 nanometers and above. This is a crucial market segment, powering a vast array of everyday electronics. But it is far from the cutting edge. By the time this fab opens in 2026, global leaders like TSMC and Samsung will be mass-producing chips at the 2-nanometer node—a technology that is exponentially more advanced and more valuable. As a late entrant, India faces the daunting risk of being perpetually stuck on older, lower-margin technologies. It is stepping onto a technology treadmill that is already moving at high speed. While the world’s leading firms invest tens of billions annually in R&D to push the boundaries of physics, India is still trying to master processes that have been mature for years. The danger is that India could find itself in a constant state of playing catch-up, always several generations behind the frontier of innovation, which would limit its profitability and strategic importance. It’s a tough position to be in.

Finally, the mission’s greatest strength could also prove to be its greatest weakness: geopolitics. The entire “China+1” strategy that makes India such an attractive alternative manufacturing destination is a direct product of the current high-tension environment between the United States and China. But what if that dynamic changes? A new political administration in Washington, a strategic de-escalation in the tech rivalry, or a global economic crisis could significantly reduce the urgency for Western companies to diversify their supply chains away from the efficiency of China. Furthermore, India’s long-standing foreign policy of “strategic autonomy”—of not formally aligning with any single power bloc—could create friction if it is not perceived as being fully and reliably aligned with U.S. and Western security interests in a crisis. Relying on geopolitics is a powerful catalyst, but it is an unpredictable and volatile foundation upon which to build a trillion-dollar, multi-decade industrial project. These critiques are not mutually exclusive; they compound one another to create a more complex risk profile. A subsidy-dependent industry is far more vulnerable to geopolitical shifts, as a change in strategic priorities could lead to a withdrawal of both foreign investment and domestic political will for continued financial support. An industry stuck on legacy technology will find it much harder to compete if a global supply glut in mature chips materializes. This points to a potential nightmare scenario for Indian policymakers. They could spend tens of billions of dollars to successfully build a domestic manufacturing capacity, only to find that it is technologically lagging, commercially uncompetitive, and has lost its geopolitical rationale. This would force a difficult choice between letting these massive national assets fail or propping them up with endless subsidies, creating a permanent drain on public finances. The success of the mission, therefore, depends not just on overcoming the initial construction hurdles, but on skillfully navigating all of these interlocking risks simultaneously. It’s a truly monumental undertaking.

• Execution Risk: India has a history of bureaucratic delays and implementation hurdles in large-scale projects (e.g., Vedanta-Foxconn JV collapse due to lack of technology partner).
• Global Subsidy Race & Over-supply: India’s 70% subsidy (50% central, 20% state) is part of a global race (US CHIPS Act, EU Chips Act). This could lead to a glut in mature chips, making India’s high-cost fabs uncompetitive without continuous subsidies.
• Technology Lag: India’s first fab targets 28nm+ chips, while global leaders will be at 2nm by 2026, risking India being perpetually stuck on older, lower-margin technologies.
• Geopolitical Volatility: The “China+1” strategy, a key driver for investment in India, is dependent on ongoing US-China tensions. A de-escalation could reduce the urgency for diversification. India’s “strategic autonomy” policy could also create friction with Western security interests.
• Compounding Risks: These challenges are interconnected; a failure in one area (e.g., geopolitical shift) could trigger cascade failures across others (e.g., withdrawal of investment, uncompetitiveness).
• Nightmare Scenario: Billions spent on a technologically lagging, commercially uncompetitive industry that loses its geopolitical rationale, leading to a permanent drain on public finances.