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For a long time, India’s role in global technology has been clear: design, software, and back-end engineering. That’s where the country made its mark, building a reputation strong enough to power entire industries. But semiconductors are different. They’re physical, fragile, unbelievably expensive to produce, and dominated by a few giants who have been doing this work for decades. When the Indian government announced the India Semiconductor Mission (ISM) and promised to match 50% of a chipmaker’s investment, many wondered whether the country was finally ready to step into one of the toughest industries in the world, or whether it was signing up for a fight that would demand more money, skill, and patience than anyone expected.

The government isn’t shy about its ambition. Over the past few years, India has approved several semiconductor projects, large and small, across states like Gujarat, Assam, Uttar Pradesh, Andhra Pradesh, and Tamil Nadu. Together, they represent over ₹1.6 lakh crore in proposed investment, a huge jump for a country with no commercial chip fab of its own. But this excitement comes with a quieter detail: almost the entire ₹65,000-crore semiconductor incentive fund, around 97% of it—has already been allocated. That alone shows how heavily the government is leaning on subsidies to attract big-ticket names.

Consider one of the marquee projects: Tata Electronics’ partnership with Powerchip Semiconductor Manufacturing Corp. The deal is pitched as India’s entry into mainstream chip production, focusing on the kind of logic and power-management chips that go into cars, appliances, industrial machines, and everyday electronics. It’s not glamorous, but it’s essential, the sort of “bread and butter” chips that keep the supply chain moving. The hope is simple: once you prove you can make these chips consistently, you can move on to more advanced technology.

But building a fab is not the same as building a software park. Chip manufacturing needs uninterrupted high-quality power, massive quantities of ultra-pure water, specialized gases, and a level of precision that leaves no room for improvisation. India is improving in all these areas, but no one pretends the country is fully ready. The supply chain for equipment alone, machines costing tens or hundreds of millions of dollars each, still lies abroad. Skilled engineers exist, but not in the numbers needed for an industry that runs 24/7 with microscopic margins of error.

And then comes the uncomfortable truth: most of the projects India has greenlit focus on mature-node chips, older generations of technology, like 28 nm. These chips power a huge part of the electronics world, but they’re not the chips that drive AI models, flagship smartphones, or high-performance computers. That’s where Taiwan, South Korea, and the U.S. still dominate. If India wants to climb that ladder, it will need more than subsidies, it will need years of research, training, and consistency.

The political gamble behind these subsidies is enormous. When the government covers half of a company’s capital costs, it’s essentially placing a long-term bet using public money. If the global market shifts or the economics become unfavorable, it’s taxpayers who absorb the loss. Critics argue that India might end up participating in a global “subsidy race” rather than building real competitiveness. Supporters counter that no country has built semiconductor strength without generous government backing. Both sides have a point.

One example that captures both the promise and the risk is the HCL–Foxconn semiconductor project approved in Uttar Pradesh. The plant is designed to produce about 20,000 wafers a month, mainly for display-driver chips. On paper, it’s a smart move: phones, TVs, and laptops will always need display chips. But production timelines in this industry are fragile. A delay in power infrastructure, a shipping bottleneck, or a shift in a major customer’s demand can throw off profitability for months. That’s the reality of chipmaking: small disruptions create large consequences.

Meanwhile, another set of projects, especially those making compound semiconductors and packaging (OSAT/ATMP) units, has been approved across states like Odisha, Andhra Pradesh, and Punjab. These facilities don’t require the astronomical investment of full-scale fabs, and they fill important gaps in the ecosystem. They’re often more realistic starting points for a country building its semiconductor identity. But they’re still pieces of a larger puzzle. Without upstream manufacturing strength, India risks becoming a packaging hub rather than a true semiconductor power.

The more complicated question is: what happens after the factories are built? Fabs age quickly. Every few years, global standards move to a newer, more efficient process. A plant designed for today’s mature nodes might struggle in the next decade unless India builds a strong ecosystem around R&D, university partnerships, materials engineering, and homegrown suppliers. Without that, India could find itself with expensive factories but little technological depth.

Still, the determination behind India’s semiconductor push is real. Policymakers, engineers, and industry groups know the scale of the challenge, but they also know the cost of staying out of the chip race. The country already designs chips for global companies. If it manages to add manufacturing muscle, India could reshape global supply chains and reduce its dependence on a handful of countries for crucial technologies.

Whether that dream becomes reality depends less on subsidies and more on execution. The next several years will show whether India can turn billions of rupees in incentives into a durable, competitive industry, or whether these early projects become the country’s most expensive “what if” story.

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