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Why Semiconductors?
A semiconductor is not merely a component inside a device — it is the invisible infrastructure of modern civilisation. Every smartphone, electric vehicle, missile guidance system, medical imaging device, and AI processor depends on chips. When global supply chains fractured during the COVID-19 pandemic (2020–2022), automobile factories shut down, consumer electronics became scarce, and governments scrambled to secure chip supplies from Taiwan and South Korea. That crisis made one fact starkly visible: countries that do not make chips do not control their own technological future.
India currently imports approximately 90% of its semiconductor needs. This structural dependency — paying for the intelligence embedded in every device while contributing only at the assembly end — costs the economy tens of billions of dollars annually. Beyond economics, semiconductors are a national security concern: defence systems, communication networks, satellites, and critical infrastructure all run on chips. A country that cannot produce its own chips remains strategically vulnerable in ways that no amount of military spending can fully offset. Reversing this dependency is the core rationale of India's semiconductor mission.
From a Failed Dream to Deliberate Policy: India's Semiconductor History
India's ambition to make chips is not new. In the 1980s, the Semiconductor Complex Ltd (SCL) at Mohali, Chandigarh was established as India's first chip fabrication facility — a bold attempt at technological self-reliance. In 1989, a devastating fire destroyed the facility, setting the dream back by decades. For much of the 1990s and 2000s, while Taiwan built TSMC and South Korea scaled Samsung Foundry into global giants, India remained a consumer — its engineering talent flowing to the design centres of foreign companies rather than building domestic production capability. The SCL in Mohali was eventually revived and continues to support limited government-sector chip work, but it never achieved commercial scale.
The decisive policy shift came in December 2021, when the Union Cabinet approved the India Semiconductor Mission (Semicon 1.0) with an outlay of ?76,000 crore. MeitY (Ministry of Electronics and Information Technology) was designated the nodal ministry, and a specialised implementation body — the India Semiconductor Mission (ISM) — was established for agile execution, outside the typical departmental bureaucracy. By 2026, tangible results were visible: 12 manufacturing projects approved, with Micron's assembly and testing facility in Sanand (Gujarat), Kaynes Semicon, and CG Semi already in commercial production. More impressively, over 70,000 chip design engineers were trained in just four years — exceeding the 85,000 engineer target originally set for ten years.
Semicon 2.0:
In July 2026, the Union Cabinet approved India Semiconductor Mission Phase 2 (Semicon 2.0) with an outlay of ?1,27,500 crore ($13.5 billion) over 12 years — a significant step up from Phase 1's ?76,000 crore. PM Narendra Modi formally launched Semicon 2.0 at SEMICON India 2026 (September 17–19, Yashobhoomi, New Delhi) — the fifth edition of the annual event that drew over 600 exhibitors from 40+ countries, including 300 international companies, under the theme "Silicon to Systems: Building the Ecosystem." The shift from "building units" to "building an ecosystem" is deliberate and marks a fundamental maturation in strategy.
Semicon 2.0 is also more internationally oriented in its design. The government eased foreign participation rules, allowing international companies to collaborate directly with Indian startups, design firms, and OCI-owned entities. This responds to a key learning from Phase 1: India's chip ambition cannot be built with domestic resources and technology alone. It requires global partnerships — particularly for front-end fabrication technology and precision equipment, which remain under strategic export controls by supplier nations. The policy also extends support to compound semiconductors, semiconductor-grade gases, and supply chain infrastructure — acknowledging that chips cannot be made without a vast supporting ecosystem
The Six Pillars of Semicon 2.0
Semicon 2.0 organises India's semiconductor strategy around six interconnected pillars, each targeting a distinct layer of the semiconductor value chain:
|
Pillar |
Focus Area |
Targets / Initiatives |
|---|---|---|
|
Chip Design |
Ecosystem for startups and IP |
Target: 200+ chip-design companies; 400+ universities with EDA tools; Semiconductor Lab at Mohali |
|
Machines & Materials |
Indigenous equipment and chemicals |
Capital equipment, cleanroom gases, specialty chemicals, wafer slicing tools; reduce import dependency |
|
Manufacturing Fabs |
Full-scale chip fabrication units |
Logic, memory, silicon, compound, display fabs; 50% fiscal support on capital expenditure |
|
Advanced Packaging |
3D chip packaging and testing |
Scaling beyond 2D packaging; Odisha facility under development; critical for AI and HPC chips |
|
Applied R&D |
Industry-driven research with academia |
Company-proposed projects; chip tapeouts; prototyping centres; academia-industry linkages |
|
Talent Development |
Manufacturing workforce creation |
Target: 1 lakh factory-floor workers and cleanroom technicians; upskilling of ITI graduates |
Odisha's Silicon Valley:
Among all states, Odisha emerged as one of the most strategically active participants at SEMICON India 2026. Chief Minister Mohan Charan Majhi personally led the state's delegation, inaugurated the Odisha Pavilion at the event, and held bilateral meetings with delegations from Japan, Sweden, and Taiwan — countries that lead different segments of the global semiconductor supply chain. This was not a ceremonial appearance. It was a calibrated diplomatic and economic push that produced concrete results.
The Naraj Hub: Location, Scale, and Strategic Logic
CM Majhi announced the development of an 870-acre "Odisha Silicon Valley" at Naraj, near Cuttack — strategically positioned on the Bhubaneswar-Cuttack urban corridor. The location is not arbitrary. Naraj sits adjacent to the Mahanadi River, providing the ultra-pure water supply that semiconductor fabs require in enormous quantities — a resource constraint that has hampered chip manufacturing in drier geographies. The site enjoys connectivity to Paradip and Dhamra ports for raw material logistics, and lies within Eastern India's fastest-growing industrial corridor, with road, rail, and future air connectivity.
Investments, MoUs, and Companies at the Table
Odisha secured investment proposals worth ?23,600 crore at SEMICON India 2026, projected to create approximately 6,100 new jobs. The state signed a Letter of Intent (LoI) with QuadQuantum for a Silicon Carbide (SiC) substrate wafer manufacturing facility — a strategically important segment given SiC's growing use in EV power electronics and renewable energy inverters. Companies that held formal discussions with Odisha at the event include Lam Research, Applied Materials, SiCSem, 3D Glass Solutions, Cyient, Linde, and HORIBA India — spanning semiconductor equipment, materials, process services, and specialty gases across the entire value chain. Odisha also held bilateral meetings with semiconductor delegations from Japan, Sweden, and Taiwan, countries that dominate specialty chemicals, compound semiconductors, and foundry operations respectively.
Odisha's Semiconductor Policy: Concrete Reforms
Beyond headline announcements, Odisha made a substantive policy amendment at SEMICON India 2026. The state now provides an additional 25% fiscal support to ISM-approved projects in semiconductor equipment manufacturing, semiconductor-grade specialty gases, raw material processing, and supply-chain infrastructure. The amended policy also extends support to workforce upskilling, internship programmes, patent filing, and applied R&D activities — positioning Odisha not merely as a land provider but as an active enabler of the semiconductor ecosystem. This directly addresses the Phase 1 learning that project approvals alone are insufficient; the support ecosystem around fabs determines whether they succeed.
Crucially, Odisha already has an Advanced Packaging unit under development as part of ISM Phase 1, meaning the state enters Semicon 2.0 with existing project momentum and a demonstrated capacity to execute, rather than starting from scratch. This positions Odisha as one of the leading beneficiary states in Phase 2 allocation.
Strengths and Structural Gaps
Where India is Genuinely Strong
India's most durable strength in semiconductors is human capital. The country produces hundreds of thousands of engineering graduates annually, and Indian-origin engineers hold leadership positions at TSMC, Intel, Qualcomm, NVIDIA, and AMD. This diaspora is increasingly being leveraged as a bridge for technology partnerships. Domestically, over 400 universities now access Electronic Design Automation (EDA) tools from major vendors, creating a design-ready talent pipeline at scale. India trained 70,000 design engineers in Phase 1 in four years — a result that surprised even industry veterans.
Policy continuity is another genuine strength. Many strategic industrial missions in India have suffered from political discontinuity and bureaucratic inertia. The semiconductor mission has survived changes of government and demonstrated long-term commitment that global investors notice. India's electronics manufacturing sector also provides a powerful demand pull: electronics manufacturing has grown sixfold in eleven years, with mobile phone exports surging, creating a large and growing domestic customer base for semiconductors.
Where the Structural Gaps Are Real
The most honest critique of India's semiconductor programme is this: all three manufacturing units in commercial production under Phase 1 are back-end facilities — assembly, testing, and packaging. Not a single transistor has been photolithographically printed on a silicon wafer in India under this mission. Front-end fabrication requires lithography machines, most critically EUV (Extreme Ultraviolet) systems manufactured exclusively by ASML of the Netherlands, which remain under strategic export controls. India's access to these machines depends not on money but on geopolitical positioning and negotiations with supplier nations and their governments.
Infrastructure constraints are real. A single modern semiconductor fab can consume as much water as a mid-sized city and requires uninterrupted power supply at tolerances that India's grid does not consistently provide outside special industrial zones. Manufacturing-level talent — cleanroom process engineers, metrology specialists, equipment maintenance technicians — is also scarce. Chip design engineers exist in abundance; cleanroom workers do not. Finally, semiconductor-grade specialty chemicals and gases are almost entirely imported, creating a supply chain vulnerability at the raw material stage.
Way Forward
Front-end fabrication must become the explicit diplomatic and investment target of Phase 2. The government's easing of OCI and foreign participation rules is a step in the right direction; it must be combined with government-to-government technology transfer agreements with the Netherlands (ASML), Japan (Tokyo Electron), and South Korea (Samsung Foundry). The QUAD technology working group provides an existing diplomatic framework for exactly this kind of strategic technology access.
Compound semiconductors — Silicon Carbide and Gallium Nitride — represent a realistic near-term entry point for front-end fabrication. Unlike silicon logic chips, which require cutting-edge nodes below 10nm, compound semiconductor wafers for power electronics and EV applications are produced at older nodes where India's infrastructure and equipment access gaps are manageable. Odisha's QuadQuantum LoI for SiC wafers is precisely this kind of strategic entry. The government should replicate this model across multiple states and materials.
Odisha's model — combining infrastructure (Naraj hub), water advantage (Mahanadi River), port connectivity (Paradip and Dhamra), and a proactive policy amendment (additional 25% ISM incentive) — should be systematised into a national semiconductor park template. States that offer this complete package, not merely land, should receive priority under Phase 2 allocation. The Centre must also formalise the cooperative federalism framework with binding investment agreements rather than non-binding MoUs, given that semiconductor fabs are decade-long investments that require decade-long legal and fiscal certainty.
The Talent Development pillar requires a separate workforce strategy focused on manufacturing, not design. This means aligning Skill India programmes, Industrial Training Institute (ITI) upgrades, and new Semiconductor Technician certification courses with specific fab commissioning timelines — so that when a facility comes online, its workforce is ready, not being scrambled for. Without this alignment, India risks the situation where approved fabs cannot find the workers they need.