India’s Semiconductor Industry in 2026
Abstract
This blog examines whether the expanding semiconductor manufacturing ecosystem of India can keep up with its domestic demand that is increasing very rapidly, which is projected by NITI Aayog to grow nearly five-fold from about $44 billion to about $206 billion between FY26 and FY35. While the fabrication and assembly projects are progressing very rapidly in Gujarat and Assam, with several of the plants reaching commercial production in 2026, this piece argues that there exists a structural mismatch that most of the capacity that is announced focuses on packaging, testing, and relatively less advanced chips, whereas the highest-value demand comes from cutting-edge logic and memory chips that our country is not currently manufacturing. There now exists a question due to ISM 2.0’s strategic shift toward advanced nodes and design-led incentives of whether India is simply becoming a larger importer or is it becoming self-sufficient.
India’s Chip Demand Set to Soar But Can Supply Keep Pace?
NITI Ayog projects a leap from forty-four billion today to about two hundred and six billion by 2035 of the demand of India’s domestic semiconductor, which is nearly a five-fold jump in about a decade. The government of our country is pitching a very simple thing, that fabrication plants are coming and so, the story of India’s chip is turning from an importer to a manufacturer. The demand of India’s semiconductor is being driven by AI infrastructure, EVs, and 5G devices, and so these sectors are growing faster than any fabrication plant can scale. This raises a simple question, that even as these plants break ground, is India genuinely moving on a track to become a bigger chip importer and not a smaller one.
NITI Aayog’s Roadmap: Mapping the $206 Billion Opportunity
“Future of India’s Semiconductor Industry”, NITI Ayog’s May 2026 roadmap estimates that the demand of India’s semiconductor is projected to grow at a rate of 19% annually, which may reach around $90 billion by FY2030 and it may potentially cross $200 billion by FY2035. This would build on a baseline of about $44 billion in FY26. This surge has arisen due to few demand drivers like AI infrastructure and data centers which rise the computational needs from AI workloads and cloud capacity, Electric vehicles and clean-tech which would power semiconductors for EVs and renewable systems, 5G/6G telecom networks which would help in connectivity hardware systems and network equipment, and Consumer electronics and defense like smartphones, smart meters, and strategic-sector procurement. NITI Aayog’s Vice Chairman has also flagged dependence on imported “black-box technologies” as it is one of the biggest strategic risks to India’s developed-nation ambitions.
Gujarat Leads the Charge: Inside India’s Fab and Assembly Hubs
Gujarat is the center for India’s semiconductor build-out, with Sanand emerging as India’s first real assembly and test hub. Micron’s facility had begun their commercial production in early 2026, whereas Kaynes Semicon’s semiconductor packaging and testing plant reached its commercial production in March 2026, just fourteen months after their construction started. The plant has already begun supplying intelligent power modules to Alpha and Omega Semiconductor. CG Power’s OSAT pilot line, which was inaugurated in August 2025 is now scaling towards 14.5 million chip units per day. Tata’s Assam ATMP facility, which was targeting 48 million chips per day, is now slated for pilot production in mid-2026. The project that is making headlines nowadays is the Tata-PSMC fab in Dholera, which is an $11 billion facility, that focuses on 50,000 wafer per month and on 28nm-110nm chips, with 50% completed construction and trial production being targeted to take place in late 2026. It has also been indicated by the officials that India’s first fabrication plant wouldn’t get fully ready until 2028.
The Reality Check: Why Capacity Still Falls Short of Demand
Optimistic scenarios like Dholera’s 50,000 wafers per month, producing roughly 3 billion chips annually or Assam’s 48 million chips per day or the Sanand OSAT cluster, sound large in unit terms show a wide gap as they aren’t dollars and even OSAT does not capture fab-level value. A rough estimate shows that if the front-end and packaging capacity that is announced by India reaches its full utilization by 2032-35, it could plausibly cover only about 15-25% of a $206 billion demand figure as most of that demand in advanced logic and memory nodes that India isn’t building right now, and the rest of it stays imported. The market has forecasted that even by 2032, India’s domestic semiconductor market size would be nowhere near self-sufficiency, with West-region fabrication plants still years away from peak output.
ISM 2.0’s New Strategy: Betting on Advanced Nodes and Design IP
ISM 2.0 had in the Union Budget 2026-27 had announced that it had shifted its focus from capacity creation to consolidation, targeting on advanced nodes like 3nm and 2nm, and also pushing the full-stack Indian IP through an expanded Design Linked Incentive ecosystem. It is projected by the officials that India could only design and manufacture chips for nearly about 70-75% of its domestic application by 2029, partly because ISM 2.0 has deliberately built across multiple segments like fabrication plants, compound semiconductors, and advanced packaging, rather than betting on one mega-fabrication plant. The DLI scheme has already been supporting 24 design startups that have drawn almost Rs.430 crore in venture funding, which suggests that the design-led value capture could matter as much as fabrication. But still, the “self-sufficiency” target is not a guarantee but are just projections and the execution speed, advanced-node feasibility, and global demand shifts would be able to each move the actual number meaningfully.
India’s IP Framework: Will $206 Billion in Demand Translate into SICLD Registrations?
Design-led growth only compounds into self-sufficiency if the resulting IP is actually owned in India. The Semiconductor Integrated Circuits Layout-Design (SICLD) Act, 2000 has given India a dedicated registration regime for chip layout designs, which is administered by the SICLD Registry with protection lasting for ten years from the date of filing. but , this protects only the layout of a chip, and not the architecture or the embedded algorithms that carry most of the advanced-node design’s value, which fall under the Patents Act, 1970, where the exclusion of Section 3(k) of “computer programs per se” leaves patent-eligibility unsettled. As DLI-backed startups push India toward 3nm/2nm design, rising SICLDR filings and clearer patent rules would show whether that value is captured domestically or licensed away.
Conclusion
The build-out of India has real momentum, but the capacity of manufacturing alone would not close the gap of $206 billion as most of the demand sits in advanced logic and memory nodes India isn’t yet building. ISM 2.0’s pivot to 3nm/2nm design and the DLI scheme is the correct response, and it targets 70-75% of the domestic coverage by 2029, though this is a projection, that is not a guarantee. Reaching it will depend as much on SICLD registrations and patent clarity as on wafer starts.
References:
ANI, ‘India Can Leapfrog in Global Semiconductor Race as Demand Set to Cross USD 200 Billion by FY35: NITI Aayog’ (29 May 2026), [https://www.tribuneindia.com/news/5g-6g-networks/india-can-leapfrog-in-global-semiconductor-race-as-demand-set-to-cross-usd-200-billion-by-fy35-niti-aayog]
Pioneer News Service, ‘India Should Target to Build $120–150 Billion Semiconductor Value Chain by 2035: NITI Aayog’ (30 May 2026), [https://dailypioneer.com/news/india-should-target-to-build-120-150-billion-semiconductor-value-chain-by-2035-niti-aayog]
The Policy Edge, ‘NITI Aayog Roadmap Targets Semiconductor Self-Reliance and USD 150 Billion Ecosystem’ (29 May 2026), [https://www.policyedge.in/p/niti-aayog-roadmap-targets-semiconductor-self-reliance-and-usd-150-billion-ecosystem]
DD News, ‘Four Semiconductor Plants to Be Ready in India This Year, Says Ashwini Vaishnaw’ (31 March 2026), [https://ddnews.gov.in/en/four-semiconductor-plants-to-be-ready-in-india-this-year-says-ashwini-vaishnaw/]
Dipanshu Chaturvedi, Beats in Brief, ‘While China Gets Blocked, India Gets the Deal: Inside the Tata-ASML Semiconductor Pact’ (18 May 2026), [https://beatsinbrief.com/2026/05/18/tata-asml-mou-dholera-semiconductor-india-china-chip-race-2026/]
Kumar Gandharv, CRN Asia, ‘Kaynes Semicon Starts Production at Sanand OSAT Facility, Marking India’s Second Chip Unit’ (31 March 2026), [https://www.crnasia.com/india/news/2026/kaynes-semicon-starts-production-at-sanand-osat-facility-marking-india-s-second-chip-unit]
IMARC Group, ‘India Semiconductor Market Size, Share & Trends, Report 2034’ (Accessed 21 June 2026), [https://www.imarcgroup.com/india-semiconductor-market]
UnderStand UPSC, ‘Semicon India Programme’ (30 May 2026), [https://www.understandupsc.com/semicon-india-programme/]
PWOnlyIAS, ‘India Semiconductor Mission 2.0 Launched in Union Budget 2026-27’ (2 February 2026), [https://pwonlyias.com/current-affairs/india-semiconductor-mission-2-0/]