India is rapidly positioning itself as a global semiconductor hub, with both Central and State governments rolling out incentive packages to attract investment. Besides the Centre’s 50 per cent capex support under the India Semiconductor Mission (ISM), states like Uttar Pradesh, Gujarat, Karnataka, and Assam are offering additional benefits—ranging from infrastructure support to single-window clearances, creating a race to become the country’s next chip manufacturing destination. However, experts say success will depend not just on incentives, but on faster approvals, robust infrastructure, and a long-term focus on chip design and R&D.
Most States have a semiconductor policy framework, with variations in the scale and nature of financial and infra-related support. The capital expenditure (capex) subsidy provided by states typically ranges between 25 per cent and 50 per cent of the central incentive offered under ISM by MeitY. Additionally, support for land, power, water, and housing differs from State to State, explained Ashok Chandak, President of SEMI India & IESA.
States like Gujarat, Assam, UP, Odisha, and Madhya Pradesh offer comparable incentive packages, sometimes extending semiconductor-specific capex incentives above existing industrial policies. For instance, Assam offers support under its general industrial policy as well as through targeted schemes for Semiconductors and Electronic Components.
Currently, the majority of investment is flowing into Gujarat, followed by Assam and Uttar Pradesh, based on projects approved under ISM. Some states—including Odisha, Andhra Pradesh, Chhattisgarh, and Maharashtra—have announced projects, yet to receive ISM approval.
Among the States, Gujarat offers a 40 per cent top-up on the central capex incentive, equating to 20 per cent of the overall project cost. UP provides a 50 per cent top-up, effectively covering half of the total project expenditure. Odisha extends a similar 50 per cent top-up for ISM-approved projects and 30 per cent of project capex for others, with subsidies disbursed on a pari passu basis. Tamil Nadu also follows the pari passu model and provides a 50 per cent top-up on the central capex incentive.
In the broader electronics manufacturing space, Andhra Pradesh offers 20–25 per cent of fixed capital investment (FCI) with a cap of ₹20–25 crore, while Telangana provides a 20 per cent investment subsidy capped at ₹30 crore. Karnataka extends a 20 per cent subsidy on plant and machinery, and Maharashtra offers 25 per cent of FCI.
“Several States have launched dedicated semiconductor manufacturing policies, reflecting a competitive spirit and a unified national vision to attract global investments and expand our semiconductor footprint. Gujarat and Assam have taken an early lead with significant project announcements and investments, and at least 10 states now have semiconductor or related manufacturing projects underway. This is increasing investor interest, broadening the ecosystem, and accelerating India’s journey towards self-reliance and global leadership in chip manufacturing,” Chandak said.
Tailored approach
However, States must identify that semiconductor manufacturing requires a tailored approach. This sector demands uninterrupted power supply, high-quality water, and well-connected, accessible locations, said HCL co-founder Dr Ajai Chowdhry, also the Founder & Chairman, of EPIC Foundation, and Chairman-Mission Governing Board, of National Quantum Mission (NQM).
Since setting up a semiconductor plant is time-intensive, approvals and clearances must be fast-tracked from the outset. States like Gujarat have adopted a single-window clearance system that enables quicker approvals. In contrast, others follow a fragmented process—directing investors to different departments for land, utilities, and other clearances, which can delay projects by three to six months.
“The speed of approval is essential in this business because the equipment acquisition time is longer. This is an area where States need to establish different policies and provide for quick approval. Also, most cases have international partners who don’t like delays.”
On the other hand, while India is gaining recognition as a trusted alternative to countries like China, it lags behind established players like Malaysia and Singapore, which have built their semiconductor ecosystems for over 25 years.
However, the country has started gaining momentum, largely due to marquee investments like Micron’s entry, along with the active participation of domestic giants including Tata and HCL. These large corporates are helping build credibility and attracting global partners to join India’s growing semiconductor landscape.
India is also leading the incentive race globally, Chowdhry added.
“To complete the picture, there should be at least three or four silicon fabs. Currently, we have only one. The second thing is we have approval for four OSAT plots. And for compound semiconductor manufacturing, we need at least two compound fabs. Then we need at least one display fab. This is what the ISM will work on next -- they will bring in compound semiconductor and display fabs, and advanced packaging.”
VLSI design talent pool
India has the world’s second-largest VLSI design talent pool, but most designers serve global markets. To build a secure and self-reliant semiconductor ecosystem, India must develop domestic chip design companies and manufacture chips locally—especially to reduce dependence on Chinese imports, which pose data security risks. Creating an internal market is critical to the industry’s success.
With strategic investments, a growing design ecosystem, and policy momentum, India is laying the groundwork for a resilient semiconductor value chain. But sustaining this growth will require faster execution, and a continued focus on talent, infrastructure, and R&D. If these elements align, India could well transform from a design powerhouse into a global manufacturing hub in the years to come, he added.