In the global semiconductor supply chain, there is a hierarchy that is worth understanding before assessing any country’s ambitions. At the top sits chip design the intellectual property layer where companies like ARM and Qualcomm write the blueprints that define what a chip does. Below that is wafer fabrication where companies like TSMC and Samsung etch those blueprints into silicon at geometries measured in single-digit nanometres, requiring billions of dollars in equipment and decades of accumulated process knowledge. Below that is assembly, testing, and packaging where finished wafers are cut, tested, and packaged into the components that end up in your phone, car, or laptop.
India, in July 2026, is firmly at that third layer. Three semiconductor facilities are now in commercial production, Micron’s memory packaging plant in Sanand ($2.75 billion), the Kaynes Semicon OSAT unit, and the newly operational CG Semi facility ($870 million, built in partnership with Japan’s Renesas and Thailand’s Stars Microelectronics). Five plants are expected to be operational by December. A Tata Electronics fabrication facility in Dholera, built with Taiwan’s PSMC, is targeting first silicon output by late 2026 or early 2027. This is genuine, measurable progress. It is also entry-level. The hard part of the climb has not yet begun.
Why the Entry Point Is Smarter Than It Looks
Before assessing the limitations, it is worth applying Porter’s Diamond framework, Michael Porter’s model for understanding why some nations develop competitive advantages in specific industries to understand what India actually has going for it.
Porter’s Diamond identifies four interconnected determinants of national competitive advantage: factor conditions (the inputs a country brings to an industry), demand conditions (the sophistication of domestic buyers), related and supporting industries (the ecosystem around the sector), and firm strategy and rivalry (the competitive environment that drives companies to improve).
On factor conditions, India’s position is genuinely strong in one specific area: engineering talent. The country produces well over a million engineering and computer science graduates annually, at a cost structure that is a fraction of comparable talent in Taiwan, South Korea, or the United States. The India Semiconductor Mission‘s report that over 70,000 people have already been trained specifically in chip design in the last two years suggests the talent pipeline is being deliberately shaped, not just inherited. Land and infrastructure in dedicated semiconductor clusters, particularly the Sanand belt in Gujarat are being developed with government support covering up to 50% of capital expenditure.
On related industries, India’s existing software and IT services sector is a genuine adjacent strength. Chip design is, fundamentally, a software-intensive activity. Companies like Qualcomm, Intel, and AMD have had India-based chip design centres for years, precisely because the engineering talent for this work exists in depth. That is not an accident, it is infrastructure that OSAT facilities and eventually fabrication plants can leverage.
Where India Actually Sits in the Value Chain
A Value Chain Analysis of the semiconductor industry makes the current position clear and clarifies what “moving up the chain” actually requires.
The global semiconductor value chain runs from design (highest value, highest margin, most knowledge-intensive) through fabrication (highest capital intensity) through OSAT (moderate capital, moderate skill) through distribution to end markets. TSMC, which operates at the fabrication layer, generates operating margins above 40%. OSAT companies globally operate on margins of 10-15%. The value in semiconductors is concentrated upstream, not downstream.
India is currently at the OSAT layer, and it got there through a deliberate sequencing decision that is actually strategically sound. OSAT requires less capital than a full fabrication facility, an OSAT plant costs hundreds of millions of dollars, while a leading-edge fab costs tens of billions. It builds process discipline, quality systems, and supply chain relationships that are prerequisites for moving upstream. It generates employment at scale while more sophisticated capabilities are developed. The CG Semi facility shipping automotive-grade chips to Japan, the United States, and Europe is not just a production milestone, it is a proof of reliability to global supply chain partners who will determine whether India gets to move to the next layer.
The Tata-PSMC fabrication facility in Dholera is the first genuine attempt to move up the value chain. At 28nm, it is not cutting-edge TSMC’s current process nodes are sub-5nm for leading-edge AI and mobile chips but 28nm is exactly the right starting point. It serves automotive, industrial, and IoT applications where the demand is enormous and the technology requirements are within reach. You do not begin climbing a mountain from the summit.
The Resource-Based View
The Resource-Based View of strategy, developed by Jay Barney, argues that sustainable competitive advantage comes from resources that are Valuable, Rare, difficult to Imitate, and supported by the Organisation to exploit them the VRIO framework.
Run India’s semiconductor ambition through VRIO and the picture becomes nuanced. The engineering talent base is valuable and rare at this scale and cost no other country of comparable size offers this combination, which is why Micron, Renesas, and PSMC are here rather than somewhere else. It is difficult to imitate quickly; building an educational infrastructure that produces engineers at this scale takes decades. The question mark is the fourth condition: whether India’s organisational infrastructure, the policy frameworks, the supply chain ecosystems, the institutional knowledge is yet developed enough to exploit the resource base at world-class level.
The 24 deep-tech chip design startups that have emerged alongside the semiconductor mission are a promising early signal. These are the companies that, over the next decade, could move India from contract packaging for global companies to indigenous chip design which is where the real value creation sits.
The Genuine Challenges
A balanced assessment requires naming what is missing. India currently lacks a domestic supply chain for the specialised inputs that semiconductor manufacturing requires at scale: precursor chemicals, photomasks, ultra-pure electronic-grade gases, and the deionised water supply that precision cleanrooms consume in enormous quantities. These are not peripheral inputs, they are what the production process runs on. Sourcing them from Japan, Germany, or the United States introduces exactly the kind of supply chain vulnerability that the semiconductor mission is designed to reduce.
The competitive environment is also unforgiving. Taiwan, South Korea, and China have decades of accumulated process knowledge, deep supplier ecosystems, and established customer relationships with every major semiconductor buyer on earth. India is entering this market at a moment when its competitors are not standing still. TSMC announced a further $100 billion expansion plan earlier this year. Samsung is investing heavily in its advanced logic foundry. The gap at the leading edge is not narrowing it is widening.
What India can realistically aim for in the next five to seven years is a defensible position in the 28nm-and-above mature-node segment, a meaningful share of global OSAT capacity for automotive and industrial chips, and if the Dholera fab delivers on schedule, then the first indigenous silicon fabrication capability. That is a realistic and valuable set of outcomes. It is not yet a position that challenges TSMC at 3nm.
The Ground Floor Take
India’s semiconductor push is real, it is funded, and it is producing operational factories rather than policy documents. The Sanand cluster in Gujarat is beginning to look like something credible: three plants, established JV partners with global brands, chips exporting to Japan, the US, and Europe. The engineering talent pipeline is the genuine long-term asset, it is deep, it is cost-competitive, and it is being shaped deliberately toward chip design skills that are prerequisites for moving up the value chain.
The honest assessment is that India has made a smart entry into a brutally difficult industry, at an entry point that gives it the best chance of building durable capabilities rather than burning capital on ambitions that outrun execution. The OSAT layer is not glamorous, but it is a real rung on a real ladder.
What comes next is the climb from packaging to fabrication, from mature nodes to advanced nodes, from contract work for global brands to indigenous chip design will be harder, slower, and more expensive than anything accomplished so far. The 2020-23 global chip shortage proved that supply chain concentration is a systemic risk. The question for India is whether it can convert the current political will and early momentum into the decades of compounding investment and institutional learning that a genuine semiconductor industry requires.
Three plants is a start. The mountain is considerably taller than three plants.
