India’s semiconductor industry is growing fast, with a major $21 billion investment plan that aims to make India an important part of the global chip supply chain. While India is not yet a big player in chip making, it is making strong progress in key final steps like assembly, testing, marking, and packaging (ATMP), as well as outsourced services (OSAT), which prepare chips for use in products like smartphones, laptops, cars, and electronics.
In semiconductor manufacturing, chip fabrication is often considered the most high-profile stage. However, the final processes, ATMP and OSAT are equally vital. They involve assembling individual semiconductor components into finished chips, testing for quality assurance, marking for identification, and packaging to protect the delicate silicon wafers.
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ATMP and OSAT contribute about 12 per cent to 15 per cent of a chip’s total value worldwide. Although this might seem modest compared to fabrication, it is where much of the industry’s operational complexity and value addition occur. Given India’s current technological and infrastructural landscape, focusing on ATMP/OSAT offers a pragmatic pathway to enter the semiconductor manufacturing ecosystem quickly and effectively.
India’s semiconductor ecosystem is taking shape with a clear strategy: to build strong ATMP and OSAT capabilities first, then move gradually towards establishing more complex chip fabrication units. This approach reflects the country’s strengths in IT, electronics manufacturing services (EMS), and a growing electronics hardware ecosystem, supported by a large skilled workforce.
The Union government, along with several state governments, has launched multiple initiatives to attract investment and technology partnerships in this segment. Incentives, subsidies, and policy support is given to encourage global semiconductor firms and contract manufacturers to establish ATMP/OSAT units within Indian boundaries. This focus has already begun to bear fruit with several technology giants and strategic alliances announcing plans to set up large-scale assembly and testing facilities.
India’s semiconductor ambitions received a major boost with the introduction of the Semiconductor Policy and related incentive schemes designed to develop the entire chip manufacturing value chain. Recognizing the critical need to reduce dependence on imports for chips which have become the backbone of modern electronics, these policies aim to create an integrated ecosystem that spans from design and fabrication to assembly and testing.
In the ATMP/OSAT segment, the government has facilitated land acquisition, infrastructure development, and skill training programs. This has attracted significant private and foreign direct investment (FDI), leading to the creation of state-of-the-art facilities. Many such units are planned or under construction in states like Tamil Nadu, Karnataka, Andhra Pradesh, and Gujarat, which have emerged as semiconductor hubs due to their industrial infrastructure and proactive governance.
A notable highlight in the ecosystem is the involvement of Tata Electronics, which is leading the country’s push into semiconductor fabrication, traditionally the most capital-intensive and technology-demanding segment. Tata Electronics is working on India’s first semiconductor fabrication plant, marking a significant milestone that complements the assembly and testing capabilities being developed around it.
The $21 billion investment pipeline for India’s semiconductor sector represents a strong economic opportunity. It will create thousands of jobs across design, manufacturing, assembly, and testing domains. Importantly, it will strengthen India’s position in the global electronics supply chain, reducing reliance on imports from countries like China, Taiwan, and South Korea, and improving supply chain resilience.
From a strategic standpoint, expanding semiconductor manufacturing within India is critical for the country’s national security and technological sovereignty. Chips power critical infrastructure ranging from defense systems and telecommunications to healthcare devices and automobiles. Developing a domestic semiconductor ecosystem ensures India can safeguard its technological independence in the future.
Despite the promising pipeline and government support, challenges remain. Semiconductor manufacturing is capital-intensive and requires continuous technological upgrades. India needs to develop a robust supply of raw materials, skilled workforce, and R&D capabilities to sustain growth. Collaboration between academia, industry, and government will be crucial to address these gaps. Moreover, fabrication plants, or fabs, require highly sophisticated technology and cleanroom environments. While India has made a start with Tata Electronics’ fab project, establishing additional fabrication units and improving yield rates will take time and sustained investment.
