Semiconductor Clusters in the Making: India’s Push for Global Competitiveness

Semiconductor Clusters in the Making: India's Push for Global Competitiveness

Photo: Wannaeka/Adobe Stock

A mapped dataset of around 73 institutions shows that India's semiconductor landscape is consolidating into distinct regional hubs. Strikingly, these hubs are not in the expected metros like Delhi or Mumbai, but in emerging industrial powerhouses. They include both fully operational facilities and projects still under construction-an important distinction for weighing near-term capacity against medium-term potential.

• Bengaluru, Karnataka: Located in the central highlands of southern India and often referred to as the "Silicon Valley of India," Bengaluru has been the country's epicenter for software and electronics design for decades. Today, it anchors India's most advanced semiconductor design ecosystem, producing the blueprints for chips deployed across global markets. This concentration of expertise is underpinned by leading research institutions such as the Indian Institute of Science (IISc) and supported by government-backed centers like the Centre for Development of Advanced Computing. Bengaluru's semiconductor capabilities are overwhelmingly design-oriented, encompassing chip architecture, EDA tools, embedded AI, and analog and mixed-signal systems, rather than large-scale wafer fabrication.
• Gujarat: This northwestern state is developing its strength in fabrication and advanced packaging with various projects in thepipeline stage. Key initiatives include Tata-Powerchip Semiconductor Manufacturing Corporation's 50,000-wafers-per-month greenfield fab (approved; construction underway), Micron's advanced packaging Special Economic Zone in Sanand (under construction), Kaynes' OSAT facility (approved), and the CG Power-Renesas-Stars OSAT (fiscal-support agreement signed). These projects are expected to come online over the next two to three years. Current operational anchors include Simmtech's substrate manufacturing facility, and segments of Micron's Assembly, Testing, Marking, Packaging (ATMP) capacity are now ramping
• Chennai-Hyderabad Corridor: This corridor combinesoperationalOSAT capacity and semiconductor equipment manufacturing led by KLA, Lam Research, Advantest, and MosChip Technologies. It is complemented by the Centre for Materials for Electronics Technology's active materials R&D programs, which provide a steady pipeline of innovations in substrates, packaging materials, and electronic ceramics.
• Northern and Eastern Nodes: These regions contribute both design and research depth. Noida hosts operational design operations for HCLTech and ARM, while ISM-backed Centers of Excellence are advancing. In Delhi, the Defence Research and Development Organisation's Solid State Physics Laboratory is fully active in gallium nitride, high-electron-mobility transistors, and compound semiconductor research. Mohali's Semi-Conductor Laboratory and the Institute of Nano Science and Technology's nanofabrication facilities provide national-scale prototyping and research capabilities, serving both industry and academia.

Q2: What are the key state-level semiconductor policies in India that drive the development of semiconductor clusters?

A2: As per industry estimates, the domestic semiconductor market was valued at approximately $38 billion in 2023, is projected to reach $45-50 billion in 2024-2025, and could expand to $100-110 billion by 2030. Achieving this growth trajectory will require both geographic specialization and robust policy frameworks. India's emerging semiconductor clusters are the result of several mutually reinforcing state-level policies:

• Gujarat and Karnataka have implemented targeted semiconductor policies to strengthen their competitive positions in the sector. Gujarat's 2022-2027 policy offers up to a 40 percent capital subsidy on top of central incentives, full reimbursement of stamp duty and registration fees, discounted power and water tariffs, and up to a 75 percent land subsidy for the first 200 acres in Dholera's "Semicon City," supported by fast-track clearances and pre-built infrastructure. Karnataka's Electronic System Design and Manufacturing (ESDM) Policy provides capital subsidies of up to 10 percent, R&D grants, patent reimbursements, marketing support, and prototyping cost assistance, alongside exemptions on stamp duty, registration, and land conversion fees, as well as power tariff concessions and interest subsidies to encourage growth in manufacturing, design, and exports.
• Tamil Nadu and Uttar Pradesh have ambitious semiconductor policies targeting large-scale investments. Tamil Nadu's 2024 policy offers eligible government of India-approved projects a state capital subsidy of up to 50 percent of the central incentive, with concessional land, full stamp duty and electricity tax exemptions, interest subvention, IP and quality certification subsidies, and a year of training support. Uttar Pradesh's 2024 policy provides a 50 percent additional capital subsidy over government of India support, extensive tax and duty exemptions, land rebates, dual power grid subsidies, and targeted support for R&D centers, Centres of Excellence, skilling programs, and worker housing.
• Andhra Pradesh and Odisha are also building their semiconductor ecosystems through targeted state incentives. Andhra Pradesh's 2024-2029 policy offers ISM-approved projects a capital subsidy equal to 60 percent of the central incentive, plus training subsidies, while providing power and custom incentives for large non-ISM investments. Odisha's 2023 policy supports manufacturing and design with up to a 30 percent capex subsidy, full tax and duty exemptions, concessional land, and funding for very-large-scale integration (VLSI) education and skilling to generate thousands of high-tech jobs.

Q3. What are the key drivers shaping India's semiconductor clusters?

A3: India's electronics manufacturing industry is already one of the fastest-growing in the world, with production reaching $102.00 billion in 2023 and exports surging to $28.45 billion in 2023-2024. Growth is concentrated in key states such as Tamil Nadu, Uttar Pradesh, Karnataka, Andhra Pradesh, and Gujarat, which host major global and domestic players like Samsung, Foxconn, Flex, Dixon, and Tata Electronics. Some of the factors driving this growth include:

• Talent Concentration: India's semiconductor clusters benefit from deep talent pools, anchored by premier institutions such as Indian Institutes of Technology (IITs), Indian Institutes of Information Technology, IISc, and state engineering universities, that produce engineers with expertise in VLSI design, embedded systems, and semiconductor materials science. Government initiatives, such as the SEMICON India program, Chips to Startup, SMART Labs, and the updated All India Council for Technical Education VLSI curriculum, are actively strengthening India's talent pipeline. India's lower labor costs, especially in engineering, allow companies to scale large design teams and R&D operations cost-effectively without sacrificing capability.
• Established Industry Presence: Long-standing multinational operations in Bengaluru, Hyderabad, and Pune form the backbone of India's semiconductor design ecosystem. Multinational leaders established an early presence, leveraging India's engineering talent and cost efficiencies: Texas Instruments opened its India R&D center in 1985, Intel followed in 1988, developing one of its largest design facilities outside the United States; and Nvidia opened its first research center in Bengaluru in 2005, laying the foundation for broader manufacturing and packaging ambitions. Their presence has also cultivated industrial parks, ESDM clusters, and local supply chains that lower barriers for new entrants.

• Global-Local Collaborations: Partnerships are a central strategic pillar, facilitating the transfer of advanced technology through collaboration between global firms and domestic players. Multinationals bring specialized process expertise, R&D capabilities, and global market access, while Indian partners provide manufacturing infrastructure, skilled labor, and national electronics supply chain integration.

  Notable examples include Micron's collaboration with Tata Projects on a $2.75 billion ATMP facility in Gujarat, the HCL-Foxconn display driver chip plant in Uttar Pradesh, and strategic tie-ups such as the United Kingdom's Clas-SiC Wafer Fab with Odisha's SiCSem, South Korea's APACT Co. Ltd. with Andhra Pradesh's ASIP Technologies, and Robert Bosch GmbH with Tata Electronics for advanced packaging. These ventures combine complementary strengths to accelerate India's capacity in fabrication, assembly, and advanced packaging. Many of these align with bilateral frameworks like the Technology for Resilient, Trustworthy, and Sustainable Supply Chains (TRUST) network, which would integrate private-sector partnerships into secure, standards-based, and geopolitically-aligned supply chains.

Q4: What are the challenges that could slow India's semiconductor manufacturing ambitions?

A4: Despite rapid advancement from strong design capabilities, generous incentives, and marquee investments, India must address persistent infrastructure deficits, supply chain dependencies, and specialized talent shortages to compete globally. Without this, India risks remaining a design powerhouse without the manufacturing depth needed for full value-chain leadership.

1. High Infrastructure Prerequisites: Semiconductor fabrication requires precision-grade facilities, uninterrupted high-voltage power, large volumes of ultrapure water, Class 1 cleanrooms, and specialized transport and logistics networks for sensitive equipment. In India, these capabilities are unevenly distributed, with only a handful of industrial zones approaching "fab-ready" standards.
2. Supply Chain Dependence: India currently lacks domestic production capabilities for essential semiconductor inputs, such as high-purity chemicals, specialty gases, silicon wafers, and ultrapure water, resulting in over 90 percent of these inputs being imported. This reliance increases costs, lengthens lead times, and exposes Indian projects to geopolitical supply shocks.
3. Skilled Workforce Shortages in Manufacturing: India's semiconductor ambitions face a significant manufacturing talent gap despite the country producing roughly 600,000 electronics-related engineering graduates annually. Only a small fraction, around one percent, possess the specialized capabilities needed for fabrication, advanced packaging, and precision equipment maintenance without extensive retraining. Industry estimates project a shortfall of 250,000-300,000 skilled professionals by 2027, highlighting a structural constraint on scaling production capacity.
4. Weak R&D and Innovation Ecosystem: A deeper challenge is India's underdeveloped research and innovation base. The country spends just 0.7 percent of GDP on R&D, far below the United States (3.6 percent) and China (2.4 percent). Corporate R&D intensity is especially low: India had only 15 firms among the world's top 2,000 corporate R&D spenders in 2023, with combined investments of $5.9 billion-less than a tenth of Google's annual R&D outlay. Universities, while producing a vast supply of engineers, publish relatively little world-class research and maintain weak industry linkages, raising concerns about whether India can generate the long-term process innovations that underpin advanced chipmaking. Without a robust R&D pipeline, India risks being confined to an assembly- and packaging-driven role, rather than evolving into a genuine technology originator.

Q5: What lessons can India draw from the United States' mature semiconductor clusters?

A5: The United States offers a tested playbook for building high-performance semiconductor clusters-one that India can adapt to accelerate the maturation of its. However, adapting this playbook will require adjustments to India's distinct institutional and regulatory context. Four elements stand out.

• Align National and State Incentives into a Single Investment Proposition: U.S. states have mastered the art of "stacking" federal and state benefits into a unified package for prospective investors. Under the CHIPS and Science Act, major awards to Intel, Taiwan Semiconductor Manufacturing Company (TSMC), Samsung, and Micron were paired with state-specific tax credits, utility rate guarantees, and infrastructure financing. New York's Green CHIPS program, layered on top of federal grants, included a staged power allocation from the New York Power Authority, while Texas's Samsung-Taylor agreement bundled county grants, city tax abatements, and special financing districts into the core deal. For India, the lesson is to present investors with a seamless term sheet that combines ISM incentives, state-level subsidies, and committed utility access, avoiding the fragmented negotiations that slow project closure.
• Use Anchor Tenants to Pull in the Supplier Ecosystem: U.S. clusters grow outward from anchor tenants. TSMC's decision to locate in Phoenix triggered a rapid influx of Tier-1 suppliers-Edwards Vacuum, EMD Electronics, and Chang Chun Arizona-each establishing local facilities to serve the fab. These moves were coupled with fast-launch workforce programs, such as Maricopa Community Colleges' 10-day Semiconductor Technician Quick Start course, built with Intel and rapidly replicated in Oregon for Intel's Hillsboro fabs. India can apply this model by recruiting suppliers in parallel with anchor investments, offering ready sites within semiconductor parks, and pre-negotiating training programs with industrial training institutes and polytechnics before construction begins.
• Embed Universities and R&D Infrastructure into the Cluster from Day One: In the United States, research capacity is not an afterthought-it is built into cluster design. Albany NanoTech's NY CREATES campus colocates International Business Machines Corporation, Applied Materials, Tokyo Electron, and soon Advanced Semiconductor Materials Lithography's High-NA EUV tools in a public-private R&D environment that also trains the local workforce. Arizona State University's engineering expansion was synchronized with Intel and TSMC hiring cycles, while the University of Texas at Austin's partnership with Samsung funds dedicated labs, scholarships, and a semiconductor training center. For India, embedding IITs, IISc, and ISM-backed Centers of Excellence into semiconductor zones-and formalizing memoranda of understanding with U.S. universities-would ensure R&D output is directly linked to industrial needs and global standards.
• Build Infrastructure Readiness into the Incentive Package: U.S. sites like New York's White Pine Commerce Park are "shovel-ready," with environmental impact assessments, grid connections, and water capacity in place before investment announcements. Arizona's industrial water reclamation and Phoenix's federally funded Advanced Water Purification Facility were planned in sync with TSMC's fab build. In Taylor, Texas, Samsung's agreement explicitly financed the backbone infrastructure within the investment deal. India's semiconductor parks should adopt this utilities-first model, pre-clearing environmental requirements, securing water and power commitments in writing, and incorporating infrastructure costs into the incentive structure instead of as separate obligations. Linking these preparations with India's existing industrial corridor and logistics reforms under Prime Minister Gati Shakti can further synchronize utility buildouts, transport connectivity, and land readiness goals.

Adapting these lessons is not only about accelerating India's cluster readiness-it is also about embedding India into a trusted transnational semiconductor network. Joint R&D centers, shared training curricula, and supplier integration plans anchored by U.S. firms can compress India's learning curve from years to months. For Washington, this creates a cost-competitive, secure production base outside East Asia. For New Delhi, it transforms today's emerging hubs into globally competitive semiconductor clusters with export-ready capacity, strengthening both countries' positions in the high-tech supply chain.

Sujai Shivakumar is the director and senior fellow of Renewing American Innovation at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Shruti Sharma is a research intern with Renewing American Innovation at CSIS.

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