By Ramachandran Rajeev Kumar — 2026-01-21

By Ramachandran Rajeev Kumar

January 2026 marks a genuine milestone: the first commercial shipments of "Made in India" semiconductor chips have left factory floors in Gujarat. After decades of talk, India finally has silicon to show for it.

Micron's $2.75 billion facility in Sanand is now producing high-density DRAM and NAND flash for AI servers. Tata Electronics, partnering with Taiwan's Powerchip Semiconductor (PSMC), has initiated high-volume trial runs at Dholera, processing 300mm wafers for automotive and 5G applications. Minister Ashwini Vaishnaw announced at Davos that four semiconductor plants will begin commercial production in 2026, backed by a $20 billion government commitment under ISM 2.0.

Better late than never.

But before the triumphalism begins, a more sober assessment is warranted. This is not India's semiconductor moment. This is, at best, a minor start—one that could easily become a missed opportunity if we continue thinking small, concentrating investment in one geography, and treating foreign capital as something to be managed rather than welcomed.

The Achievement, in Perspective

What India has accomplished is real. Micron Sanand is operational. Tata-PSMC Dholera is running trial production. Commercial chips are shipping. For a country that has announced semiconductor ambitions repeatedly since the 1980s, execution—any execution—is progress.

But let's be clear about what we're producing.

Micron's facility handles Assembly, Testing, Marking, and Packaging (ATMP)—the back-end of semiconductor manufacturing. This is valuable work, but it's not fabrication. The wafers arrive from elsewhere; India adds the final steps. It's a start, but it's not the same as producing chips from scratch.

Tata-PSMC's Dholera facility is more ambitious, processing 300mm wafers at nodes ranging from 28nm to 110nm. This is legitimate fabrication—but at mature nodes that Taiwan mastered a decade ago. TSMC is shipping 3nm chips. Samsung is ramping 2nm. India is celebrating 28nm.

Again: better late than never. But let's not pretend we've joined the frontier. We've joined the race—several laps behind.

The Gujarat Problem

Here's what should worry policymakers: every major semiconductor investment is landing in the same state.

Micron Sanand. Tata-PSMC Dholera. CG Power's proposed OSAT facility. All Gujarat. The state's proactive land acquisition, infrastructure development, and business-friendly administration have made it the default destination for semiconductor projects.

This is a problem.

India's semiconductor ambitions cannot be a Gujarat program. Concentrating an entire strategic industry in one geographic cluster creates risk—supply chain fragility, infrastructure bottlenecks, and the political hazard of a single state capturing the benefits of a national priority.

Tamil Nadu has a deep electronics manufacturing base. Karnataka has the design talent. Telangana has been courting chipmakers for years. Odisha, Andhra Pradesh, and Maharashtra all have land, water, and power—the basic inputs semiconductor fabs require.

Where are their fabs?

The answer lies in India's competitive federalism, which has devolved into a race to offer the biggest subsidies rather than the best ecosystems. States bid against each other with land and tax breaks; companies take the most generous offer; and national strategy dissolves into whichever Chief Minister moves fastest.

A mature semiconductor policy would designate multiple clusters—coastal sites for export-oriented fabs, inland sites for defense-sensitive production, southern hubs leveraging existing electronics ecosystems. Instead, we have Gujarat winning by default, and the rest of India watching.

The FDI Timidity

India's semiconductor push remains curiously ambivalent about foreign capital.

The $20 billion ISM 2.0 commitment is substantial—but it's government money, disbursed through bureaucratic processes, subject to political cycles. What India actually needs is a flood of private capital: global semiconductor equipment makers, foundry operators, and financial investors who see India as a place to deploy billions.

The policy signals remain mixed. Foreign direct investment in semiconductor manufacturing is nominally welcome, but the approval processes are slow, the land acquisition challenges real, and the regulatory environment unpredictable. Global chipmakers don't lack capital—they lack confidence that India will remain a stable destination over the 10-20 year horizon that semiconductor investments require.

The solution is straightforward: 100% FDI with automatic approval, long-term policy guarantees, and financial market infrastructure that allows global capital to flow freely.

India's equity markets have matured dramatically. Our bond markets remain shallow. Our venture and private equity ecosystem, as discussed elsewhere, starves for institutional capital. Semiconductor manufacturing requires patient, long-term financing—exactly what India's financial infrastructure struggles to provide.

If we want Intel, Samsung, or TSMC to build in India (rather than their junior partners and ATMP facilities), we need to offer what they get in Arizona, Dresden, or Kumamoto: certainty, capital access, and a government that treats their investment as a partnership rather than a favor to be extracted.

Thinking Bigger

The deeper problem is ambition—or the lack of it.

India's semiconductor strategy, as currently conceived, is about catching up. Attract some ATMP facilities. Convince a second-tier foundry partner to build a mature-node fab. Celebrate the jobs created. Declare victory.

This is insufficient.

The semiconductor industry is undergoing its most significant transformation in decades. AI is rewriting demand patterns. Advanced packaging is becoming as important as fabrication. New materials—gallium nitride, silicon carbide—are enabling applications impossible with traditional silicon. The US, Europe, Japan, and Korea are pouring hundreds of billions into next-generation capacity.

India's goal shouldn't be to host assembly plants for chips designed and fabricated elsewhere. It should be to build companies—Indian companies—that design, fabricate, and sell semiconductors globally.

Where is India's fabless design champion? Where is the Indian equivalent of MediaTek, Qualcomm, or Nvidia—a company that designs chips manufactured by foundry partners? India produces more semiconductor engineers than any country except China. Most of them work for foreign multinationals, designing chips that generate profits in San Jose and Hsinchu.

The engineering talent exists. The entrepreneurial energy exists. What's missing is the ecosystem: the venture capital willing to fund hardware startups (which require far more capital and patience than software), the domestic customers willing to buy from unproven suppliers, and the government procurement that could anchor nascent Indian chip companies.

Israel built its semiconductor industry by funding design startups that were eventually acquired by global giants—transferring technology and expertise in the process. Taiwan built TSMC with government backing but commercial discipline. Korea created Samsung Semiconductor through industrial policy and patient capital.

India's approach—wait for foreigners to build facilities, provide subsidies, hope for the best—produces jobs but not capability. We become a manufacturing location, not a semiconductor power.

What Would "Thinking Big" Look Like?

Geographic diversification: Mandate that ISM 2.0 subsidies are distributed across at least four states, with dedicated clusters for different segments—ATMP in Gujarat, fabrication in Tamil Nadu, design in Karnataka, equipment manufacturing in Maharashtra. Force the ecosystem to spread.

100% FDI with teeth: Not just approval, but active courtship. India's embassies should have semiconductor investment officers. State governments should compete on infrastructure quality, not just subsidy size. Make India's FDI regime for semiconductors the most welcoming in the world—because we're competing with countries that already have fabs.

Domestic design push: Launch a $2 billion fund specifically for Indian fabless semiconductor startups. Accept that most will fail. The ones that succeed will be worth more than any ATMP facility.

Anchor demand: Government procurement should mandate Indian semiconductor content where feasible. Defense, telecom infrastructure, smart city projects—all should preference chips designed or manufactured in India. This is what every semiconductor power has done. It's not protectionism; it's industrial strategy.

Financial market freedom: Allow pension funds and insurance companies to invest in semiconductor ventures. Create a dedicated semiconductor investment trust that retail investors can access. Let Indian savings finance Indian silicon.

The Bottom Line

India's first commercial semiconductor shipments are worth celebrating. A milestone is a milestone. After decades of false starts, chips are actually leaving Indian factories.

But the celebration should last about five minutes.

Then we should ask why it took so long, why all the investment is in one state, why we're producing 28nm chips when the frontier is 2nm, and why our policy imagination remains limited to attracting foreign ATMP facilities.

India has the engineers. India has the domestic market. India has the strategic imperative—supply chain security in a fragmenting world. What India lacks is the policy ambition to build a semiconductor industry rather than host one.

Silicon sunrise? Perhaps. But the sun is barely above the horizon, and we're already acting like it's noon.