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| India’s chip push: strong on design, moving into packaging/testing first — and why fabs come later | |
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| India has major chip design talent and is building a semiconductor ecosystem. The near-term focus is packaging/testing (OSAT), not leading-edge fabs. | |
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| India’s chip push: strong on design, moving into packaging/testing first — and why fabs come later | |
| Nature | |
| Climate | |
| Can India build a semiconductor industry? Why it starts with packaging, not fabs | |
| / | |
| Technology | |
| / By | |
| Admin | |
| Summary: | |
| India is already a global heavyweight in | |
| chip design | |
| , but it still depends on overseas manufacturing for most semiconductors. After Covid-era shortages exposed how fragile supply chains can be, India is trying to build a domestic semiconductor ecosystem—starting not with the most advanced chip “fabs,” but with | |
| packaging, assembly, and testing | |
| . | |
| The story is a good example of industrial strategy: India isn’t trying to leap straight to cutting-edge manufacturing. It’s trying to choose the part of the value chain where it can realistically compete first. | |
| The semiconductor value chain (simple map) | |
| A modern chip doesn’t appear out of nowhere. The pipeline roughly looks like: | |
| Design | |
| (architecture, logic, verification) | |
| Wafer fabrication | |
| (fabs: etching circuits onto silicon wafers) | |
| Assembly, test, packaging | |
| (often called OSAT) | |
| India is strong at (1), weak at (2), and is deliberately pushing into (3). | |
| What India already has: a design superpower | |
| The BBC report highlights that India has a large base of semiconductor design talent: | |
| many global chip companies have major design centres in India | |
| India is estimated to have a significant share of the world’s semiconductor engineers | |
| That matters because design is upstream: it’s where product differentiation happens. | |
| But design alone doesn’t guarantee supply. If your manufacturing is elsewhere, shocks elsewhere still break your business. | |
| What India lacks: fabs at scale | |
| Leading-edge fabs are among the most expensive industrial assets on Earth. They require: | |
| extremely costly lithography tools | |
| deep process control | |
| pristine cleanrooms | |
| huge power and water inputs | |
| The report notes this stage is dominated by Taiwan for the most sophisticated chips, with China trying to catch up. | |
| India’s strategy is not “build a world-leading fab tomorrow.” It’s “build the ecosystem that makes that path feasible over time.” | |
| Why Covid changed the conversation | |
| Covid-era chip shortages made a simple point: | |
| the global system is efficient, but brittle | |
| When chips became scarce, production slowed across industries: | |
| cars | |
| telecom hardware | |
| consumer electronics | |
| That experience pushed many governments to treat chips as strategic infrastructure. | |
| For India, the argument is resilience: | |
| if one region shuts down, electronics manufacturing everywhere is disrupted | |
| India’s near-term target: OSAT (assembly, packaging, testing) | |
| The report notes India is moving first into OSAT because: | |
| it’s easier to start than fabs | |
| it builds local know-how and supply chain capability | |
| Packaging is not “putting a chip in a box.” It’s a multi-step process that turns a wafer into a usable industrial component: | |
| slicing wafers into dies | |
| attaching and connecting | |
| encapsulating | |
| testing and qualification | |
| If you can’t package and test, even a perfect wafer is economically useless. | |
| A real example: Kaynes Semicon | |
| The report describes Kaynes Semicon as the first company to get a semiconductor plant up and running with government support: | |
| a reported ~$260m investment | |
| a facility in Gujarat | |
| production beginning recently | |
| The focus is not on the most advanced AI chips. It’s on economically important chips used in: | |
| telecoms | |
| automotive | |
| defence | |
| That is a crucial insight: industrial policy often starts with “unglamorous” chips because they represent large domestic demand and strategic importance. | |
| The hardest bottleneck: people and process culture | |
| One of the strongest lines in the report is that semiconductors require: | |
| discipline | |
| documentation | |
| process control | |
| This is not just technical—it’s cultural. | |
| Factories succeed when thousands of small decisions are consistent and controlled. | |
| The report describes training as a major bottleneck: | |
| you can’t compress years of experience into months | |
| This is why chip ecosystems develop slowly. Skills compound. | |
| Why telecom chips are special | |
| The report uses Tejas Networks as an example of a company that designs chips in India but manufactures overseas. | |
| Telecom chips emphasise: | |
| reliability | |
| redundancy | |
| fail-safe operation | |
| Telecom networks can’t go down. So chips are judged not only on performance, but on operational stability. | |
| That’s a reminder that “chips” is not one industry—it’s many sub-industries with different requirements. | |
| What success looks like for India (a realistic path) | |
| India’s best path isn’t to “beat Taiwan” in leading-edge nodes quickly. | |
| A realistic success trajectory: | |
| scale OSAT and packaging | |
| build supplier networks (chemicals, tooling, services) | |
| develop mid-level manufacturing capability | |
| expand into more advanced nodes over time | |
| The report suggests India is at the start of a long journey that will require: | |
| patient capital | |
| sustained policy support | |
| stable demand signals | |
| The strategic angle: resilience + leverage | |
| Domestic capability gives India: | |
| resilience against supply shocks | |
| bargaining power in trade and geopolitics | |
| a platform to capture more of the electronics value chain | |
| Even partial success can change a country’s position in global supply chains. | |
| What to watch next | |
| Whether OSAT plants reach mass production | |
| reliably. | |
| Talent pipelines | |
| : training programmes, retention, industry-university links. | |
| Domestic demand pull | |
| : whether local companies buy locally made packaged/tested chips. | |
| Policy stability | |
| : industrial policy needs multi-year consistency. | |
| Expansion beyond OSAT | |
| : steps toward wafer fabrication capacity. | |
| Bottom line | |
| India is trying to turn design strength into a broader semiconductor ecosystem—starting with packaging and testing because that’s where it can build capability fastest. | |
| The timeline will be measured in years, not quarters. But if India can execute OSAT at scale and build process discipline, it creates a foundation for deeper manufacturing ambitions later. | |
| Sources | |
| BBC News (Technology): | |
| https://www.bbc.com/news/articles/cn40j0772vwo?at_medium=RSS&at_campaign=rss | |
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| India has major chip design talent and is building a semiconductor ecosystem. The near-term focus is packaging/testing (OSAT), not leading-edge fabs. | |
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