Semiconductors and India: What Chips Are, the Global Value Chain, India Semiconductor Mission, New Fabs and Packaging Units, Challenges and the Way Ahead (UPSC Notes + PYQs)

What a semiconductor is

Conductors such as copper let electricity flow freely; insulators such as glass block it. A semiconductor sits in between, and adding tiny amounts of other elements, called doping, lets engineers control exactly how it conducts. Silicon is the most used; gallium arsenide, gallium nitride and silicon carbide serve special uses such as power electronics, electric vehicles and 5G. A chip, or integrated circuit, packs billions of microscopic switches called transistors onto a sliver of silicon. Smaller transistors mean faster, more efficient chips; leading-edge chips are now made at “3 nanometre” and “2 nanometre” process nodes, names that describe a generation of technology rather than a real dimension.

The value chain

India is strong in design, with about a fifth of the world’s chip design engineers, but until recently had no commercial fab or large packaging unit. Its only fab, the Semi-Conductor Laboratory at Mohali, makes older-node chips mainly for strategic uses.

Why chips are geopolitical

Taiwan’s TSMC makes most of the world’s most advanced chips, so any conflict across the Taiwan Strait would cripple the global economy. The chip shortage of 2020-22, when car factories stood idle, showed how fragile supply chains are. The United States passed the CHIPS and Science Act (2022) with about USD 52 billion in support and imposed export controls on advanced chips and tools to China; the EU, Japan and South Korea launched their own subsidies. Countries now want “trusted” supply chains, and India pitches itself as one through partnerships such as the US-India TRUST initiative, the Quad’s semiconductor supply chain work, and agreements with Japan and Singapore.

India Semiconductor Mission

The Union Cabinet approved a ₹76,000 crore programme in December 2021, run by the India Semiconductor Mission (ISM) under MeitY. It offers fiscal support of up to 50% of project cost, on a pari-passu basis, for fabs, display fabs, compound semiconductor units and ATMP/OSAT units, with States adding their own incentives. A Design Linked Incentive scheme supports chip design start-ups, and the Chips to Startup programme trains engineers. A second phase of the mission has been announced to cover equipment, materials and more advanced nodes.

Projects approved

The first chips from Indian pilot lines were shown at Semicon India in 2025. Prelims 2026 tested the location of these plants.

Challenges

• Capital and time: a modern fab costs billions of dollars and takes years to build and yield well.
• Utilities: fabs need uninterrupted power and huge volumes of ultra-pure water.
• Ecosystem: specialty gases, chemicals, wafers and equipment are mostly imported.
• Skills: India has designers but few fab process engineers; ISM aims to train 85,000 engineers.
• Technology: leading nodes are controlled by a handful of firms that guard their know-how.
• Demand: plants need assured buyers; India’s electronics manufacturing is still assembly-heavy.

Why it is worth it

Chips are to the digital age what steel was to the industrial age. India’s electronics demand is rising fast with phones, cars, data centres and defence systems, and a domestic base reduces the risk of supply shocks and import dependence. Packaging units create many jobs and build skills, which can then support more advanced fabs. Mature-node chips (28 nm and above), which India is targeting first, are used in cars, appliances and power systems, a large and steady market.

Way forward

Build from packaging and mature nodes upward, attract equipment and chemical suppliers into clusters at Dholera and Sanand, secure water and power, expand university courses in microelectronics, use the Design Linked Incentive to create Indian chip product companies, and deepen partnerships with the US, Japan, Taiwan and the EU for technology and markets.

Display fabs and compound semiconductors

Chips are not the only target. Screens for phones, TVs and laptops come from display fabs, almost all in China, South Korea, Japan and Taiwan, and ISM offers the same 50% support for them. Compound semiconductors such as silicon carbide and gallium nitride handle high power and frequency far better than silicon, so they are used in electric vehicle inverters, fast chargers, solar inverters, radar and 5G base stations. Because this field is newer and less crowded, India sees a chance to catch up faster here, which is why the SiCSem unit in Odisha and research at institutes such as IISc Bengaluru matter.

PYQ trend

Mains GS-III 2025 asked about the challenges of making India a semiconductor hub. Prelims 2026 asked about plant locations; older papers asked about materials such as graphene.

Semiconductors: UPSC angle

Semiconductors UPSC PYQs (Prelims)

Questions UPSC has actually asked, from the official papers. Pick an option to check yourself.

Mains PYQs on this topic

Questions from the official UPSC Mains papers (2023-2026 in the Battle IAS Mains bank), newest first. Each links to a model answer.

1. UPSC Mains 2025 · GS Paper III · Q16 · 15 marks

   India aims to become a semiconductor manufacturing hub. What are the challenges faced by the semiconductor industry in India ? Mention the salient features of the India Semiconductor Mission.

   Model answer and approach

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