The Semiconductor Industry Is Becoming a Strategic Sector
Semiconductors are the foundation of almost every modern technology product. Smartphones, electric vehicles, artificial intelligence systems, data centres, telecom equipment, defence electronics, medical devices and industrial machines all depend on semiconductor chips. For India, the opportunity is not limited to manufacturing chips. The larger opportunity is to build an entire semiconductor and electronics ecosystem covering chip design, fabrication, packaging, testing, equipment, materials and electronics manufacturing.
India already has a strong advantage in semiconductor design because of its large engineering talent base and presence of global technology companies. The next stage is to convert that design capability into a broader manufacturing ecosystem. Government data shows that 12 semiconductor manufacturing projects had been approved by July 2026, involving committed investments of more than ₹1.64 lakh crore, with three projects already having started commercial production.
From Electronics Manufacturing to Semiconductor Manufacturing
India’s electronics manufacturing industry has expanded significantly over the past decade. Electronics production increased from around ₹1.9 lakh crore in FY2014-15 to ₹13.11 lakh crore in FY2025-26, while electronics exports reached around ₹4.24 lakh crore. This expansion creates an important foundation for the semiconductor industry because chips need a large downstream ecosystem of electronics manufacturers to create sustained domestic demand.
The semiconductor opportunity therefore should not be viewed as only a few large fabrication plants. A semiconductor ecosystem includes chip designers, semiconductor equipment suppliers, chemicals and materials companies, packaging and testing facilities, electronic component manufacturers and companies that integrate chips into finished products. As India’s electronics production expands, the potential customer base for these businesses also becomes larger.
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Why AI, EVs and Data Centres Matter
Artificial intelligence is creating a structural increase in semiconductor demand. AI servers require powerful processors, memory chips, networking components and specialised accelerators, while data centres require large quantities of computing and power-management electronics. At the same time, electric vehicles contain significantly more electronic systems than conventional vehicles, increasing demand for power semiconductors, sensors, microcontrollers and battery-management components.
Telecommunications, 5G infrastructure, industrial automation, robotics and connected devices add another layer of demand. This means semiconductor consumption is becoming increasingly diversified across industries rather than depending on a single technology cycle.
India’s Semiconductor Ecosystem Is Expanding
The initial phase of India’s semiconductor programme focused on establishing manufacturing and packaging capabilities. The next phase is designed to broaden the ecosystem. The government approved Semicon 2.0 in July 2026 with an outlay of ₹1,27,500 crore, covering areas including chip design, semiconductor equipment and materials, fabrication, advanced packaging, research and talent development.
This is significant because semiconductor manufacturing cannot succeed through fabrication plants alone. A fab requires specialised chemicals, gases, equipment, packaging facilities, testing capabilities, engineering talent and reliable infrastructure. Building these supporting industries can create opportunities beyond the headline semiconductor companies.
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The Rise of Packaging and Testing
Advanced packaging is another important part of the industry. A semiconductor chip must be packaged and tested before it can be incorporated into an electronic product. Packaging is also becoming more technologically important as chip architectures become more complex.
India’s approved projects include several packaging facilities, while companies such as Micron, Kaynes and CG Semi have already moved into commercial production. Government data indicates that the approved projects cover silicon and compound semiconductor facilities as well as advanced packaging units.
This creates a broader investment theme around semiconductor manufacturing equipment, testing, packaging materials, industrial automation and specialised engineering services.
Where Indian Companies Could Benefit
The opportunity extends across multiple layers of the value chain. Semiconductor manufacturing companies are the most direct beneficiaries, but electronics manufacturing services, component suppliers, engineering companies, power-electronics manufacturers and specialised industrial technology companies can also participate in the ecosystem.
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Companies connected to electronics manufacturing can benefit from increasing localisation, while businesses supplying equipment, materials, testing systems and industrial infrastructure may gain as more semiconductor facilities are established. However, each company needs to be analysed separately because semiconductor-related revenue can represent very different proportions of their overall businesses.
The Biggest Challenges
Semiconductor manufacturing is highly capital intensive and technically demanding. A fabrication plant requires enormous investment, specialised equipment and extremely stringent manufacturing conditions. The industry also depends on global supply chains for advanced machinery, chemicals and materials.
India will therefore need to develop capabilities gradually rather than expecting to immediately compete across every advanced semiconductor technology. Execution, technology partnerships, manufacturing yields, power and water availability, skilled talent and global semiconductor cycles will remain important factors.
Another consideration for investors is valuation. Semiconductor and electronics themes can attract significant market attention, but strong industry growth does not automatically mean every company connected with the theme will deliver similar financial performance. Revenue growth, margins, debt, order visibility, capital expenditure and actual semiconductor exposure remain important when analysing individual stocks.
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India’s Semiconductor Opportunity Through 2030–2035
The semiconductor industry could become an important component of India’s broader manufacturing transformation. The combination of rising electronics production, AI infrastructure, electric mobility, defence electronics, telecommunications and government support is creating demand across multiple parts of the ecosystem.
The more important development is that India is moving from being primarily a semiconductor design destination toward developing manufacturing, packaging, materials and equipment capabilities as well. Semicon 2.0 specifically expands the policy focus toward building a more complete value chain.
For investors, the semiconductor theme therefore needs to be studied as an ecosystem rather than a single industry. The long-term opportunity may emerge across chip manufacturing, packaging, electronics, components, industrial equipment, power electronics and specialised engineering. The companies that successfully convert this expanding ecosystem into sustainable revenue and profitability will ultimately determine the investment outcome.
Disclaimer: This article is for educational and informational purposes only. It is not investment advice or a buy/sell recommendation. Onetrader is not a SEBI-registered investment adviser. Investors should conduct their own research and consult a qualified financial professional before making investment decisions.
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