India’s Semiconductor Journey: Old Designer, New Producer

India's semiconductor push, with $13 billion committed to ISM 2.0, is a re-entry, not a debut. The country had a strong chip industry in the 1980s, nearly matching global manufacturing technologies. The 1989 fire at Semiconductor Complex Limited and subsequent liberalization shifted focus to imports. This history means India is rebuilding, not starting fresh.

The test for India is whether it can convert its 20 percent share of global chip design talent into domestic IP ownership. ISM 2.0's co-ownership clause, requiring state agency involvement in strategically important designs, complicates licensing and venture funding. This condition could deter the very fabless startups it aims to support, limiting India's ability to create globally competitive companies.

The thing to watch is how India addresses its reliance on imports for over 90 percent of chipmaking equipment. Without a robust domestic supplier base, India's manufacturing ambitions will remain constrained. Success hinges on specific policies that incentivize local production of these critical inputs, moving beyond just chip design and assembly.