India’s semiconductor strategy: building capacity from design to packaging

India is converting a long-standing strength in chip design into a tangible manufacturing foothold by prioritizing the less capital‑intensive stages of production: assembly, testing and packaging. The shift responds to supply‑chain shock lessons from the pandemic and a strategic imperative to reduce dependence on overseas fabs for critical electronics used in telecoms, cars and defence systems. Policymakers and industry leaders are aligning incentives and financing to attract companies that can take wafers and turn them into deployable components, a process that involves multiple precise steps and tight process control. The first commercial facility supported under this policy framework began operations after a multi‑hundred‑million dollar investment, proving that capital and domestic demand can bring Osat capacity online. Moving into packaging and test requires a different set of skills and culture than traditional manufacturing; firms report that rigorous documentation, cleanroom discipline and multi‑year training programs are the biggest bottlenecks. India’s comparative advantage is clear at the design layer—global firms already run major R&D centres here—so the near‑term aim is to capture more value by completing chips locally rather than importing finished parts. That strategy reduces logistical fragility for network equipment suppliers and other domestic buyers, shortening lead times and improving control over quality and security. However, the plan deliberately avoids immediate competition on the most advanced wafer fabrication technologies, acknowledging the scale, supply ecosystem and specialist equipment that leaders in Taiwan and elsewhere have developed. Instead, officials and CEOs argue for a stepwise climb: establish volume in mid‑range and specialty markets, build workforce expertise, then consider longer‑term investments in complex fabs. If execution matches intent, India could strengthen its telecom and automotive supply chains and create a pathway for higher‑value semiconductor activities, but success hinges on sustained funding, realistic timelines for skills development and steady demand from anchor customers. The current policy mix emphasizes practical wins—localising critical assembly and testing—while keeping the option open to move up the value chain as industrial capabilities mature. This approach reduces immediate strategic exposure and buys time to nurture a manufacturing culture that meets the discipline of semiconductor production. Ultimately, the effort will be judged on whether domestic Osat capacity can scale to meaningful volumes and whether it accelerates the migration of design innovation into India‑based finished products.