Institut Montaigne features a platform of Expressions dedicated to debate and current affairs. The platform provides a space for decryption and dialogue to encourage discussion and the emergence of new voices. Europe and International19/03/2026PrintShareThree Questions to Shyam Krishnakumar - India's Rise in SemiconductorsAuthor Institut Montaigne Five years since the launch of the India Semiconductor Mission, India has emerged as an increasingly pivotal force in the global chip landscape. The Free Trade Agreement concluded with the EU on January 27 marks a milestone, offering a prime opportunity to deepen strategic ties and leverage the profound complementarities between both economies. Between a booming domestic market and bold industrial ambitions, fierce competition with China, and persistent structural hurdles—what are the real drivers and bottlenecks of India’s ascent? As part of the Chips Diplomacy Support Initiative, we asked three questions to Shyam Krishnakumar, Co-founder and Director of Strategy at the Pranava Institute.Describe key trends and instruments in India’s current semiconductor industrial policy?India’s semiconductor industrial policy truly took shape in 2021, at a time when the country had no footprint in semiconductor manufacturing or packaging, yet already commanded a strong position in chip design. Until then, progress had stalled largely due to a lack of political momentum. That changed in 2021 with the launch of the India Semiconductor Mission. Initially focused on cutting-edge nodes, the Mission quickly broadened its scope to include mature nodes and packaging. By 2022–2023, policymakers had recognized a fundamental reality: advanced-node manufacturing cannot emerge in isolation and requires a fully developed semiconductor ecosystem.India’s strategy is anchored first and foremost in an ambitious subsidy framework. The Mission provides up to 50% fiscal support for semiconductor fabrication projects, while fabless companies receive 50% incentives for design activities. In parallel, individual Indian states have introduced their own semiconductor policies, typically adding another 20% in project-level support. In practice, this brings total public backing to roughly 60–70% of capital expenditure, depending on the state. These figures are unprecedented in the Indian context, marking a historic shift in the country’s industrial policy ambitions. The Mission set out a series of strategic objectives: deepening capabilities to address global shortages, serving India’s larger industrial strategy to drive export-led manufacturing in critical sectors (electronics, renewable, defense) in order to become a major export-oriented manufacturing hub for smartphone production and other IT hardware (an additional USD 8.5 billion for electronics manufacturing complements the USD 10 billion Semiconductor Mission); reducing deficits; generating manufacturing jobs; bolstering supply chain resilience; and establishing India as a major China +1 export manufacturing destination. Lastly, another more indirect pillar of India’s semiconductor industrial policy lies in the wave of international partnerships now taking shape, including projects with Renesas Electronics and Thailand’s Stars Microelectronics, with Foxconn, with Powerchip Semiconductor Manufacturing Corporation, and through a memorandum of understanding with SK Hynix. This proves India is no longer operating at the margins of the global semiconductor landscape. Five years after the launch of the India Semiconductor Mission, the transformation is tangible. The sector has undergone a structural shift. Ten projects are now underway across different segments of the semiconductor value chain, spanning six Indian states, with several more in active discussion. A new round of subsidies is expected next year. But financial incentives alone will not define success. What India will require over the next decade is sustained political commitment, at both central and state levels, alongside the development of trusted value chains and trusted international partnerships.Your report, India Semiconductor Report: State of Play, outlines several approved and proposed projects. Which of these projects do you see as having the greatest potential to transform India’s semiconductor landscape and generate ecosystem effects, driving broader industrial growth?First, it is important to stress that India is not starting from scratch. The country combines strong semiconductor design capabilities with a fast-growing IT and startup ecosystem. The projects most likely to succeed will be those that build directly on these competitive advantages. At the forefront stands the Tata–PSMC semiconductor fab in Gujarat. This is India’s flagship project and its first large-scale commercial chip manufacturing facility in decades, representing an investment of around USD 11 billion. The fab is expected to manufacture 28nm-node semiconductors.India is not starting from scratch. The country combines strong semiconductor design capabilities with a fast-growing IT and startup ecosystem. The projects most likely to succeed will be those that build directly on these competitive advantages.In parallel, some compound semiconductor fabs are advancing. The most significant project in this segment is backed by an India–US partnership involving the US Space Force and Indian companies, with a focus on defense and advanced military applications. Though the project has recently run into some challenges, this marks the first time that the US military has agreed to transfer technology and source defense-related semiconductor components from India. On the advanced packaging front, between six and eight facilities are now operational or under construction. This segment is particularly promising: packaging requires lower capital expenditure and shorter timelines than wafer fabs, making it a natural entry point that aligns with India’s cost advantages and subsidy framework. The most strategic project in this space is the packaging facility being built by Micron Technology in Gujarat, with full-scale production expected by 2027. Beyond its industrial value, the project, combined with the Tata-PSMC fab, has already begun catalyzing a broader semiconductor cluster, attracting equipment suppliers and strengthening the surrounding ecosystem. Meanwhile, Tata Electronics is also establishing a major semiconductor assembly and test facility in Assam, in eastern India. Finally, a growing number of semiconductor startups are emerging across the country. Given India’s deep talent pool in engineering and design, this momentum may well become a decisive factor.All these projects can use the country’s growing domestic demand for semiconductors as a lever. India is a “four trillion dollar” economy, with a large automotive industry, a rapidly growing USD 13 billion defense sector, and a highly dynamic electronics manufacturing ecosystem. Ambitious renewable energy targets further add to the country’s industrial footprint. The demand is projected to triple by 2030, growing at a 15% compound annual rate.Indian States play a decisive role in shaping the semiconductor investment environment, as key factors such as land, water, labor regulations fall under state jurisdiction.These projects also benefit from an interesting phenomenon: Indian States play a decisive role in shaping the semiconductor investment environment, as key factors such as land, water, labor regulations fall under state jurisdiction. Competition among states to attract semiconductor players is fierce: the Indian central administration is promoting a model of “competitive federalism”, with the top four or five manufacturing states competing for projects, which encourages them to fix inefficiencies they might not have addressed otherwise. Through this competition, states double down on their unique advantages. Gujarat has emerged as a clear cluster, with most major investments concentrated within a roughly 100 km radius. Bangalore is likewise a highly dynamic ecosystem for semiconductor design.Whether India will succeed in moving up the value chain and eventually producing leading-edge semiconductors is not certain. This may take longer than currently imagined. With policy continuity over the next five years, a virtuous cycle could emerge, driven more by the ecosystem than by subsidies, provided that India manages to address certain structural constraints: infrastructure, water, and uninterrupted power are not available everywhere; Gujarat is a seismically sensitive zone; factor costs (land, labour) are increasing compared with alternatives like Vietnam; though promising steps have been taken with the harmonised labour codes, labor regulations remain challenging; persistence of operational bottlenecks (customs procedures, port handling, etc.). For some of these constraints, cooperation with European companies could help ease the business environment, especially in terms of infrastructure.How do you expect the EU–India Free Trade Agreement to shape semiconductor trade and investment relations between the EU and India?It is important, first and foremost, to recognize the historic nature of the EU-India Free Trade Agreement, after so many years of negotiation. The agreement builds on decades of constructive bilateral cooperation, and particularly India’s strong ties with countries such as France and Germany, as well as a shared commitment to technological collaboration. A decisive step in this direction was the launch of the EU-India Trade and Technology Council in February 2023, driven by Ursula von der Leyen and Narendra Modi. It became only the second mechanism of its kind—and today the only one still active. The same year, an MoU on semiconductor cooperation was signed.Why is the FTA historic? Because it brings together nearly two billion people within a single integrated market and sends a powerful political signal to industry.Why is the FTA historic? Because it brings together nearly two billion people within a single integrated market and sends a powerful political signal to industry. It reduces tariffs across multiple categories of semiconductor equipment, promotes market integration, and strengthens cooperation in green technologies, defense, and electronics. Its political clarity provides businesses with the confidence to invest and build durable partnerships. European machinery and equipment exports to India will benefit from tariff elimination. In the automotive sector, targeted quota and import arrangements could enable a convergence between India’s emerging semiconductor manufacturing capacity and Europe’s automotive industry. Semiconductors are also clearly identified as a priority within the joint EU-India Comprehensive Strategic Agenda 2030. The agenda emphasizes joint R&D, reciprocal talent mobility, strategic joint ventures, and even collaboration on AI prototyping. The logic is compelling: the EU and India possess deeply complementary strengths across the semiconductor value chain. Europe remains closer to leading-edge manufacturing, while India is positioning itself in mature nodes, packaging, compound semiconductors and design. Certain operations are structurally more cost-effective in India, creating a natural division of labor: Indian manufacturers could further focus on mature technologies and design, while European firms could further concentrate on advanced manufacturing and high-end equipment.The EU and India possess deeply complementary strengths across the semiconductor value chain. Europe remains closer to leading-edge manufacturing, while India is positioning itself in mature nodes, packaging, compound semiconductors and design.In recent years, interest across European companies in projects with India has expanded steadily. Concerns do exist however, particularly regarding intellectual property protection. The FTA addresses this directly, as IP protection was a central component of the negotiations. Many European firms already develop IP in India and rely on mitigation strategies. Ultimately, the relationship will be built on long-term trust. Of course, there is room to go further. In my view, six priority areas could significantly deepen cooperation between our respective semiconductor ecosystems:Supply chain resilience via close EU-India coordination in third countries ;Joint talent development across the value chain, including capacity-building programs ;Expanding joint ventures and partnerships in packaging can provide reliable inputs for the European ecosystem given India’s growing capacity and complementarities ;Joint R&D projects, including open GPU architectures, open-source EDA tools, and joint design initiatives. Combining Europe’s world-class RTOs with India’s design talent can build indigenous AI hardware and reduce dependence on US IP, especially amid IP “weaponization” concerns ;Semiconductor equipment, where India’s growing market offers opportunities for Europe ;Industrial collaboration around fabs, as India’s ecosystem progressively matures. Copyright Sajjad HUSSAIN / AFP India's Prime Minister Narendra Modi, European Council President Antonio Costa and European Commission President Ursula von der Leyen after their meeting at the Hyderabad House in New Delhi on January 27, 2026.PrintShare