India aims to grow its semiconductor market to $200 billion by 2035, but the real challenge lies in building a comprehensive ecosystem that supports manufacturing, talent, and infrastructure, moving beyond headline projects to sustainable industry development.
India’s semiconductor market could expand to $200 billion by 2035 from about $64 billion in 2026, but the bigger test for New Delhi is no longer simply announcing factories. According to a report from EY and the India Electronics and Semiconductor Association, the country’s next phase will depend on whether it can build the wider industrial base needed to support those plants, from materials and equipment to testing, packaging and specialist talent.
The report, released alongside the government’s Semicon 2.0 push, argues that India is moving beyond a strategy focused mainly on headline projects and towards one aimed at building an ecosystem. The new programme, launched in July with a budget of ₹1.275 trillion, covers six areas: chip design, machinery and materials, fabrication, advanced packaging, research and development, and talent development. That follows Semicon 1.0, under which 12 projects have been approved with cumulative investment of about ₹1.64 trillion.
EY and IESA said the economics of a chip plant depend heavily on the availability and price of inputs over its full operating life, not just on the initial build cost. If a factory relies too much on imports for materials, spares, technical services and equipment support, domestic output may rise without a matching increase in local value added, the report said. It also warned that gaps remain in infrastructure, supplier depth, technology access and commercialisation capability.
The report said India’s strengths are still concentrated in chip design and engineering services. It estimated that the country already has nearly 20% of the world’s semiconductor design engineers, but warned that manufacturing and packaging will require a broader workforce, including process and equipment engineers, packaging and testing specialists, technicians and cleanroom staff. It also pointed to uneven state-level support, saying some states still lack dedicated semiconductor incentives and others offer limited help with essentials such as water and utilities.
Alongside the industrial challenge, the report called for policy changes that would make it easier to scale up. Those include semiconductor-specific tax measures, lower withholding taxes, simpler export and customs procedures, and tighter coordination between central and state governments. It also recommended integrated manufacturing clusters with common infrastructure, dedicated certification programmes and a national research and commercialisation platform, modelled in part on institutions such as Taiwan’s Industrial Technology Research Institute and Belgium’s IMEC. Separate industry reporting has said consumer electronics makes up about 30% of India’s semiconductor demand, followed by automotive and industrial uses, while emerging areas such as artificial intelligence, data centres, telecoms and electric mobility are expected to add further demand.
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