Budget 2025: Can Sitharaman and co help India turn into a semiconductor superpower?

Finance Minister Nirmala Sitharaman along with her team is working for the preparations of Union Budget 2025. Among the key focus areas could be India’s semiconductor industry which is undergoing a transformation currently.

India has historically been a consumer of semiconductor chips rather than a producer. However, in last few years, the Modi government has been focusing on building an indigenous semiconductor manufacturing ecosystem to reduce dependence on imports, foster innovation, and capture a larger share of the global semiconductor market.

With significant budget allocations, policy interventions, and partnerships, India could position itself to become a major player in the global semiconductor industry.

How much did India’s semicon industry get in previous Budgets

The government’s union budget allocations for the semiconductor industry have seen a notable rise in recent years. The Ministry of Electronics and Information Technology (MeitY) was allocated Rs 21,936.9 crore in the 2024-25 union budget, a 52% increase over the previous year. An important reason for this increase is the Modified Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India, which saw a 355% rise in its capital allocation to Rs 6,903 crore.

Of this, Rs 4,203 crore is earmarked for the establishment of critical semiconductor infrastructure such as fabrication plants (fabs), Assembly, Testing, Marking, and Packaging (ATMP) facilities, and Outsourced Semiconductor Assembly and Test (OSAT) units. These initiatives have been taken to help reduce the country's reliance on imported semiconductors but also foster innovation, create high-tech jobs, and enhance India's competitiveness on the global stage. With increased focus in last few years, Sitharaman may announce a boost for India’s semicon industry in 2025 Union Budget as well.

Major players in India’s semiconductor sector

A cornerstone of India's semiconductor ambitions is the government’s push for large-scale private investments. The approval of Rs 3,300 crore for Kaynes Semicon Pvt Ltd to set up a semiconductor manufacturing unit in Gujarat is an example. This project, which will have a production capacity of 60 lakh chips per day, is expected to cater to sectors such as automotive, electric vehicles, consumer electronics, telecom, and mobile phones. The investment is also in line with the broader semiconductor development programme, which has a total allocation of Rs 76,000 crore.

In addition to Kaynes Semicon, major players like Tata Electronics and CG Power are setting up facilities across India, including locations in Gujarat, Assam, and other strategic areas. These investments are projected to total Rs 1.5 lakh crore and will enable India to produce a combined capacity of approximately 7 crore chips per day. The union budget of 2025 could support these ventures through incentives like the Production-Linked Incentive (PLI) schemes and enable both domestic and international firms to contribute to India’s semiconductor ecosystem.

Union Budget 2025: What next for the semiconductor industry?

The government’s strategy to bolster the semiconductor industry goes beyond financial allocations. A crucial element of this approach is the creation of an advanced, scalable AI infrastructure under the IndiaAI mission. A previous allocation of Rs 10,000 crore for the IndiaAI mission aims to develop the necessary infrastructure to support AI, which is increasingly interlinked with semiconductor technology. As part of the mission, initiatives such as the IndiaAI Compute Capacity and Innovation Centre are expected to drive demand for more advanced semiconductor components, providing a fertile ground for the growth of this sector. These initiatives could receive a boost through budget 2025.

Moreover, the government’s focus on attracting global investments and reducing dependency on foreign semiconductor sources shows its focus is on building a self-reliant ecosystem. Budget 2025 could play a major role in helping India’s broader goals of technological self-sufficiency.

Government policies for semiconductor industry

As the semiconductor sector expands, the demand for skilled professionals in semiconductor design, fabrication, and assembly is expected to surge, a report by NLB Services said in November.

Furthermore, the government’s initiatives, such as the IndiaAI FutureSkills programme, aim to ensure that India’s workforce is equipped with the necessary skills to thrive in the digital and semiconductor domains. With fresh allocations, Budget 2025 could help strengthen India’s chances to grab these opportunities in the semicon sector.

The establishment of semiconductor manufacturing units and related infrastructure will also create a multitude of high-tech jobs, NLB Services said in the same report.

By attracting global chipmakers and facilitating the growth of homegrown companies, India is poised to generate a significant number of employment opportunities in areas like R&D, manufacturing, and testing. These efforts will not only help meet the country’s domestic semiconductor needs but also boost exports, the report predicted. In line with these projections, Budget 2025 could play a crucial part in enhancing India’s semiconductor powerplay.

While the Indian government’s initiatives have laid a strong foundation for semiconductor growth, several challenges remain, according to iVP semi founder Raja Manickam. These include the need for an advanced supply chain, improved research and development (R&D) capabilities, and stronger international collaborations. India must also address challenges in energy infrastructure, as semiconductor manufacturing is power-intensive and requires a stable and reliable power supply, Manickam said in an ET opinion column in October. With Union Budget 2025 around the corner, the finance ministry could focus on strengthening these areas of interest.

Prime Minister Narendra Modi has, on several occasions in 2024, spoken with industry experts from the semiconductor sector. Modi has urged international players to invest in the Indian soil and said that the country would work towards becoming a flourishing semiconductor powerhouse. Budget allocations specific to the Prime Minister’s vision could help India enhance its global footprint in the semiconductor world.