Gujarat to Kashmir: Mapping Risk Landscapes in India’s Semiconductor Mission

Introduction

India’s ambition to emerge as a global leader in semiconductor manufacturing has gained significant momentum in recent years. In his Semicon India 2025 address, Prime Minister Modi emphasized India’s commitment to becoming a global leader in semiconductor manufacturing, highlighting the country’s potential to drive innovation, enhance self-reliance, and build a robust semiconductor ecosystem. However, success in this venture is contingent upon several factors, including infrastructure development, political stability, skilled workforce availability, and access to critical raw materials like silicon. The path toward this goal is fraught with a series of risks that need to be carefully navigated. By examining this topic through the lens of strategic risk management, it is possible to identify critical challenges and formulate strategies to mitigate risks.

Key Players in Semiconductor Manufacturing

Different Indian states play an important role in developing manufacturing hubs, sourcing raw materials, and setting up research and development (R&D) centers. Gujarat stands out as a leader in industrial development, boasting robust infrastructure and a pro-business environment. With its strong manufacturing base, the state is well-positioned to attract semiconductor manufacturing units. Kashmir has emerged as a significant player in India’s semiconductor mission due to its discovery of rare minerals that are essential for semiconductor manufacturing. The region is rich in critical raw materials like lithium and graphite, which are key components in the production of semiconductors. This discovery has attracted attention from both government and private sector stakeholders, positioning Kashmir as a valuable resource hub for the semiconductor supply chain. India should focus on building its indigenous capabilities in areas such as semiconductor design, assembly, and testing, which would reduce dependence on global supply chains thereby minimizing supply chain risks. 

Identifying the Risks in India’s Semiconductor Mission

• Technology Risk

India faces a significant technology gap in semiconductor fabrication, design, and advanced manufacturing processes. This lag is primarily due to limited local research and development (R&D), insufficient technology transfer mechanisms, and a lack of domestic innovation in high-end semiconductor technologies.

Mitigation Strategy :

• Fostering R&D and Innovation – Recent studies, including those by the India Electronics and Semiconductor Association (IESA), suggest the creation of industry-led public-private consortiums for advancing semiconductor R&D. These consortiums could focus on key areas like chip design, process technologies, and system integration, with active participation from both domestic and global players.
• Government Incentives – The government can introduce specific fiscal incentives, such as tax breaks for R&D activities, grants for innovation in semiconductor technologies, and funding for startups focused on semiconductor design. This would help create an ecosystem where both established companies and startups can thrive. A key component of this mission should be a National Semiconductor Research Hub that provides grants to local firms for cutting-edge research on chip architectures and materials like gallium nitride (GaN) and silicon carbide (SiC).
• Leveraging India’s Software Strength – India is globally recognized for its software prowess, particularly in software-driven services like EDA (Electronic Design Automation) tools. Building indigenous software tools tailored to semiconductor design could give India a strategic edge. The government can collaborate with Indian universities to foster homegrown EDA innovations, reducing dependency on foreign tools.
• Indigenous Innovation – Focused investments in AI-driven design optimization and automated testing processes could reduce the reliance on foreign chipmakers for advanced components.

• Labour Risk

The semiconductor industry is highly specialized and requires a highly skilled workforce. India faces a shortage of qualified professionals in semiconductor engineering, materials science, and other technical fields. While there are many engineering graduates in India, the number of those specifically trained in semiconductor design, manufacturing, and testing is limited.

Mitigation Strategy:

• Focused Education and Training Programs: India must scale up educational programs specifically focused on semiconductor technology. Leading institutions can introduce specialized courses and certification programs in semiconductor engineering, design, and manufacturing. A strategic collaboration between educational institutions and semiconductor manufacturing companies could provide internships, on-the-job training, and skill development programs. Companies could sponsor specialized courses, ensuring the curriculum meets current industry requirements while providing students with practical, hands-on experience. The Semiconductor Skills Development Council (SSDC) could be established as a national body for workforce training. This body could focus on certifications for high-demand skills in semiconductor technology.

• Regulatory Risk

Despite the government’s substantial incentives and initiatives to promote semiconductor manufacturing, regulatory risk and policy uncertainty remain a challenge. The absence of clear policy guidelines could create an environment of uncertainty, deterring both domestic and foreign investors.

Mitigation Strategy:

• Transparent Policy: Clear and consistent policies related to taxation, land acquisition, environmental regulations, and labor laws will help investors plan long-term investments in the semiconductor sector with confidence.
• Engagement with Industry Stakeholders: Regular dialogue between policymakers and industry stakeholders, including semiconductor manufacturers, investors, and research institutions, is vital. This engagement can ensure that regulations are responsive to the needs of the industry and can be updated in line with global trends.
• Electronics and Semiconductor Investment Zones (ESIZs): India can follow the special economic zone (SEZ) model but customize it for semiconductor manufacturing. The ESIZs could offer customized incentives, including simplified regulatory processes, tax holidays, and streamlined customs procedures.
• Harmonizing Standards with Global Norms: To reduce the risk of trade barriers, India should align its semiconductor manufacturing standards with international norms, particularly those of the World Trade Organization (WTO) and International Organization for Standardization (ISO). By doing so, India would improve its chances of exportability and access to foreign markets while creating a competitive environment for foreign investments.

• Financial Risk 

The semiconductor industry requires massive capital investment, particularly for the establishment of fabrication plants (fabs) and related infrastructure. The high upfront costs, coupled with a long gestation period before returns can be realized, create financial risks that require strong financial risk management strategies. 

Mitigation Strategy:

• Public-Private Partnerships (PPP): To address the high capital requirements and reduce capital risk , the government could facilitate PPPs, encouraging both public and private investments. This model has been successful in other high-tech sectors and can help spread the financial burden while also driving innovation and efficiency.
• Semiconductor Sovereign Wealth Fund: The government could create a Semiconductor Sovereign Wealth Fund that pools investments from both domestic and international sources, with the sole aim of funding semiconductor projects. This fund would mitigate risks for investors by providing long-term financing for startups.
• Investment Incentives: The Indian government can offer tailored investment incentives to attract private players into the semiconductor space. These could include tax breaks, subsidies, and access to cheap land or energy for semiconductor projects. The government can also consider setting up a dedicated fund to assist startups and smaller players in the semiconductor ecosystem.
• International Financing and Partnerships: India can explore international financing options through development banks which have an interest in fostering the semiconductor sector in emerging markets. Collaborations with foreign governments or investment entities could also reduce financial risk. By introducing differentiated financing models—including low-interest loans, equity participation, and co-financing—India can attract private investment with reduced financial risk. The Indian Renewable Energy Development Agency (IREDA) model for green projects could be adapted for semiconductor manufacturing.

• Cybersecurity and Intellectual Property (IP) Risks

Semiconductor manufacturing involves sensitive intellectual property, including cutting-edge designs and technologies. As India grows its semiconductor capabilities, cybersecurity risk and IP theft become more pronounced. A lack of robust cybersecurity infrastructure could lead to significant financial losses, reputational damage, or intellectual property leakage.

Mitigation Strategy:

• Strengthening Cybersecurity Infrastructure: India must develop and implement world-class cybersecurity protocols to protect semiconductor production facilities and intellectual property. This includes investing in secure networks, encrypting sensitive data, and establishing monitoring systems to detect potential threats.
• Collaboration with Global Cybersecurity Firms: India can partner with global cybersecurity firms to develop a cybersecurity strategy tailored to the semiconductor industry. This would include not only protecting physical facilities but also securing digital platforms, supply chains, and design systems.
• Cybersecurity Framework for Semiconductor Plants: Following the Cybersecurity and Infrastructure Security Agency (CISA) standards, India should establish a national cybersecurity framework tailored for semiconductor manufacturing. This framework should incorporate stringent protocols for access control, data encryption, and threat monitoring specific to semiconductor fabs.
• Dedicated IP Protection Legislation: India can enact specific IP protection laws for semiconductor design, similar to the CHIPS Act in the United States, to safeguard innovation in semiconductor technologies. This would provide strong legal backing to semiconductor firms, ensuring that their proprietary designs and processes remain protected from global espionage or unauthorized access.

• Environmental and Sustainability Risks

Semiconductor manufacturing is resource-intensive, consuming large amounts of water, energy, and raw materials. Additionally, the chemicals and materials used in semiconductor fabrication can have significant environmental impacts if not handled properly. As India embarks on its semiconductor journey, managing environmental risk and sustainability risks is crucial to ensuring the industry’s long-term viability.

Mitigation Strategy:

• Adopting Green Manufacturing Practices: Semiconductor manufacturing plants should be designed with sustainability in mind. India can promote the adoption of green technologies such as energy-efficient cooling systems, water recycling techniques, and renewable energy sources like solar and wind power.
• Environmental Impact Assessment (EIA): The government must enforce stringent environmental regulations and ensure that new semiconductor facilities undergo comprehensive environmental impact assessments. This will help identify and mitigate risks related to water usage, waste management, and emissions from semiconductor fabrication plants.
• Circular Economy Models: India could explore the adoption of circular economy models in the semiconductor industry. This includes recycling old chips and electronics, which could help reduce raw material demand and minimize electronic waste.
• Carbon Neutral Semiconductor Manufacturing: Encouraging semiconductor manufacturers to move toward carbon-neutral operations would align India with global environmental targets, such as those set under the Paris Agreement. 
• Eco-Friendly Material Innovation: India should invest in next-generation, low-carbon semiconductor materials that require fewer resources and have a lower environmental impact. 

Conclusion: Mapping the Future of India’s Semiconductor Mission

India’s semiconductor mission represents a unique blend of opportunities and risks. By addressing the geopolitical risk and infrastructural, technological, and financial challenges with careful, structured risk mitigation strategies, India can carve a path toward becoming a global leader in semiconductor manufacturing. In the long term, the success of India’s semiconductor mission will depend on creating a resilient, diversified ecosystem that can adapt to shifting global dynamics.