A look at India's $10B incentive scheme for chip makers, as some experts warn about its lack of hardware expertise and erratic transport and public utilities
The factories outside Chennai, in India's southern state of Tamil Nadu, are home to an array of global corporate names … Tweets: @jyots43 , @chicagobooth , @siddarthpaim , @btarunr , @d_jaishankar , @chadbown , @financialtimes , @fletcherschool , @ks1729 , and @ftopinion Tweets: Jyotsna Singh / @jyots43 : India's ambition to enter the chipmaking business comes at a time of growing trade and geopolitical tension as western economies have pushed to decouple their supply chains from China, which has invested heavily to become a leader in the semiconductor industry. @JohnReedwrites https://twitter.com/... @chicagobooth : “It's an attempt to follow the China path and create manufacturing in India,” says Booth's Raghuram Rajan of the country's bid to begin making semiconductors. https://www.ft.com/... Siddarth Pai / @siddarthpaim : India's high-stakes bid to join the global semiconductor race India is set for semiconductor manufacturing with supply chain being disrupted post pandemic. India offers opportunity given largest talent pool, business friendly climate and largest market https://www.ft.com/... Tarun Raju / @btarunr : Lack of semiconductor manufacturing in India isn't a fault of Indian government policy/infra, it's geopolitics. The West simply doesn't want India making cutting-edge chips. It's too big an economic force-multiplier in the hands of a country that's too big. Creates another China https://twitter.com/... Dhruva Jaishankar / @d_jaishankar : “Europe, the UK, the US and many other countries are simultaneously laying out billions to subsidise the onshoring of chipmaking...To have any chance of achieving its goal, India will need to move exceptionally quickly and decisively.” https://www.ft.com/... Chad P. Bown / @chadbown : Modi puts $10bn of incentives on the table to tempt manufacturers to set up new fabs. A push into microchips, which demands some of the most exacting factory conditions of any in manufacturing, would mark a MAJOR shift for India. by @JohnReedwrites https://www.ft.com/... @financialtimes : India's ambition to enter the chipmaking business comes at a time of growing trade and geopolitical tension as western economies have pushed to decouple their supply chains from China https://www.ft.com/... @fletcherschool : “India might better use its money in chip assembly and packaging facilities, where labour costs are more important. If India were to direct its subsidies...$10bn could go a long way,” says Professor @crmiller1. Read more in @FinancialTimes https://www.ft.com/... Keerthik Sasidharan / @ks1729 : Excellent piece on India's push into semiconductors w/ $10bn package. [Fascinating subtext is a debate b/w @narendramodi vs @ptrmadurai: how to allocate $10bn. Defray costs for industry today OR Fund universities to train chip engineers for tomorrow?] https://www.ft.com/... @ftopinion : The Big Read: The road ahead will not be smooth for India as it tries to market itself abroad to chipmakers as an alternative to China. To have any chance of achieving its goal, India will need to move exceptionally quickly and decisively https://www.ft.com/...
Context & Ripple Effects
India's $10B incentive scheme, unveiled amid Western efforts to decouple supply chains from China, was the opening bid in a state-led attempt to buy a semiconductor industry from scratch. The scheme immediately ran into the two problems experts flagged at launch: no hardware talent base and unreliable transport and utilities, which showed up in the Foxconn-Vedanta joint venture's struggles within months.
The arc since has been a stress test of subsidy-led entry. A planned $3B plant by the ISMC consortium, which included chipmaker Tower, stalled over Tower's pending takeover by Intel — foreign M&A, not Indian policy, deciding project viability — while TrendForce projects China's share of global mature-node production rising from 31% in 2023 to 39% in 2027, swamping India's ambitions on cost and scale. By 2025 the mission had grown to $18.2B across 10 projects in six states, with critics still asking whether talent and investment are enough.
First-order effects
- India puts $10B on the table to lure chipmakers riding the China-decoupling wave, but entrants inherit the flagged deficits directly: the Foxconn-Vedanta venture's issues and the ISMC stall show infrastructure gaps and foreign-parent decisions landing on projects the moment they are announced.
Second-order effects
- China's counter-investment compresses the window: with TrendForce projecting its mature-node share climbing to 39% by 2027, India's incentive math must compete against an incumbent that is simultaneously lowering global mature-node prices.
Third-order effects
- The pattern points toward subsidy escalation without structural fix — India's mission grew to $18.2B across 10 projects, yet Bloomberg's critique that the $11B mission fixates on self-reliance over quickly scalable niches suggests the bottleneck is strategy, not headline funding.
The trend: India is scaling subsidy-led chipmaking ambitions from $10B to $18.2B while China's mature-node expansion and recurring execution failures test whether incentives alone can build a semiconductor industry.