AI Boom Gives India a Major Opportunity to Build Semiconductor Industry: Report

India has an opportunity to expand its semiconductor industry as AI drives demand for computing power and global companies diversify their supply chains, Boston Consulting Group (BCG) Managing Director and Partner Ankush Wadhera told PTI on September 27.

Wadhera said rising electronics consumption and government incentives were creating opportunities for investments across the semiconductor value chain. He described the current period as an important opportunity for India’s chip industry.

The AI boom is expected to drive demand for graphics processing units (GPUs), computing capacity and memory chips. Wadhera said the relationship between AI and semiconductors would continue to grow as demand for computing power and data processing increases.

He also said discussions about responsible AI development were important but did not expect them to slow semiconductor demand.

“The recent discussions and conversations are good speed-breakers, but they are not stop signs, so I don't see this stopping,” Wadhera said.

Wadhera said India’s large population and growing digital economy offered an opportunity to develop domestic chip manufacturing capabilities.

“We have one-fifth of the world’s population, the world is getting increasingly digitalised, anything that we consume has chips in it, somebody has to make these chips. So if you’re going to consume as much as one-fifth of the world’s chips, why should we not make them in India,” he said.

Wadhera credited the first phase of the India Semiconductor Mission (ISM) with creating initial momentum. The second phase, ISM 2.0, expands support for the sector and aims to develop capabilities across chip design, materials, machinery, fabrication, assembly and testing.

The government has committed ₹1.27 lakh crore to the second phase. According to government estimates cited by PTI, the programme has attracted nearly ₹1 lakh crore in investor interest.

Wadhera said expanding fabrication plants and outsourced semiconductor assembly and test (OSAT) facilities could generate investment across the wider ecosystem.

This includes equipment, materials, industrial gases, water, substrates and services required to support semiconductor manufacturing.

Recent announcements include Applied Materials’ planned ₹5 billion investment in India through 2035, Lam Research’s proposed ₹10,000 crore investment, Tata Electronics’ 363-acre vendor park at Dholera and Fujifilm’s ₹800 crore semiconductor materials plant. These announcements cover investment plans and proposals at different stages.

Wadhera also cited India’s international relationships, free trade agreements and geopolitical position as factors supporting its role in global semiconductor supply chains.

He said responsible AI development remained important to ensure the technology benefited society.

“It is, of course, important that we keep development in check so that it continues to work in the favour of human development, and not against it,” he told PTI.

Wadhera expects demand for computing power and data processing to continue supporting semiconductor growth as AI adoption expands.