Tamil Nadu Doesn't Need a Fab to Dominate India's Chip Future

As questions mount over why Tamil Nadu has not secured a major semiconductor fabrication plant under the Semicon India Programme, the Centre has defended its investor-driven approach, arguing that semiconductor investments are ultimately determined by industry decisions rather than government allocation.

The issue surfaced during the Monsoon Session of Parliament after concerns were raised about Tamil Nadu’s absence from the list of states hosting semiconductor manufacturing projects, despite the state being one of India’s largest electronics manufacturing and export hubs.

Responding to the query, the Ministry of Electronics and Information Technology (MeitY) reiterated that the Semicon India Programme, launched in January 2022 under the India Semiconductor Mission (ISM), was designed to create a comprehensive semiconductor ecosystem spanning fabrication, packaging, design, talent development, and supply-chain manufacturing.

According to the government, 12 semiconductor manufacturing projects have been approved across Andhra Pradesh, Assam, Gujarat, Punjab, Odisha, and Uttar Pradesh, attracting investments of approximately ₹1.64 lakh crore. Three facilities have already commenced commercial production.

However, the government stressed that project locations are selected by investors themselves.

“Semicon India programme is designed to leave the choice of location with the investors. Investors evaluate the location based on various factors. The government encourages distributed manufacturing. Because of this approach, semiconductor plants are today located in six states across the country,” the response mentioned.

‘50% of the Value Chain is Design’

For Amitesh Kumar Sinha, CEO of the India Semiconductor Mission and Additional Secretary at MeitY, the debate around fabrication plants overlooks a much larger reality. India’s semiconductor strengths today lie in chip design.

Speaking to AIM, Sinha argues that the South, including Tamil Nadu, already occupies a strategic position in the semiconductor value chain. “Actually, if you see the strength of India, all of the design is happening in the South,” he states.

According to him, design contributes significantly more value than manufacturing alone.

“I want to tell you that 50% of the value chain is from design only. The fabrication and packaging are the lower part of the value chain,” Sinha clarifies.

Sinha says that the government’s long-term semiconductor strategy is not solely focused on attracting fabrication facilities but also on strengthening indigenous chip design capabilities and building Indian semiconductor companies. “Design is key for us and [developing an] Indian fabrication company is our main focus area.”

He also hints that semiconductor manufacturing investments could eventually arrive in southern India.

He cites the example of ASIP Technologies’ semiconductor manufacturing facility at Tarluvada, Visakhapatnam. The ₹2,500 crore outsourced semiconductor assembly and test (OSAT) project is Andhra Pradesh's and South India's first semiconductor manufacturing facility approved under the India Semiconductor Mission (ISM 1.0).

“It is starting, and you will see fabrication happening in the South also,” he assures, reiterating that ISM is ultimately a national project rather than fuelling competition between states.

Tamil Nadu Remains a Manufacturing Powerhouse

Even without a semiconductor fab, Tamil Nadu continues to be one of the biggest beneficiaries of India’s electronics manufacturing boom.

The Centre noted in its Lok Sabha responses that India’s electronics production has grown from ₹1.9 lakh crore in 2014-15 to ₹13.11 lakh crore in 2025-26, while electronics exports have increased from ₹38,000 crore to ₹4.24 lakh crore during the same period.

Mobile phone manufacturing has expanded even more rapidly, growing from ₹18,000 crore to ₹6.27 lakh crore, with exports touching ₹2.59 lakh crore.

Tamil Nadu accounts for a significant share of this manufacturing footprint. According to government data, the state hosts electronics manufacturing facilities across multiple districts, including 38 plants in Kancheepuram, eight in Krishnagiri, six in Chennai, six in Tiruvallur, and four in Chengalpattu.

The Centre has also backed the state through the Electronics Manufacturing Cluster (EMC) scheme. Two major projects include the 474-acre Manallur EMC with an investment of ₹587.47 crore and the 379-acre Pillaipakkam EMC with an investment of ₹424.55 crore.

Why Tamil Nadu Missed a Fab—For Now

While fabrication remains elusive, Tamil Nadu has steadily emerged as one of India’s strongest semiconductor design hubs.

Several Chennai-based semiconductor startups have received support under the Design Linked Incentive (DLI) scheme, including Mindgrove Technologies, InCore Semiconductors, MBit Wireless, Struent Semiconductors, PRSsemicon Technologies, Aheesa Digital Innovations, and Sicrest Semiconductors.

The state has also become a focal point for semiconductor talent development. Under the semiconductor workforce programme, the Centre has extended support to 61 institutions across Tamil Nadu, including IIT Madras, NIT Tiruchirappalli, IIITDM Kancheepuram, Anna University, VIT, and PSG College of Technology.

Speaking to AIM, Shashwath TR, Co-founder and CEO of semiconductor startup Mindgrove Technologies, argues that Tamil Nadu’s absence from the first wave of semiconductor fabrication projects is less about the state’s capabilities and more about the complexity of semiconductor manufacturing itself.

“Considering that we are just starting off, we need to attract the right kind of investment, the right kind of people who can actually pull it off,” he states.

He points out that semiconductor fabs are fundamentally different from conventional manufacturing projects. Even OSAT facilities, which focus on chip packaging and testing rather than fabrication, require substantial investments. “An OSAT is like 100 times cheaper,” he comments.

The challenge then is more about finding investors with the capital, technical expertise, and execution capability to build and operate such facilities. Moreover, chip fabrication plants are expensive to set up. 

In February, Taiwanese chip major TSMC broke ground on its latest facility to pioneer the 1.4-nanometre node. The initial investment for that single plant is pegged at $49 billion.

“I don't think the country is ever going to have more than two or three [fabrication plants],” Shashwath predicts.

Despite missing out on the first round of investments, Shashwath sees no structural reason why Tamil Nadu cannot eventually host a semiconductor fab. According to him, the two most important requirements are power and water. Tamil Nadu largely satisfies the first criterion.

Tamil Nadu often experiences seasonal power surpluses, with renewable energy accounting for 50–54% of the state’s total installed power capacity. However, the Central Electricity Authority has projected that the state will see tight supply-demand margins over the next decade.

The state also benefits from a mature industrial ecosystem spanning Chennai, Coimbatore, Hosur, and other manufacturing centres.

More Than a Fab Story

However, the Centre’s cautious evaluation process may be justified given the scale of subsidies and infrastructure commitments involved.

“The government is also very sceptical of anybody just coming in and saying, I want to do it just to take advantage of the incentive,” Shashwath states “Evaluating the project and making sure it actually makes sense is a bottleneck.”

The objective, he says, is to avoid a situation where multiple projects are announced but only a few are completed. Ultimately, he argues that Tamil Nadu’s missing fab should not be viewed as a setback.

“I think it is just going to take its time for that to happen,” he says.

In the meantime, the state is increasingly positioning itself across the broader semiconductor value chain—from chip design and talent development to equipment manufacturing and supply-chain partnerships.

As India’s semiconductor ambitions gather momentum, Tamil Nadu may not yet have a fab. But it is rapidly becoming one of the most important pieces of the country’s chip ecosystem.