The ₹1.27 Lakh Cr Semiconductor Pivot: Why India is Betting on Design Over Fabs

In its next phase, the India Semiconductor Mission is focusing on building the design and intellectual property ecosystem that can make existing fabs commercially viable.

The Union Cabinet approved the Semicon 2.0 programme in July with a total budget outlay of ₹1,27,500 crore. It builds on Semicon 1.0, with an outlay of ₹76,000 crore, which focused on foundational goals of attracting large fabs and assembly units

The emphasis on design is emerging as a deliberate strategy. While India has begun attracting investments into semiconductor manufacturing, the larger value creation lies upstream—chip architecture, product development, and IP ownership.

Speaking to AIM, Amitesh Kumar Sinha, CEO of India Semiconductor Mission, states, “50% of the value chain is from design only. The fabrication and packaging are the lower part of the value chain.”

For Indian semiconductor startups, the argument for prioritising design is fundamentally economic. 

Take Tata Electronics' planned fabrication facility in Dholera, Gujarat, for example. It is backed by a massive ₹91,000 crore ($11 billion) investment in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation, and targets nodes from 28–110nm on 300mm wafers for high-performance computing, IoT, electric vehicles, and data centres. To justify the investment and keep the facility commercially viable, it would need enormous volumes of business. 

“Dholera is a small fab, by the way. They are talking about something like 50,000 wafers per month,” comments Shashwath TR, Co-founder and CEO of IIT Madras-incubated semiconductor startup Mindgrove Technologies.

The output from those wafers can run into millions of chips. As a result, fabs require a sustained pipeline of orders from chip companies. “For the foundry to make sense commercially, somebody needs to place enough orders for 35 million-odd equivalent chips,” he states.

That creates a fundamental disposition. India is building manufacturing capacity without simultaneously creating enough companies that design chips and own the underlying IP.

“Granted, some of that is going to come from global players. But then we know this capacity, and we do contract manufacturing for somebody else without owning the IP as a country,” he adds.

According to Shashwath, Indian semiconductor companies therefore need to account for a significant share of the demand that eventually flows into domestic fabs. The objective is not merely to ensure that chips are manufactured in India, but that the intellectual property behind those chips is also created and owned in the country.

Value Lies in Design

The design-first approach is also being echoed by global semiconductor companies operating in India.

Navin Bishnoi, VP and India Country Manager of US-based semiconductor company Marvell Technology, argues that India should focus on product development, chip design, and IP creation because those activities generate greater value than manufacturing alone.

He notes manufacturing will eventually become more of a service-oriented activity due to automation, while the larger economic value will be created through the products and intellectual property built around semiconductor technology. “The margins and the value contribution are not that high,” he states.

Some of the world's most valuable semiconductor companies operate on such a fabless model. NVIDIA, Broadcom, AMD, and Qualcomm focus purely on software, architecture, and chip design without owning fabrication plants, outsourcing chip production to foundries like TSMC.

For India, the implication is that building a strong design ecosystem could create demand for fabs, OSAT (outsourced semiconductor assembly and test) facilities, and electronics manufacturing rather than the other way around.

“Once you accelerate those IPs and turn a chip into a product, you will immediately need many more fabs, OSATs, EMS boards, and other manufacturing systems," Bishnoi explains.

The alternative, he warns, could leave India merely shifting manufacturing capacity geographically without capturing the higher-value parts of the semiconductor chain.

From Design to Fabs

However, manufacturing can’t be discarded altogether. Instead, fabs can be the downstream outcome of a successful design ecosystem.

“If you build the products right from here and then sell to the world, then you have the opportunity to create a billion-dollar company from here and probably a trillion-dollar valuation in the future as well,” Shashwath notes.

For that, India needs to create a different sequencing of priorities—from constituting chip companies, creating IP, converting that IP into commercial products, and then generating the sustained demand required to support domestic manufacturing capacity.

This is why design is particularly important because it is where India can create capabilities that are difficult to replicate simply by attracting manufacturing investments. “Design is where IP is created. Design is where sovereignty is created,” Shashwath remarks.

He also describes chip design as the bridge between the semiconductor and electronics industries. “Design is the interface of the semiconductor industry to the electronics industry,” he explains.

India's unique requirements also make local design capabilities strategically important. Historically, Indian companies have often relied on imported semiconductor designs, adapting them for local markets rather than developing the underlying technology themselves. The case for domestic design is then not only about economic value. 

The Talent Problem

Building a design-led semiconductor ecosystem, however, requires a different kind of talent pipeline. 

Ashwini Vaishnaw, the Union Minister of Electronics and Information Technology, recently flagged that the global semiconductor industry faces a shortage of 1 million workers, and India faces severe shortages in core hardware fabrication, cleanroom operations and ATMP (assembly, testing, marking, and packaging) skills. 

Siemens, which is participating in the India Semiconductor Mission, says its role is increasingly focused on helping create that talent through university partnerships, skilling initiatives, and access to industry-grade engineering tools.

Mathew Thomas, Vice President and Managing Director for India at Siemens Digital Industries Software, believes India's semiconductor journey is evolving beyond assembly.

“When you say ‘Make in India’ earlier, it was probably assembled in India. I think that has moved away. We really see ‘design in India’, ‘make in India’, ‘manufacture in India’ value chain,” Thomas states.

Talent development is therefore a critical component of the semiconductor mission.

MNCs Can Help

Marvell, however, sees its role in India's semiconductor ecosystem extending beyond its own R&D operations. Bishnoi says that multinational companies can help startups, universities, and governments build a more integrated semiconductor supply chain.

“Multinationals are needed to ensure that we can guide, hold a hand together, and take them to a complementary solution or a larger system solution that we can bring in,” he adds.

The company is working with academic institutions including IIT Hyderabad, IIT Tirupati, IIT Bombay, and IIT Madras on areas ranging from hardware and software accelerators to advanced packaging and analogue mixed-signal design.

Marvell has also been working with startups and is looking at ways to support the semiconductor startup ecosystem as India prepares for the next phase of its semiconductor mission. The company plans to invest $250 million in India over the next three years to expand its capabilities across technology, talent and infrastructure.

For Bishnoi, the eventual objective is to build an ecosystem that can survive beyond government incentives. “One day, incentives will go away, and then the India ecosystem has to survive on its own,” he adds.