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India has done well to tweak incentives for semiconductor fabrication units to cover chips used in a broader range of industries. This should help get its plans to become a global player in the business off the ground. India is entering the race with technology and infrastructure challenges, and the production incentives pale in comparison with those announced by the US for local chip manufacturing. India must hit the right policy matrix to be able to seed its ecosystem. Existing proposals to set up chip fabrication units are facing challenges like sourcing technology, delay over corporate action and unattractive planning. The government is on the right course in throwing the field open to a wider bunch of players.

The semiconductor industry is at the heart of India’s push into electronic hardware manufacture and export. Without local chip-making capability, the country will remain confined to assembly, locking out significant value addition in industries ranging from automobiles to mobile handsets. Production incentives should direct investments into technologically demanding smaller chips that involve bigger upfront capital and value chain development. Policy needs to be flexible to encourage market and ecosystem testing prior to setting up fabrication plants. And the government may have to eventually scale up incentives.

All of this has been accomplished within a tight window of a decade over which the global demand for chips is expected to double. User industries like automobiles and consumer electronics are driving the push for semiconductor supply resilience. India can tap into this transformation by delivering on parameters like uninterrupted power and pure water required for chip-making. Besides, it has to bring logistics up to speed. The country’s first fab unit will serve as a coming-of-age event for Indian manufacturing. Initial missteps with investment proposals have more to do with corporate decisions than with policy support. India now needs proof of execution.