India's semiconductor opportunity expanding beyond fabs: Report

India's semiconductor market is evolving beyond the traditional focus on wafer fabrication, according to a report from YES Securities. The report, which was presented at the SEMICON India 2026 conclave, suggests that the country's semiconductor future lies in building a comprehensive ecosystem that encompasses chip design, equipment, materials, advanced packaging, research, and electronics products.

The report emphasizes that the potential economic opportunity in this broader ecosystem is much larger than in wafer fabrication alone. This expanding ecosystem could create opportunities for various stakeholders, including equipment manufacturers, engineering companies, packaging firms, materials producers, and chip-design companies.

The government's Semicon 2.0 program, with a budget of Rs 1,27,500 crore, is playing a pivotal role in this transformation. The program is focusing on six key areas: semiconductor design, machines and materials, next-generation fabs, ATMP/OSAT, research and development, and talent development. Investment commitments under the program have reached around Rs 1 lakh crore, with further investments expected over the next two to three years.

The traditional constraints on semiconductor demand are shifting, with emerging drivers such as artificial intelligence, data centers, automobiles, industrial automation, and communications becoming major growth areas. As a result, the focus is now on enhancing supply-chain depth to capture a larger share of the growing semiconductor market.

Global semiconductor companies are demonstrating increasing localization efforts, with major players like Applied Materials and Lam Research committing substantial investments. Applied Materials plans to invest USD 5 billion over the next decade in India, covering research, supply-chain development, and talent acquisition. Lam Research is set to invest around Rs 10,000 crore in a silicon-component manufacturing facility and expand its research and development activities.

Tata Electronics has also signed seven strategic agreements for its Dholera semiconductor fab, covering fabrication, advanced packaging, materials, research, vendor development, and workforce training.

Despite these investments, there are still key gaps in India's semiconductor ecosystem, including semiconductor materials, specialized gases, equipment, and precision manufacturing. The report suggests that India should aim to develop capabilities in strategically important areas while continuing to collaborate with global suppliers, rather than striving for complete self-sufficiency.

India's semiconductor design workforce is a significant asset, accounting for about 20% of the global chip-design workforce. However, the next challenge is to transition from merely designing for global companies to developing and owning semiconductor intellectual property, products, and systems. The report emphasizes that execution and ecosystem depth will determine the extent of economic value India can capture as semiconductor demand continues to grow.

Advanced packaging, mature-node chips, precision manufacturing, and product ownership are identified as potential areas to expand India's role in the global semiconductor value chain.