“That chip deal is so bad,” US President Donald Trump criticised Joe Biden’s CHIPS and Science Act during his interview on “The Joe Rogan Experience” podcast in October last year.

Not only did he signal his commitment to attain the United States’ technological independence by reshoring and reducing reliance on foreign supply chains but he also accused Taiwan of ‘stealing’ cheap industry from America.

As Trump ignites tensions with a slew of executive orders, the global tug-of-war for semiconductor supremacy is set to intensify. Amid this paradigm shift, what happens to India’s dream of becoming a global leader in semiconductor production? Will her vision remain merely a pie in the sky?

The CHIPS Act has played a crucial role in shaping the global semiconductor supply chain, particularly benefiting emerging markets such as India. By imposing a 10-year embargo on American firms from establishing high-tech chip manufacturing facilities in China if they accept federal subsidies, the Act has incentivised companies to explore alternative destinations, with India emerging as a strong contender.

Over the past few years, India has attracted significant interest from global semiconductor firms, with major players such as Applied Materials and LAM Research expanding their R&D footprint in the country. Additionally, the Indian government’s Production-Linked Incentive (PLI) scheme has further encouraged semiconductor investments, laying the groundwork for advanced manufacturing and assembly, testing, marking, and packaging (ATMP) facilities.

The CHIPS Act, by restricting China’s access to critical semiconductor advancements, has thus indirectly accelerated India’s progress in developing its own ecosystem. Its removal or dilution under the Trump administration could disrupt this momentum, potentially diverting investment back to China or creating uncertainty among firms considering expansion into India.

Recent developments in the Indian semiconductor industry

India’s semiconductor industry has witnessed significant advancements recently, marked by substantial investments and strategic collaborations. In September 2024, Analog Devices and the Tata Group agreed to explore semiconductor manufacturing in India. Tata Electronics is investing $14 billion to establish the country’s first semiconductor fabrication facility in Gujarat and a chip-assembly and testing unit in Assam, aiming to produce Analog Devices’ products at these sites.

India and the United States have partnered to set up a semiconductor fabrication plant focused on advanced sensing, communication, and power electronics for national security, next-generation telecommunications, and green energy applications. This initiative, supported by the India Semiconductor Mission and a strategic technology partnership between Bharat Semi, 3rdiTech, and the US Space Force, marks the first such collaboration between the US military and India in semiconductor technology.

Additionally, NXP Semiconductors announced plans to invest over $1 billion in India to double its research and development efforts. Such initiatives align with India’s broader strategy to become a significant player in the semiconductor industry, supported by a $10 billion incentive package and an expected market valuation of $63 billion by 2026.

These developments reflect India’s commitment to strengthening its semiconductor ecosystem through international partnerships and substantial investments, positioning the country as a key contributor to global supply chains.

How will Trump 2.0 impact India’s semiconductor industry?

A potential Trump 2.0 administration is expected to further solidify the US-India technological partnership, with significant implications for India’s semiconductor ambitions. According to Ramya Mohan, Vice President & Head of Corporate Strategy at Cyient, US companies are increasingly recognising India’s strategic importance in the global semiconductor supply chain.

“Micron’s $2.75 billion investment in Gujarat to establish a state-of-the-art assembly and testing facility is a landmark move,” she noted, highlighting the role of India’s Semiconductor Mission in facilitating such collaborations. This facility, backed by substantial Indian government support, aims to bolster local manufacturing capabilities while creating thousands of jobs, thereby strengthening global supply chain resilience.

The reshaping of global trade dynamics, particularly US-China tensions, is creating additional opportunities for India. As Mohan explained, “Changes in US-China trade policies and reshoring initiatives are pushing global companies to diversify their supply chains, and India is well-positioned to fill this gap.”

Mohan emphasised that India’s strengths in integrated circuit (IC) design and its 20% share of global semiconductor talent give it a distinct edge. Sectors like automotive semiconductors, driven by the rise of electric vehicles, and telecommunications, with the rollout of 5G networks, are poised for significant growth.

As global supply chains diversify, Cyient’s new semiconductor subsidiary, focused on fabless turnkey Application Specific Integrated Circuit (ASIC) solutions, is set to capitalise on the increasing demand for advanced chip designs, particularly in the automotive and communications sectors.

Echoing this optimism, Shetal Mehta, Co-founder of Suchi Semicon, suggests that a more assertive Trump administration could accelerate India’s semiconductor ambitions. She explains that while Trump’s previous term prioritised reshoring and national security, these protectionist measures could inadvertently benefit India as companies diversify away from China.

Mehta points out that India’s proactive government initiatives, like the $10 billion Semiconductor Mission and the Production-Linked Incentive (PLI) scheme, position the country as an attractive alternative for global semiconductor manufacturing. Furthermore, partnerships with US firms—such as Intel, Micron, and Texas Instruments—could provide India with critical technology transfers and R&D collaborations, fostering an end-to-end semiconductor ecosystem. She believes that India’s strengths in chip design, fabrication, and packaging, supported by strategic alliances, will be pivotal in making the country a significant player in the global semiconductor supply chain.

India must eliminate tariffs on semiconductor manufacturing if it hopes to establish itself as a key player in global supply chains, according to John Neuffer, President and CEO of the US Semiconductor Industry Association (SIA).

Speaking exclusively to CNBC-TV18, Neuffer acknowledged India’s progress in expanding its semiconductor footprint but stressed the need for a more competitive trade policy. He pointed out that while the US enjoys zero-tariff benefits from its chip supply chain partners worldwide, India has yet to offer the same incentives.

Neuffer also highlighted the importance of investing in workforce development, not just in semiconductor design but also in manufacturing, to strengthen India’s position in the long term.

Representing 99% of American semiconductor firms and two-thirds of global industry players, the SIA is a major voice in the sector. Neuffer emphasised that as competition in chip production heats up in Southeast Asia, India must take steady, strategic steps to prove itself as a dependable partner in the global semiconductor ecosystem.

Trump’s criticism of the CHIPS Act casts uncertainty over the future of projects funded by the legislation, potentially reshaping the global semiconductor landscape. While India has made significant strides with major investments and strategic partnerships, the shifting US policy could influence the pace and direction of these developments.

However, India’s diversified approach—focusing on both domestic capacity building and international collaborations—may help buffer against potential disruptions. By continuing to strengthen its semiconductor ecosystem and leveraging geopolitical shifts, India remains well-positioned to emerge as a critical player in the global supply chain, even amidst evolving US policies.