India has officially embarked on an ambitious journey to establish itself as a global semiconductor powerhouse, but the road ahead is increasingly obstructed by China’s aggressive expansion into mature chip technologies. As New Delhi pours billions into subsidies to attract international foundries, Beijing is simultaneously flooding the market with older generation chips, often referred to as legacy semiconductors. This strategic move by China threatens to undercut the economic viability of India’s nascent manufacturing facilities before they even reach full operational capacity.
The Indian government recently approved several high-profile projects, including a massive fabrication plant by the Tata Group in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp. These initiatives are designed to reduce India’s reliance on imports and secure its domestic supply chain for everything from automobiles to consumer electronics. However, most of these new Indian ventures are focused on 28-nanometer to 40-nanometer nodes. While these are not the cutting-edge chips found in high-end smartphones, they are the workhorses of the global industrial and automotive sectors. This is precisely the segment where China has decided to exert its dominance.
Industry analysts observe that China is pivoting its strategy in response to Western sanctions on advanced chipmaking equipment. By doubling down on legacy chips where it faces fewer export restrictions, China is building a massive production base that could lead to a global supply glut. For India, this creates a precarious situation. If Chinese manufacturers can produce these essential components at a significantly lower cost due to massive state support and existing infrastructure, Indian startups and established players will find it difficult to compete on price without permanent government intervention. 
Furthermore, the semiconductor industry is notoriously capital-intensive with long gestation periods. India’s success depends on creating a holistic ecosystem that includes not just fabrication plants, but also assembly, testing, and packaging facilities, as well as a reliable supply of specialized chemicals and gases. While the Indian workforce offers a deep pool of engineering talent, the physical infrastructure requirements—such as uninterrupted ultra-pure water and high-voltage electricity—remain a challenge. China’s established lead in these peripheral areas gives its manufacturers a logistical advantage that further compounds the pressure on Indian newcomers.
Geopolitics also plays a critical role in this brewing competition. The United States and its allies are keen to see India succeed as a viable alternative to China in the global tech supply chain. This diplomatic support has translated into technology transfer agreements and increased interest from Western semiconductor equipment makers. However, geopolitical alignment does not automatically translate to market share. Indian firms must still prove they can achieve the yields and reliability standards required by global electronics manufacturers who are used to the efficiency of East Asian hubs.
To counter the Chinese surge, some experts suggest that India should focus on niche applications where it can integrate its strengths in software and design with hardware manufacturing. By targeting specific high-growth areas like power electronics for electric vehicles or specialized chips for telecommunications, India might find a way to bypass the direct price war in the commoditized legacy chip market. Additionally, the Indian government may need to consider protectionist measures or further incentives to ensure that domestic industries prioritize locally made silicon over cheaper imports from across the border.
The next five years will be a defining period for India’s technological sovereignty. While the ambition to compete with a seasoned veteran like China is bold, the execution will require more than just financial incentives. It will require a sustained commitment to infrastructure, a rapid scaling of the domestic supply chain, and a strategic navigation of the global trade environment. India is not just building factories; it is attempting to enter one of the most complex and competitive industries in history while its largest neighbor is actively working to consolidate its hold on the very same market.
