Sanand’s Semiconductor Assembly and Test Facility: An Overview

In January 2024, the Prime Minister inaugurated a semiconductor assembly and test facility by Kaynes Technology India Pvt Ltd in Sanand, Gujarat. This ₹3,300 crore investment marks a significant milestone under the India Semiconductor Mission (ISM), aiming to position Sanand as a critical node in the global semiconductor supply chain. The plant focuses on manufacturing intelligent power modules with export targets including the United States, symbolizing India’s intent to integrate domestic manufacturing with Silicon Valley’s innovation ecosystem.

India Semiconductor Mission: Policy Framework and Strategic Objectives

The India Semiconductor Mission, launched in 2021 under the Ministry of Electronics and Information Technology (MeitY), coordinates efforts to develop a comprehensive semiconductor ecosystem encompassing design, fabrication, assembly, testing, and packaging. The mission operates under the constitutional Union List (Entry 54) for industrial and economic policy. It features a ₹76,000 crore (~$10 billion) Production Linked Incentive (PLI) scheme administered by the Department of Revenue, Ministry of Finance, aimed at incentivizing domestic semiconductor manufacturing over eight years.

• Focus areas: Semiconductor fabs, display fabs, assembly/testing/packaging (ATMP/OSAT), and design-linked incentives.
• Investment pipeline: Over ₹1.5 lakh crore approved across Gujarat, Assam, and Karnataka.
• ISM’s role: Bridging design capabilities with manufacturing infrastructure.

Economic Dimensions: Market Size, Investments, and India’s Position

India’s semiconductor market stood at approximately ₹4.5 lakh crore (~$50–55 billion) in 2023, projected to nearly double to ₹9 lakh crore (~$100+ billion) by 2030, driven by AI, IoT, and electric vehicle (EV) ecosystem growth (India Semiconductor Mission Report, 2023). Despite this growth, India’s share in the global semiconductor market remains around 3%, predominantly in design rather than manufacturing.

• India accounts for ~20% of global semiconductor design engineers (NASSCOM, 2023), highlighting a design talent surplus.
• Kaynes Semicon’s Sanand facility exemplifies a ₹3,300 crore investment in assembly and testing, a segment where India has comparative advantage.
• Current manufacturing capacity is limited; India lacks large-scale semiconductor fabrication (fabs).

Comparative Analysis: India vs Taiwan Semiconductor Industry

Critical Gaps in India’s Semiconductor Ecosystem

India’s semiconductor ecosystem faces structural challenges, primarily the absence of large-scale fabrication facilities, which limits domestic value addition and technological sovereignty. The capital-intensive nature of fabs, requiring investments upwards of $5–10 billion, deters private sector entry without sustained government support. Additionally, India’s R&D infrastructure and supply chain maturity lag behind global leaders, constraining innovation diffusion and scale economies.

• Dependence on assembly and testing restricts India to lower-value segments of the semiconductor value chain.
• Insufficient upstream fabrication capacity reduces control over critical chip manufacturing technologies.
• Global supply chain disruptions underscore the need for domestic fabs to enhance resilience.

Legal and Institutional Framework Supporting Semiconductor Development

The semiconductor sector falls under the Union List (Entry 54) empowering the central government to legislate on industrial and economic policy. The India Semiconductor Mission functions under MeitY, coordinating with the Department of Revenue, Ministry of Finance for PLI incentives. The Industrial Development and Regulation Act, 1951 and the Electronics Manufacturing Clusters (EMC) Scheme provide additional regulatory and infrastructural support to promote semiconductor manufacturing hubs.

• PLI scheme incentivizes capital expenditure and operational costs for semiconductor fabs and ATMP units.
• EMC scheme facilitates creation of infrastructure clusters to reduce logistical and operational bottlenecks.
• Semiconductor Laboratory (SCL), Chandigarh, represents government-owned fabrication efforts but remains limited in scale and technology.

Significance and Way Forward

• Sanand’s facility exemplifies India’s strategic intent to integrate design talent with manufacturing capabilities, serving as a ‘bridge’ to Silicon Valley’s innovation ecosystem.
• Scaling fabrication capacity is critical to reduce import dependency and achieve technological sovereignty.
• Enhancing R&D infrastructure and fostering public-private partnerships will be essential to develop a vertically integrated semiconductor ecosystem.
• Policy continuity and increased financial incentives can attract global semiconductor firms to establish fabs and R&D centers in India.
• Strengthening supply chain linkages and skill development will improve India’s competitiveness in the global semiconductor value chain.