India’s semiconductor ambitions have never been louder. Billion-dollar fab announcements, state-level incentive wars, and a steady drumbeat of “Make in India” chip headlines suggest momentum. But ambition is not architecture. If India wants a semiconductor ecosystem that survives beyond its first ribbon-cutting, it would do well to study two very different neighbour's who got there before it: China, the state-backed industrial giant, and Vietnam, the nimble assembly-and-test success story. Between them lies a playbook India has only partially read.
Patience Is a Policy, Not a Virtue:
China’s chip rise was never a sprint. Through vehicles like the National Integrated Circuit Industry Investment Fund
— the so-called “Big Fund” — Beijing committed capital over a decade, absorbing the inevitable early losses that
come with capital-intensive fab construction. Vietnam took a different but equally disciplined route, offering long term
tax holidays and land-lease certainty that gave investors confidence in outcomes five and ten years out, not just
this budget cycle.
India’s incentive schemes, by contrast, have shifted shape too often for comfort. For global chipmakers weighing
multi-billion-dollar, multi-decade commitments, policy stability matters more than the size of any single subsidy
headline. India needs to treat semiconductor policy as long-horizon industrial strategy, not an annual scheme to be
tweaked.
Start Where You Can Win:
China didn’t chase the most advanced nodes first — it built volume and competence in mature-node manufacturing,
then moved up the value chain. Vietnam went further in playing to its strengths, focusing almost entirely on
assembly, packaging, and testing, and building the logistics and export infrastructure to make itself indispensable to
Intel, Samsung, and Amkor.
India, still finding its footing, would benefit from the same humility. Rather than spreading thin across design,
fabrication, and equipment simultaneously, sequencing matters — and packaging and testing, where India already
shows momentum, may be the more realistic first foothold.
Cluster, Don’t Scatter
One of China’s underappreciated strengths is geographic clustering — provinces compete to host fabs, and the
resulting density of suppliers, technicians, and logistics networks lowers costs for everyone nearby. India’s fab and
packaging announcements, spread across Gujarat, Uttar Pradesh, Assam, and beyond, risk the opposite effect:
fragmented supply chains and duplicated infrastructure spend. A tighter cluster strategy — concentrating fabs,
OSATs, and materials suppliers near each other — would do more for India’s ecosystem than another state joining
the incentive race alone.
Infrastructure Is the Real Incentive:
Vietnam simplified customs and built single-window clearances specifically for high-tech manufacturers. China
treated water, power, and land not as afterthoughts but as core semiconductor infrastructure, guaranteed before
construction even began. Semiconductor fabs need ultra-pure water and uninterrupted power at a scale most
industrial parks aren’t built for. India’s ease-of-doing-business reforms need a semiconductor-specific layer —
customs, utilities, and land — or its fab sites will keep discovering these gaps mid-construction.
Build the Demand, Not Just the Supply:
China grew its downstream electronics and EV industries in lockstep with its chip capacity, ensuring domestic
manufacturers had somewhere to sell their output. India has a similar opportunity sitting in plain sight: its mobile
manufacturing base, its growing EV sector, and its defence electronics needs could all anchor domestic chip demand
— if policy explicitly links them. Chip capacity without captive demand is a fragile bet.
Don’t Forget the Toolmakers:
China invested seriously in domestic equipment and materials champions, reducing its exposure to foreign
lithography and etching tool suppliers — a lesson made more urgent by export controls. India’s semiconductor
conversation remains dominated by fabs and design; equipment and materials start-ups get comparatively little
attention or capital. A resilient ecosystem needs suppliers of the tools and chemicals, not just the chips.
The Talent Pipeline Has to Be Built, Not Assumed:
China ties university research directly into fab R&D through joint labs and structured talent pipelines. Vietnam
trained a large, disciplined technical workforce through vocational partnerships with the very global firms it was
courting. India’s engineering talent pool is enormous, but the pipeline from IIT and IISc research to fab-floor
competence remains loosely connected. Structured industry-academia partnerships, not just headline talent
numbers, will determine whether India’s workforce is fab-ready.
The Bottom Line:
Neither China’s state-directed scale nor Vietnam’s assembly-first pragmatism is a template India can copy wholesale
— its politics, geography, and starting position are its own. But the underlying disciplines are transferable: patient
capital over quick incentives, sequencing over sprawl, infrastructure guarantees over promises, demand-building
alongside supply, and talent pipelines built deliberately rather than assumed. India doesn’t need to choose between
the Chinese model and the Vietnamese one. It needs to borrow the parts
