Chiplet Manufacturing in India: Current State and Outlook

How Tata, Micron, and Government Incentives Are Powering India’s Chiplet Revolution by 2030

1. Companies Involved in Chiplet Manufacturing

Indian Companies and Initiatives

Several Indian companies have embarked on chiplet manufacturing or advanced semiconductor packaging initiatives. Tata Group is emerging as a key player: Tata Electronics, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp (PSMC), is setting up India’s first semiconductor fab in Dholera, Gujarat to produce 28 nm chips. Tata has also launched Tata Semiconductor Assembly and Test (TSAT) to build an Outsourced Semiconductor Assembly and Test (OSAT) unit in Assam with an investment of ₹27,000 crore (~$3.3 billion) . This facility will develop indigenous advanced packaging technologies (e.g. flip-chip and system-in-package) with a planned capacity of 48 million chips per day. Another Indian conglomerate, Larsen & Toubro (L&T), formed L&T Semiconductor (LTSCT) in 2023 focusing on semiconductor design and intellectual property, with an eye towards areas like chiplet-based packaging in the future.

India’s first locally-owned chip packaging success came from Sahasra Semiconductors, a Rajasthan-based firm. In October 2023, Sahasra became the first Indian company to produce memory chips, operating a semiconductor assembly, test, and packaging unit in Bhiwadi. Sahasra has begun shipping made-in-India microSD memory cards and plans to start advanced packaging of internal memory chips in its second phase. Government incentives under the production-linked incentive (PLI) scheme and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) have supported this venture, with SPECS providing a 25% capital expenditure subsidy for the plant. Other Indian players include legacy semiconductor assembly companies like SPEL Semiconductor (an OSAT in Chennai) and emerging firms such as Kaynes Technology, which received approval to set up an OSAT facility in Gujarat with a ₹3,307 crore investment (70% government-funded) and capacity of ~6.3 million chips per day. Fabless semiconductor design companies (e.g. MosChip, Signalchip) are also part of the ecosystem, working on chiplet-based system-on-chip designs, though their manufacturing is outsourced.

Foreign Investments and Partnerships

Global semiconductor companies are increasingly investing in India’s chiplet and semiconductor manufacturing ecosystem, often via partnerships with Indian firms. Micron Technology (USA) is a notable entrant – in June 2023, the Union Cabinet approved Micron’s $2.75 billion proposal to set up a large Assembly, Testing, Marking, and Packaging (ATMP) facility in Sanand, Gujarat. Construction of this plant (India’s first of its kind) began in mid-2023 and is over 60% complete; once operational in 2025, it will package and test memory (DRAM/NAND) chips, largely for export. Micron is investing $825 million of the total, with the Indian central government covering 50% of the project cost and the state government a further 20% – a testament to the heavy incentives on offer.

Taiwan’s Foxconn (Hon Hai Precision) has also committed to India’s semiconductor venture. In 2024, Foxconn and Indian conglomerate HCL announced a joint venture to establish an OSAT unit for chip packaging and testing, with Foxconn investing $37.2 million for a 40% stake. This comes after the Foxconn–Vedanta attempt to build a $19.5 billion fab in Gujarat, which was shelved in 2023 due to slow progress and the search for a technology partner. Foxconn remains “committed to India” and is now seeking new partners and applying under India’s incentive scheme to set up semiconductor manufacturing using mature nodes (e.g. 40 nm) for applications like automotive electronics. Another Taiwanese firm, PSMC, as noted, is partnering with Tata for the 28 nm fab – bringing in foundry expertise and marking a major foreign collaboration.

Japan’s semiconductor industry is involved as well. Renesas Electronics (Japan) has teamed up with India’s CG Power and Thailand’s Sterling & Wilson (through Stars Microelectronics) to establish a semiconductor ATMP unit in Gujarat for specialized chips, with a ₹7,600 crore (≈$920 million) investment. Renesas will provide technology for manufacturing microcontrollers, analog and power semiconductors, targeting automotive, industrial and consumer applications. This partnership underscores a trend of foreign tech transfer: Renesas’ expertise in automotive chips will help India produce chips for cars and power electronics locally.

Other global players are strengthening India’s semiconductor ecosystem primarily via R\&D and design centers, which complements chiplet development. For instance, Applied Materials (USA) is investing $400 million in an engineering center in Bengaluru, and AMD (USA) is investing $400 million to expand its India design center – now the company’s largest globally. While these investments are in chip design and research (not fabrication), they focus on areas like advanced chip architectures (AI, GPUs, etc.) that often use chiplet designs. IBM (USA) has signed agreements with the Indian government to become a knowledge partner for the India Semiconductor Mission; IBM is helping establish a semiconductor research center that will promote innovation in advanced packaging and heterogeneous integration (the core of chiplet technology). This collaboration aims to share IBM’s expertise in chip design and packaging, fostering local capability in 3D IC and chiplets. These partnerships, along with others in the pipeline (such as ongoing India–Japan and India–US dialogues), are accelerating technology transfer and joint ventures, positioning India as an emerging destination for semiconductor assembly and potentially chiplet manufacturing.

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2. Market and Industry Data

Indian Chiplet Market Size and Growth

India’s chiplet market is currently at a nascent stage but is poised for rapid growth this decade. As of now, India represents a very small share of the global chiplet market (since domestic production of chiplet-based devices is minimal), but projections indicate an explosive rise as ecosystem investments bear fruit. Market studies project the India chiplet market to grow at ~77.8% CAGR from 2023 to 2030 – one of the fastest growth rates worldwide. This growth will be driven by new domestic packaging and assembly capacity coming online (such as Micron’s and Tata’s plants) and increasing demand from Indian industries for high-performance chips. By comparison, the overall Asia-Pacific chiplet market (dominated by China, Taiwan, South Korea and Japan) is expected to grow at ~76% CAGR in the same period. China currently leads adoption in the region – it dominated the Asia-Pacific chiplet market in 2022 and is on track to achieve a market value of about $48 billion by 2030, thanks to heavy investments in 5G, AI, and chip manufacturing. India’s absolute chiplet market size in 2030 is projected to remain smaller than China’s, but the high growth rate reflects India’s low base and the strong upside as new capacity and use-cases develop.

In the broader semiconductor context, India’s semiconductor consumption market (which includes all chips, not just chiplets) is expected to reach $52 billion in 2024-25 and grow to ~$103 billion by 2030. This represents a ~13% CAGR in semiconductor demand, driven by industries like mobile devices, IT, automotive, and industrial electronics. A portion of this growing demand will shift toward chiplet-based components as they become more common in advanced products. Currently, most high-end chips (including chiplet-based processors) are imported; however, as local packaging plants become operational (e.g. Micron’s 2025 timeline) and if planned fabs come online by late decade, India could start supplying a share of its own demand.

Global Chiplet Market Comparison

Globally, the chiplet market is expanding exponentially as the semiconductor industry embraces modular architectures. In 2023, the global chiplet market was valued around $6.5 billion, but it is forecast to reach $148 billion by 2028 – an astonishing ~86.7% CAGR in five years. Some long-term forecasts are even more bullish; for instance, one analysis projects the market to surge to $1.72 trillion by 2032 (over 70% CAGR) as chiplet-based designs become ubiquitous in high-performance computing and AI hardware. While estimates vary, all agree on strong double- or triple-digit growth driven by industry-wide adoption of chiplets to overcome the limits of Moore’s Law.

In this global landscape, Asia-Pacific is currently the leading region for chiplet technology by revenue, accounting for roughly 40% of the market (as of 2024). This is unsurprising given that major chip manufacturers and packagers in Taiwan, South Korea, and China are at the forefront of advanced packaging. The United States and Taiwan are key players in chiplet innovation: U.S. companies like AMD and Intel pioneered chiplet-based CPUs (e.g. EPYC and Ryzen series), and U.S. government initiatives (CHIPS Act) are channeling funds into chiplet-related manufacturing and R\&D. Taiwan’s TSMC and ASE Group lead in 2.5D/3D packaging technologies that enable chiplet integration. China is rapidly ramping up chiplet capabilities as well – for example, Chinese firms are using chiplets in 5G network equipment, edge computing devices, and even smart city infrastructure, and China is reportedly “ramping up purchases of chip packaging equipment” to bolster large-scale chiplet manufacturing. In comparison, India’s chiplet segment is still in an infancy stage; India contributed only around 1% of global semiconductor trade in recent years and an even smaller fraction in advanced packaging. However, India’s government and industry are aiming to leverage the global shift to chiplets as a jump-start opportunity, much like India leapfrogged in mobile telecom. By focusing on assembly, packaging and design (rather than immediately on cutting-edge fabs), India seeks to integrate into this burgeoning chiplet supply chain.

India’s Competitive Advantages

India’s push into chiplet manufacturing builds on several competitive advantages. First is the extensive semiconductor design talent pool: roughly 20% of the world’s chip designers are based in India, working for firms like Intel, Qualcomm, AMD, and many startups. This large skilled workforce in chip design can be harnessed to develop chiplet architectures and IP blocks locally. The presence of established design R\&D centers (as noted with AMD, Google Tensor team, etc. in India) means India understands the design requirements for chiplet-based systems, which is a critical piece of the value chain.

Secondly, India offers a cost advantage and government support. The government’s incentive schemes (discussed in the next section) significantly reduce capital costs for setting up packaging and fab units – e.g. 50% capital subsidy for fabs and 30%+ for ATMP facilities. Combined with relatively lower labor costs, this can make India an attractive location for labor-intensive chip assembly and testing activities. The geopolitical climate also favors India as an alternative manufacturing hub (a “China+1” strategy). India’s large domestic electronics market (projected to be one of the largest consumers of semiconductors) provides assurance of local demand for any chiplet-based components made in India. Additionally, India has strengths in software and systems integration – important for co-designing chiplet systems and the software that runs on them, especially in domains like AI and telecommunications.

Challenges Facing India’s Chiplet Industry

Despite optimism, India faces significant challenges in establishing a robust chiplet manufacturing industry. A major hurdle is the lack of existing semiconductor manufacturing infrastructure – India does not yet have an operational advanced node semiconductor fab, and its legacy fab (SCL Chandigarh) is on older technology. Building new fabs and advanced packaging facilities from scratch is capital-intensive and time-consuming, requiring coordination among numerous stakeholders. The lead times for facilities like the Tata-PSMC fab mean India’s own chiplet-enabled silicon (at 28 nm) won’t roll out until at least 2025-2027. In the interim, India must rely on foreign-made wafers/dies and focus on packaging those – which limits the value capture.

Another challenge is the shortage of specialized semiconductor manufacturing talent and supporting supply chain. India has abundant chip design engineers, but a dearth of experienced fab engineers, technicians, and assembly experts. As one industry analysis noted, India is “currently facing [an] alarming shortage of skilled workforce” in semiconductor manufacturing, along with infrastructure gaps. Training or importing talent is necessary to run fabs and ATMPs at yield. Moreover, key raw materials and equipment for chiplet integration (photolithography tools, advanced substrates, etc.) are not produced in India and will have to be imported, raising costs and logistical complexity.

Competition from established semiconductor hubs is also stiff. Countries like Taiwan, South Korea, and the US have years of head-start in chiplet and 3D packaging technologies, backed by strong industrial ecosystems. For India to win investments, it must offer not just subsidies but also consistent policies, reliable power and water supply, and IP protection. Past attempts (such as the stalled Vedanta-Foxconn fab and other proposals) show that securing a technology partner is crucial – India needs to convince top-tier firms (like TSMC, Intel, or STMicro) to transfer know-how, which can be challenging. Finally, the high capital cost of chiplet-capable fabs and packaging lines could be a bottleneck if not met with sustained funding; a single advanced packaging line can cost billions, and maintaining cutting-edge capability (for example, adopting the latest interposer or hybrid bonding techniques) will require continuous investment. Despite these challenges, the outlook remains cautiously optimistic: with strong government push and global companies looking to diversify manufacturing, India has a window of opportunity to carve out a niche in chiplet assembly and integration.

3. Specific Applications and Demand Trends for Chiplets in India

Chiplets are a modular approach to building complex chips, and their use cases span many high-tech industries. Globally, high-performance computing (HPC) and artificial intelligence are primary drivers for chiplet adoption, and this trend is mirrored in India’s tech ecosystem. As India builds out data centers and supercomputing capabilities, there is rising demand for server CPUs and AI accelerators that use chiplet architectures. For example, modern server processors like AMD EPYC or Intel Xeon chips (widely used in cloud data centers) integrate multiple chiplets to boost core counts and performance. Indian data center operators and cloud providers (including global players setting up regions in India) are deploying such chiplet-based CPUs to support cloud services and AI workloads. The proliferation of data centers worldwide – India included – is cited as a key driver for the chiplet industry’s growth. In AI, the need for specialized hardware is acute; chiplets allow mixing of processing cores and AI accelerators. This means AI startups and research labs in India can benefit from chips that combine, say, a CPU chiplet with a custom AI coprocessor chiplet. As generative AI and machine learning adoption grows in India (e.g. in cloud AI platforms or edge AI for smart industries), demand will increase for these high-performance multi-die chips.

Another domain seeing chiplet use is consumer electronics and mobile devices, which is highly relevant given India’s huge smartphone market. Chiplet designs can improve power efficiency and customize features in devices. Already, smartphones and tablets are starting to leverage multi-chip packages – for instance, to integrate modem, processor, and AI engine dies. This modular design helps manage heat and yields. Industry reports indicate that the consumer electronics sector is set to dominate the global chiplet market in coming years, fueled by demand for high-performance yet energy-efficient phones, tablets, and laptops. In India, where over 150 million smartphones are sold annually, manufacturers could eventually adopt chiplets to differentiate their products (for now, most phone SoCs are monolithic, but chiplet approaches may appear in future 5G or AI-intensive phones). Additionally, the rise of wearables and smart home devices in India contributes to IoT growth – chiplets can be used to pack more functionality into these small form-factor gadgets. For instance, a wearable might use a chiplet-based SiP (System-in-Package) to include sensor hubs, processors, and connectivity in one compact module.

The automotive sector in India is an emerging area where chiplets could play a role. Cars are increasingly “computers on wheels,” requiring chips for engine control, infotainment, ADAS (advanced driver assistance), and electric vehicle battery management. Modern vehicles require efficient processors for autonomous driving and real-time analytics, and chiplets provide a flexible way to achieve the needed performance and integration. In India, the push for electric vehicles (EVs) and connected cars means new demand for automotive semiconductors. Chiplet-based designs allow mixing high-performance processors with safety-critical microcontrollers or analog components. Notably, the Renesas-CG facility being set up in Gujarat plans to manufacture chips for automotive and power applications using chiplet-like multi-die packaging (to integrate power management, microcontroller, and connectivity functions). As Indian automotive companies (and global OEMs in India) advance toward ADAS and eventually autonomous features, they will likely utilize chiplet-based controllers and sensors, supplied either by local packaging units or imported.

Beyond these, a range of industrial and networking applications in India stand to benefit from chiplets. The telecommunications sector, for example, with 5G rollout, needs high-performance networking gear. Base stations and network switches can use chiplets to combine processors, accelerators, and I/O dies for better throughput. The rise of 5G and edge computing in India is creating opportunities for customized chiplet solutions – as seen globally, “the rise in demand for AI, 5G, and IoT applications fuels chiplet adoption.” In industrial automation, factories implementing Industry 4.0 will use edge devices and PLCs that could adopt chiplet-based multicore processors to handle complex tasks. Healthcare devices and military/aerospace in India (sectors where reliability is key) could also use chiplets; for instance, a defense-grade system-on-module might integrate radar processing and secure elements as separate chiplets in one package.

In summary, the key industries for chiplets in India align with global trends:

Data centers and Cloud AI – driving need for chiplet-based CPUs and AI accelerators to support cloud services and AI training/inference.
Consumer electronics (Smartphones, PCs, gaming) – looking to chiplets for performance gains and power efficiency in devices; reports highlight that integrating chiplets enables “innovation, compact designs, and efficiency” in consumer devices.
Automotive and Industrial (incl. IoT) – requiring heterogeneous integration (mixing logic, analog, power chiplets) for EVs, smart vehicles, IoT sensors, and automation controllers.
Telecom and Networking – 5G infrastructure and upcoming 6G or networking hardware can use chiplets to meet high bandwidth and low latency requirements.
Defense and Aerospace – strategic applications where on-shore packaging of critical chips (with chiplet tech) could be important for security and customization.

India is at the early stage of utilizing chiplets in these sectors. Much of the current demand is met by imports (e.g. importing an AMD chiplet-based processor for a server, or an AI GPU for a research lab). However, as domestic capability in chiplet packaging improves, we can expect more “Made in India” multi-chip modules catering to local industries, especially in automotive and electronics. The government’s emphasis on emerging areas like AI and IoT means that demand for chiplet-based solutions in those areas is set to increase swiftly, ensuring a growing market for any local chiplet manufacturing ventures.

4. Government Policies and Incentives

Policy Initiatives: India Semiconductor Mission and PLI Scheme

The Indian government has launched several policy initiatives to support semiconductor and chiplet manufacturing, recognizing it as a strategic industry. In late 2021, the government set up the India Semiconductor Mission (ISM) as a dedicated agency to drive India’s semiconductor program. Under this mission, a $10 billion incentive package (PLI – Production Linked Incentive scheme for semiconductors and displays) was approved to attract chip fabrication units and ATMP/OSAT facilities. This includes generous capital subsidies: up to 50% of project cost for eligible semiconductor fabs and display fabs, and around 30% of capital expenditure for ATMP/OSAT (chip assembly and packaging) units. For example, the ISM’s modified program offers to cover half the cost of establishing fabs at mature nodes, which was a key factor in recent proposals (Tata-PSMC fab, Vedanta-Foxconn earlier). States complement this with their own incentives (such as subsidized land, electricity, and additional capital grants like Gujarat’s 20% for the Micron plant).

Alongside fabrication, the government introduced a Design-Linked Incentive (DLI) scheme to encourage domestic semiconductor design (including startups working on chiplet IP). This scheme provides financial support (such as reimbursements for design house expenses and product development) to make India a hub for chip design. The idea is to create a pipeline of Indian-designed chiplets and chips that could eventually be manufactured or packaged in India.

By mid-2023, seeing the intense global competition, the government indicated that it would expand and extend these incentives. In September 2024, ISM’s CEO announced a “fresh incentives package” was in the works, likely exceeding another $10 billion, to support the industry for the next 10 years. This new package is set to broaden support to the entire ecosystem, including semiconductor components and materials, not just fabs, reflecting a more holistic approach. The goal is to have at least 5 more fabs and multiple packaging units by the end of the decade, which will require sustained incentive outlays. In essence, India’s policy framework (PLI and related schemes) heavily subsidizes capital investment, shares risk with investors, and provides infrastructure support to anyone setting up semiconductor manufacturing or advanced packaging in India. These policies specifically mention “advanced packaging” and “chiplets” as focus areas, underscoring that India aims to leap into the chiplet era rather than only chasing cutting-edge fab nodes.

Government Incentives and Investments

The government incentives have translated into concrete support for chiplet-related manufacturing projects. As noted, Micron’s ATMP project is funded roughly 70% by central and state funds combined. Similarly, the approved units under ISM are all receiving significant subsidies: e.g., the Tata-PSMC fab (₹91,000 crore investment) will get 50% of capital from the government, and the Tata TSAT packaging plant (₹27,000 crore) will get around 50-70% government funding as well. The ISM’s strategy has been to share the upfront cost burden, making India a financially attractive location. In addition to cost-sharing, other incentives include tax breaks (semiconductor manufacturing is eligible for lower corporate tax rates of 17% in India, and often enjoys tax holidays), as well as infrastructure facilitation like setting up electronics manufacturing clusters with ready facilities. For instance, the Dholera Special Investment Region in Gujarat, where the Tata fab will be, is being developed with state support for power and water specifically for the fab’s needs.

The government is also directly investing in skilling and research which indirectly incentivizes the industry. It has announced the SemiconIndia program, which includes funding for training 85,000 semiconductor professionals in the country and partnerships with institutes to launch semiconductor education curricula. Such workforce development is effectively an incentive for companies, as it ensures a pipeline of talent. Additionally, India’s public R\&D institutions (like C-DAC and IITs) have been allocated funds to work on areas like chiplet integration, 3D IC design, and compound semiconductors. The aim is to foster innovation that companies in India can utilize. For example, C-DAC is working on indigenous processor IP (the DIR-V RISC-V initiative) and exploring collaborations with IBM to possibly adopt or co-develop high-performance processors for India, which might involve chiplet designs for HPC.

It’s worth noting that state governments are aggressively competing to host these projects by sweetening deals. Gujarat, Maharashtra, Karnataka, Tamil Nadu, and Telangana have all rolled out special policies for semiconductor and electronics. This includes reimbursement of GST, stamp duty waivers for land, subsidized loans, etc., on top of central incentives. The cumulative incentives can often cover 70-75% of a project’s cost, as seen in Micron’s case. Such generous support underscores how strategically important chip manufacturing is viewed in India’s policy circles.

International Collaborations and Technology Transfer

India is actively engaging with foreign governments and companies to facilitate technology transfer and collaboration in semiconductors, which is crucial for catching up in chiplet and advanced packaging know-how. A landmark development is the India–USA semiconductor partnership forged in 2023. Under the U.S. CHIPS and Science Act, a portion of funding (the International Technology Security and Innovation Fund) has been earmarked to help allies build up semiconductor capacity. The US government has decided to partner with India’s ISM using this fund – about $100 million per year until 2027 – specifically to boost India’s assembly, testing, and packaging capabilities. This collaboration will start with the U.S. helping assess India’s ecosystem and identifying gaps, and is expected to lead to joint initiatives in workforce training, standards development, and possibly co-investment in facilities. The motive on the U.S. side is to diversify supply chains away from China, and on the Indian side to leapfrog into advanced packaging leadership. This partnership has already resulted in Indian delegations visiting U.S. packaging labs and an agreement to set up a training program for Indian engineers in American semiconductor fabs and ATMP plants.

India has also deepened ties with Japan in this field. In July 2023, India and Japan signed a Memorandum of Cooperation on semiconductor supply chain partnership. Japan, which has expertise in materials, equipment, and mature node chips, is working with India to potentially set up facilities (for example, there were reports that a Japanese consortium may assist in a 65 nm analog fab in India). Japanese companies like Tokyo Electron (a major equipment maker) have partnered with Tata to supply tools for the upcoming fab, and others are exploring joint ventures in packaging. The India-Japan collaboration extends to research – the two governments are funding joint research projects on advanced packaging and chiplet integration, and have initiated talent exchange programs (Indian engineers training in Japan’s tech institutes). Similarly, European and Taiwanese collaborations are in progress. The EU “Chips Act” has a provision for international cooperation, and companies like STMicroelectronics (Europe) and TSMC (Taiwan) have been in discussions to either invest in India or help through technical consultancy. In fact, as part of its post-Foxconn strategy, India encouraged STMicro to be a tech partner in an Indian fab; while ST did not take equity, it was willing to license technology to Vedanta-Foxconn, and may yet partner with Foxconn or Vedanta separately. Additionally, Belgium’s research hub imec and France’s CEA-Leti have signed MoUs with Indian institutions to advise on setting up a semiconductor research center that includes 3D packaging test lines.

Another notable collaboration is with Israel: the stalled ISMC analog fab project in Karnataka involved Tower Semiconductor (Israel) as a partner. With Intel’s takeover of Tower failing, that project may revive with direct Intel involvement or other Israeli expertise. Israel and India have also discussed working together on heterogeneous integration for defense electronics (where chiplets could be vital).

Finally, the Indian government’s outreach to global industry is evident in events like the SemiconIndia conference, where CEOs of Intel, AMD, ARM, and others participated and pledged support. The government often highlights that companies setting up in India will not just serve the local market but also export, leveraging India’s strategic location and trade partnerships. In summary, international collaboration – whether via direct investment (Micron, Foxconn, Renesas), government-to-government agreements (US, Japan), or research partnerships (IBM, imec) – is a cornerstone of India’s strategy. It accelerates technology transfer in chiplet manufacturing techniques and assures global companies that India is committed to building a secure, thriving semiconductor ecosystem.

Overall, India’s entry into chiplet manufacturing is being carefully scaffolded by supportive policies, significant financial incentives, and global partnerships. While the industry is still in early days, the coming together of Indian enterprise and multinational expertise under the government’s enabling framework has set the stage for India to become a notable player in chiplet-based semiconductor production in the years ahead.

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