India's ambitious entry into semiconductor manufacturing has sparked considerable debate, particularly concerning the choice of technology nodes for its first fabrication plant. While some critics argue against starting with 28nm, often termed "legacy" technology, industry experts contend this decision is a strategic imperative for a nation building its semiconductor ecosystem from the ground up.
The 28nm Debate: Understanding India's Strategy
Recent discussions gained traction following reports suggesting Tata Electronics' semiconductor fab would produce chips using older technology. However, Kyunghoon Kim, Head of the India & South Asia Team at the Korea Institute for International Economic Policy (KIEP), clarified that Tata's project has consistently planned for 28nm and above, refuting claims of a shift to outdated processes.
Kim highlights a common misunderstanding: while advanced chips below 5nm power premium smartphones and AI accelerators, the vast majority of semiconductors globally rely on mature manufacturing processes. These chips are essential for critical sectors like automotive, industrial machinery, networking equipment, consumer electronics, and power management systems, where reliability and cost often outweigh cutting-edge performance.
Building a Foundational Semiconductor Ecosystem
Establishing semiconductor manufacturing capabilities is viewed as a long-term industrialization project rather than an immediate race for the most advanced chips. As Kim explains, industrialization is fundamentally about "learning by doing" and meticulously building an entire ecosystem. Dominant manufacturing nations like Taiwan and South Korea spent decades cultivating skilled workforces, supplier networks, and supporting industries before reaching technological frontiers.
India's Electronics Boom Drives Demand
India's semiconductor aspirations are intrinsically linked to its rapidly expanding electronics manufacturing sector. The country has transformed into one of the fastest-growing smartphone manufacturing hubs. Mobile manufacturing units surged from 2 in 2014-15 to 300 in 2024-25, dramatically reducing imports from 75% to just 0.02% of domestic demand. Production value rose from ₹1.8 lakh crore to ₹5.45 lakh crore, with exports soaring from ₹1,500 crore to ₹2 lakh crore.
This domestic demand, coupled with growth in automotive electronics, industrial automation, and data centers, makes increasing local semiconductor production a logical next step to boost local value addition across these industries. A system-on-chip (SoC) in a smartphone alone accounts for approximately 14% of the device's bill of materials, underscoring the strategic importance of chip manufacturing for India.
A Trillion-Dollar Market Opportunity
The timing aligns favorably with India's ambitions. Industry projections from PwC anticipate the global semiconductor market will grow from around $627 billion in 2024 to approximately $1.03 trillion by 2030. McKinsey's base-case scenario suggests an even larger expansion to $1.6 trillion by 2030. Much of this growth will come from computing, data storage, wireless communications, automotive electronics, industrial applications, and AI infrastructure.
While AI chips capture significant attention, demand for mature-node semiconductors across automobiles, industrial systems, and consumer electronics is expected to remain substantial throughout the decade, ensuring a robust market for India's 28nm output.
Why Mature Nodes Remain Crucial
Despite slower growth compared to leading-edge processors, legacy-node chips continue to represent one of the largest segments of semiconductor demand. Forecasts indicate manufacturing capacity for logic chips at 22-28nm will expand through 2030, with larger nodes remaining vital for industrial and automotive applications. This aligns perfectly with India's domestic demand profile and offers a competitive advantage due to relatively lower labor costs, especially when combined with government incentives under initiatives like the India Semiconductor Mission.
While challenges in supply chains, skilled talent, and capital costs persist, experts like Kim assert that starting with 28nm – or even 90nm – technology should be viewed as a strength, providing a solid foundation for India's long-term aspirations in the global semiconductor landscape.