In the high-stakes global competition for semiconductor leadership, the colossal investment required for silicon fabrication facilities (fabs) has long presented a formidable barrier for emerging players like India. However, the rapidly evolving landscape of chip manufacturing is creating new opportunities, with advanced packaging emerging as a pivotal entry point for nations seeking to establish a foothold in the semiconductor ecosystem.
The Shifting Paradigm of Chip Manufacturing
For decades, chip performance relied primarily on shrinking transistor sizes. This approach, however, has reached its limits, becoming both technically challenging and exorbitantly expensive. Chipmakers are now increasingly turning to advanced packaging technologies to enhance performance, reduce power consumption, and integrate diverse components more effectively.
“For years, chipmakers made chips faster by shrinking transistors. Now making transistors smaller is becoming harder and more expensive, so chipmakers are combining different chips, or chiplets, in one advanced package,” explained Pareekh Jain, CEO at EIIRTrend & Pareekh Consulting.
This innovation allows for the combination of multiple chips or 'chiplets'—manufactured using different process technologies—into a single, high-performance package. The growing demand for AI, high-performance computing, data centers, and automotive applications is accelerating this shift, as these sectors require extremely fast connections between components like GPUs and HBM memory.
Advanced Packaging: A Lower-Cost Entry Point
Establishing a cutting-edge semiconductor fab can cost upwards of $10-20 billion with a gestation period of 3-5 years before commercial production. In contrast, advanced packaging facilities, while still sophisticated, require a significantly lower upfront investment, typically ranging from $2 billion to $8 billion, and can achieve high-volume manufacturing within approximately three years.
India's initial attempts under ISM 1.0 faced challenges in attracting major fab investments. The subsequent ISM 2.0 program has adjusted fiscal support for fabs to 40% of capital expenditure, while specifically highlighting advanced packaging projects with support up to 35%.
India's Strategic Focus and Challenges
With 12 semiconductor projects approved under ISM 2.0, India is broadening its focus beyond just fabs to include design, equipment, materials, advanced packaging, R&D, and talent development. This strategic shift acknowledges that while advanced packaging offers a quicker path to commercial relevance, it is not a shortcut to becoming a semiconductor superpower.
Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research, noted, “Packaging offers a wider capital ladder than fabrication, not an exemption from capital intensity.” He added that India’s late start in conventional manufacturing does not necessarily disadvantage it in advanced packaging, as new integration technologies are creating fresh entry points.
To succeed, global companies will require a robust ecosystem. While India boasts strong engineering talent, lower costs, and a large domestic market, it faces weaknesses in the local supply chain for advanced substrates, materials, equipment, and experienced packaging engineers.
A Narrowing Window of Opportunity
The global semiconductor advanced packaging market, valued at $20.2 billion in 2024, is projected to nearly double to $39.6 billion by 2030. This presents a substantial opportunity for India to become a meaningful player without waiting to build a vast fab ecosystem.
However, this window is narrowing. Chipmakers are investing heavily in new packaging capacity closer to their manufacturing bases and customers. Countries that can swiftly offer the right combination of incentives, skilled talent, robust infrastructure, technology access, and a supportive customer base will gain a decisive advantage in this critical segment of the semiconductor industry.