India’s chip import dependence poses strategic risk

India’s heavy reliance on imported chips has emerged as a strategic vulnerability, with supply-chain shocks during the Covid-19 pandemic underscoring the risks of being shut out of critical semiconductors needed across sectors, from automobiles to defense. Despite having a strong base of chip designers, the country still lacks a homegrown manufacturing ecosystem, a gap that can only be bridged with Indian-made chips, says Raja Manickam, Founder & CEO, of iVP Semi.

iVP Semi is a fabless semiconductor start-up and product company, providing components and modules for various sectors, including solar/renewable energy, electric vehicles, and industrial automation. Headquartered in Chennai, the company has additional offices in Bengaluru, Singapore, Taiwan, and the US.

“Despite several chip design companies in India, we don’t have an Indian chip company. As a big country, we need our own chips. Even in countries like the US, there is a push towards moving chip manufacturing back into the country. India is a large country, and we have the biggest demographic. And so, there will be huge consumption in electronics. It makes sense to start making our own chips,” the founder explained.

The risk of relying on imported chips is that India remains vulnerable to disruptions in the global supply chain. The Covid-19 pandemic highlighted this dependency, as the country struggled to secure critical semiconductors. With chips also playing a key role in defense applications such as drones, developing a domestic electronics and semiconductor base is crucial, he reiterated.

iVP is currently targeting Indian customers. “Japanese buy from Japanese and Chinese buy from Chinese. I have an advantage in selling to an Indian company. They will buy because we give them support and are more accessible. We can also match the same quality and liability. We are focusing on helping Indian companies succeed. This success would, in turn, take me global.”

Sampling chips
iVP is already sampling its chips, with several customers having placed production orders. The company currently has a catalog of around 300 products and a pipeline of nearly 40 customers at various stages of qualifying its chips, with many more prospects in the queue.

While highly complex chips may take 15 years to develop domestically, there is significant scope in lower-end chips, like those used in power electronics. Unlike software, chip production requires a network of specialised companies — from machinery makers to mold compound and lead frame suppliers. This ecosystem does not yet exist in India, but over the next 10 to 20 years, the country is expected to gradually build the infrastructure necessary to support domestic chip manufacturing.

The government is pushing initiatives to address this gap. Designing a chip typically takes around three years, followed by another year for rollout — a four-year process that requires substantial support and runway. Programmes like the Design-Linked Incentive (DLI) provide financial assistance to help companies navigate this long gestation period.

Manickam noted: “DLI 2.0 will make it easier for chip companies to get the money from the compound. We work with some of these DLI companies and are trying to bring all the DLI-benefitting companies together as each is making a different type of chip.” He said the company has not received DLI support yet but plans to apply once the scheme opens again.