India has spent years trying to answer one of the most difficult questions in modern industrial policy: Can a country known for software and chip design become a serious semiconductor manufacturing power?
This week, that ambition received one of its strongest endorsements yet.
Applied Materials, one of the world’s most important suppliers of semiconductor manufacturing equipment, has announced plans to invest $5 billion in India over the next decade, equivalent to roughly ₹44,000–₹45,000 crore at recent exchange rates.
The announcement, made during SEMICON India 2026, is significant not because India is getting another conventional technology office, but because Applied Materials operates much deeper inside the semiconductor supply chain.
It builds the highly sophisticated machinery used to manufacture chips.
And in the semiconductor industry, whoever controls the machines, materials, processes and engineering knowledge behind chipmaking occupies one of the most valuable positions in global technology.
India’s semiconductor story is beginning to shift from “Can we build a fab?” to “Can we build the ecosystem that makes fabs possible?”
That is what makes the Applied Materials investment particularly important.
From chip design to chipmaking
India already has a major role in the global semiconductor industry.
Thousands of engineers in Bengaluru, Hyderabad, Chennai, Noida and other technology centres work on chip architecture, verification, embedded systems and very-large-scale integration design.
Many processors eventually manufactured in Taiwan, South Korea, the United States or elsewhere have passed through Indian engineering teams during development.
But historically, much of India’s contribution has ended before manufacturing begins.
The physical chip is usually produced elsewhere.
That is the gap New Delhi is now trying to close.
India wants to move beyond being one of the world’s largest pools of semiconductor design talent and become a country involved across the entire chain: research, equipment, materials, wafer fabrication, packaging, testing and ultimately finished semiconductor products.
Applied Materials’ expansion fits directly into that strategy.
The company plans to develop a 140-acre semiconductor research park in Bengaluru, expand research and development activity and significantly strengthen its local supplier ecosystem.
Its India workforce is also expected to grow substantially as the company increases engineering and product-development activity.
Prabu Raja, president of Applied Materials’ Semiconductor Products Group, described the shift in simple terms: India already participates strongly in the design stage, but the next objective is to participate more broadly across the product lifecycle.
That is a much bigger industrial challenge.
Why Applied Materials matters
Applied Materials does not compete with Nvidia by designing GPUs.
It does not manufacture chips in the way Taiwan Semiconductor Manufacturing Company does.
Instead, Applied Materials builds some of the equipment that companies such as TSMC, Samsung, Intel and other semiconductor manufacturers depend on.
That equipment performs some of the most delicate operations in modern industrial production.
Semiconductor manufacturing involves constructing microscopic electrical structures layer by layer across silicon wafers. The process can involve hundreds or even thousands of individual steps.
Materials have to be deposited.
Other materials have to be removed.
Surfaces must be modified.
Patterns must be inspected.
Defects have to be detected.
Measurements may involve structures only a few nanometres wide.
A modern semiconductor factory therefore depends on a relatively small number of highly specialized equipment companies.
Applied Materials is one of the biggest.
That makes its Indian investment strategically different from another software engineering centre or general manufacturing plant.
India is attracting a company that helps other companies manufacture semiconductors.
Without semiconductor equipment, there is no semiconductor factory.
And without engineers, suppliers and service capabilities supporting that equipment, building a sustainable chip industry becomes considerably harder.
The fab is only the visible part
When people imagine semiconductor manufacturing, they often picture a giant fabrication plant filled with futuristic machinery.
But the fab is only the centre of a much larger industrial network.
A functioning semiconductor ecosystem requires specialty gases, chemicals, silicon wafers, advanced ceramics, vacuum systems, precision valves, clean-room systems, robotics, power electronics, optical equipment, metrology systems and highly specialized software.
A single machine inside a semiconductor factory can contain thousands of precision components supplied by companies across multiple countries.
Some parts must operate inside extreme vacuum.
Others must tolerate aggressive chemicals.
Some require manufacturing tolerances that would be unnecessary in almost any ordinary industrial application.
This is why semiconductor manufacturing tends to form powerful geographic clusters.
Taiwan developed Hsinchu.
South Korea built enormous semiconductor ecosystems around companies such as Samsung and SK Hynix.
Japan became indispensable in materials and manufacturing equipment.
The Netherlands became globally important through ASML.
The United States remains dominant in semiconductor design and many categories of manufacturing equipment.
India now wants its own place inside that network.
Applied Materials could help create one.
India has already put serious money behind the plan
The current semiconductor push did not begin with Applied Materials.
In 2021, the Indian government approved the Semicon India Programme, with an initial outlay of ₹76,000 crore.
The objective was to attract semiconductor fabrication, packaging, testing, design and related investments.
Since then, India has approved a growing number of semiconductor projects involving both domestic and international companies.
The government has now moved into a second phase of its strategy, commonly referred to as Semicon 2.0, with greater emphasis on the broader ecosystem.
That includes not just fabs but also research, semiconductor machinery, materials, design, assembly, packaging and talent development.
This shift is important because governments around the world have learned that simply paying for a factory does not automatically create a semiconductor industry.
Factories need ecosystems.
And ecosystems take years to build.
The Tata fab remains the biggest test
The most closely watched project in India’s semiconductor programme remains Tata Electronics’ proposed fabrication facility in Dholera, Gujarat, developed in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation.
The project is expected to involve roughly $10 billion of investment.
If successful, it could become one of the most important manufacturing assets in India’s technology sector.
But large fabs are extraordinarily difficult projects.
They require uninterrupted high-quality electricity, huge quantities of ultra-pure water, reliable chemicals, highly trained engineers and complex supply chains.
Even after construction, success is not guaranteed.
The critical metric in semiconductor manufacturing is yield — the percentage of chips produced on a wafer that actually work correctly.
A factory can technically manufacture chips and still struggle commercially if yields remain too low.
That is why established semiconductor hubs have such a powerful advantage. They have accumulated engineering knowledge over decades.
India is attempting to compress part of that learning curve into a much shorter period.
AI has changed the stakes
India’s semiconductor expansion is happening at an unusually important moment.
Artificial intelligence has triggered one of the largest infrastructure investment cycles the technology industry has ever seen.
Training and operating advanced AI models requires vast quantities of computing power.
That has created extraordinary demand for GPUs and AI accelerators.
But AI infrastructure needs far more than GPUs.
It also needs high-bandwidth memory, networking processors, optical interconnects, storage controllers, power-management chips and advanced packaging.
All of those components require semiconductor manufacturing capacity.
The AI boom therefore expands the opportunity far beyond one category of processor.
The AI revolution is not simply a software boom. It is becoming one of the largest hardware build-outs in modern history.
Major technology companies are spending enormous sums constructing AI data centres.
That spending ultimately flows through semiconductor companies, memory manufacturers, networking suppliers, equipment vendors and materials companies.
Applied Materials sits near the beginning of that chain.
Why advanced packaging could matter enormously for India
One of the biggest changes in semiconductor technology is taking place after the chip leaves the wafer.
Traditionally, processors were often thought of as single pieces of silicon.
That is changing.
Modern processors increasingly combine multiple specialized pieces of silicon — commonly called chiplets — inside sophisticated packages.
AI processors are especially dependent on this architecture.
A powerful accelerator may need to sit extremely close to stacks of high-bandwidth memory so that enormous amounts of data can move between them quickly.
That makes packaging a critical performance technology rather than simply the final step before a chip is shipped.
India is already building capabilities in semiconductor assembly, testing and packaging.
That may provide an important entry point into the AI hardware ecosystem even before the country reaches the most advanced levels of wafer fabrication.
In other words, India does not need to immediately replicate Taiwan’s entire semiconductor industry to become strategically important.
It can participate in several layers simultaneously.
Tata has another global partner
The momentum around SEMICON India has also produced other important announcements.
Dutch semiconductor company Nexperia has announced a strategic partnership with Tata Electronics involving semiconductor manufacturing and packaging in India.
Nexperia specializes in chips widely used in automobiles, industrial systems, consumer electronics and power-management applications.
These are not the flashy processors that normally dominate technology headlines.
But they are enormously important.
The global chip shortage demonstrated why.
During the pandemic-era supply disruptions, automobile factories around the world were forced to slow or stop production because comparatively inexpensive semiconductor components were unavailable.
A car worth tens of thousands of dollars can remain unfinished because a chip costing only a few dollars is missing.
That experience fundamentally changed how governments think about semiconductor supply chains.
Chips are no longer treated simply as commercial components.
They are increasingly regarded as strategic infrastructure.
Lam Research is expanding too
Applied Materials is not the only semiconductor-equipment company increasing its interest in India.
Lam Research has also announced substantial investment related to semiconductor manufacturing, engineering and research.
That is important because semiconductor ecosystems become stronger when multiple equipment suppliers, component manufacturers and research teams operate in the same geography.
One global company arriving is interesting.
Several global companies expanding simultaneously suggests something more structural may be happening.
The semiconductor ecosystem India is attempting to create is beginning to attract the companies that sit upstream from the fabs themselves.
Bengaluru could evolve beyond software
The proposed Applied Materials research park in Bengaluru could have consequences beyond the company itself.
Bengaluru is already one of the world's major centres for semiconductor design.
But semiconductor-equipment engineering involves different disciplines.
It requires mechanical engineering.
