India's Chip Push: The Missing Link In The Electronics Success Story

India remains heavily dependent on imports for crude oil and runs a sizable merchandise trade deficit. Yet in one key sector, mobile phones, the country has achieved a remarkable turnaround. Today, 99.2% of the mobile phones sold in India are manufactured domestically, a milestone reached in a span of a few years.

India's mobile phone production has increased 33-fold, while exports have surged 165-fold over the last 11 years. A country once known for repeated false starts in electronics manufacturing has now emerged as the world's second-largest mobile phone manufacturer by volume.

The success story extends beyond mobile phones. India's broader electronics trade has witnessed rapid growth as well. Over the past five years, electronics exports have nearly doubled, while imports have risen about 1.6 times. According to the Ministry of Commerce and Industry, India imported electronic goods worth $179 billion and exported $90.6 billion in 2025-26.

Tamil Nadu leads India's electronics export boom. The state accounted for nearly 31 per cent of the country's electronics exports in 2025-26. Maharashtra contributed 16 per cent, while Karnataka accounted for 15.4 per cent. Together with Gujarat and Uttar Pradesh, the top five exporting states generated nearly 79 per cent of India's electronics exports, underscoring the growing concentration of manufacturing capacity in a handful of industrial hubs.

While India has made significant strides in electronics manufacturing and exports, its dependence on imported semiconductors remains strikingly high.

"The country's semiconductor market is projected to reach around $200 billion by 2035. However, despite growing domestic demand, nearly 90-95 per cent of this demand is currently met through imports, leading to large foreign exchange outflows and increasing the vulnerability of critical sectors to supply-chain disruptions," according to a May 2026 report by NITI Aayog.

The report warns that the widening gap between rapidly growing demand and limited domestic manufacturing capability represents both a strategic vulnerability and a historic opportunity. The trade numbers reflect that challenge. Against semiconductor exports of about $1.5 billion, India imported semiconductors worth $36.5 billion in 2025-26. As a result, the semiconductor trade deficit widened from $21 billion in 2021-22 to nearly $35 billion in 2025-26.

Nevertheless, India is moving quickly to narrow that gap. The government has launched multiple initiatives to build a domestic semiconductor ecosystem and reduce import dependence.

Addressing the Semicon India 2026 event on September 17, Prime Minister Narendra Modi stressed the need to nurture fabless semiconductor companies, create intellectual property within the country, and integrate emerging technologies such as silicon photonics into AI-driven infrastructure. He urged industry leaders in equipment, chemicals, gases and materials to capitalise on opportunities arising from the 12 approved semiconductor projects and a rapidly expanding demand pipeline.

Highlighting the changing dynamics of the global semiconductor industry, the Prime Minister noted that the explosive growth of artificial intelligence is shifting the focus beyond transistor size to broader system-level integration, including memory architecture and heat management. He also positioned India as a reliable and trusted destination for companies looking to diversify and expand semiconductor manufacturing amid evolving global supply chains.