Paused, not derailed—experts see the Adani and Zoho exits as distinct but strategic, not setbacks. Rather than failure, they signal a pivot: India’s chip drive now hinges
on design depth and delivering existing models.
On April 30, 2025, reports emerged that the Adani Group had paused discussions with Israel’s Tower Semiconductor regarding a much-anticipated $10 billion chip fabrication model in India. A day later, software major Zoho announced the suspension of its $700 million plan to enter chip manufacturing.
The Economic Times framed these exits as a “setback to Prime Minister Narendra Modi, who has for several years tried to lure companies in his pursuit to make India a global chip manufacturing hub.”
Yet the reasons diverged. Zoho founder Sridhar Vembu explained that, despite an extensive search, the company could not secure a suitable technology partner to navigate the complexities of chipmaking. Adani, on the other hand, cited uncertainty around domestic demand and doubts over the model’s viability.
The shelving of two high-profile, capital-intensive ventures raises critical questions. What do these exits mean for India’s semiconductor roadmap—particularly as the domestic market is projected to reach $64 billion by 2026, and Union Electronics and IT Minister Ashwini Vaishnaw maintains that ‘Made-in-India’ chips will debut by year-end? Do these developments point to structural gaps in India’s readiness for chip manufacturing? Are policy frameworks overly optimistic—or are such shifts part of a natural evolution shaped by global headwinds?
A timeline
On September 6, 2024, Adani Group partnered with Israel’s Tower Semiconductor to establish a $10 billion semiconductor fabrication plant in Taloja, near Mumbai, Maharashtra. Approved by the Maharashtra state government, the project was to be developed in two phases; the first with a production capacity of 40,000 semiconductor wafers per month, followed by expansion to 80,000 wafers per month in the second phase.
The venture applied for subsidies under the India Semiconductor Mission (ISM)’s incentive programme. However, the application remained under review by the central government, with no incentives granted. The plant was projected to generate nearly 5000 jobs.
By May 2025, reports emerged that discussions had been terminated, as internal evaluations cited uncertainty about domestic semiconductor demand and concerns regarding Tower’s financial commitment.
In March 2023, Chennai-based software-as-a-service (SaaS) firm Zoho announced plans to establish a semiconductor design model in Tenkasi, Tamil Nadu. This initiative aimed to harness local talent and boost India’s semiconductor design capabilities.
In June 2023, Zoho applied for a licence under the ISM to set up a compound semiconductor fabrication plant. The company earmarked an initial investment of $200 million, with projections suggesting the total investment could reach $600 million, contingent on a suitable technology partnership.
In December 2024, the Karnataka government approved Zoho’s proposal to establish a semiconductor manufacturing facility in the Mysuru region. Valued at ₹34.26 billion (approximately $400 million), the project was to be executed through Zoho’s subsidiary, Silectric Semiconductor Manufacturing. The facility was expected to create approximately 460 jobs and would have been the state’s first semiconductor unit.
However, in May 2025, the capital-intensive nature of semiconductor fabrication prompted Zoho to suspend the project. Sridhar Vembu noted, “We did not have that confidence in the tech, so our board decided to shelve this idea for the time being, until we find a better tech approach.”
These are not isolated cases. Previous big-budget semiconductor ventures have also faltered despite initial momentum. A notable example is the $19.5 billion joint venture between Vedanta and Foxconn to establish a semiconductor fab in Dholera, Gujarat, which was dissolved in July 2023.
That venture also applied under the ISM but did not advance far enough to receive formal approval or fund disbursement. It faced setbacks, notably the inability to secure a committed technology partner. Talks with European semiconductor firm STMicroelectronics collapsed after the Indian government insisted on deeper technical involvement rather than superficial collaboration.
Delays in incentive processing and escalating cost projections further complicated matters, culminating in Foxconn’s exit from the joint venture by mutual consent. Vedanta has since explored alternative partnerships to pursue its semiconductor goals.
And Dholera? It is now slated to host India’s first approved commercial semiconductor fabrication facility. In March 2024, Tata Electronics and Taiwan’s PSMC received approval for an ₹910 billion (~$11 billion) project focused on 28nm+ nodes for automotive, consumer, and industrial applications.
Why setting up a fab is not a cup of tea
A few months ago, McKinsey & Company reported that by 2030, over $1 trillion in fab investments would have been planned globally. Yet, building and sustaining these facilities is becoming increasingly complex. While AI and digital infrastructure are fuelling unprecedented demand, success depends on five critical challenges: cost, materials, packaging, logistics, and talent.
A mature fab may cost between $10-20 billion and require 2-3 years to build. In regions such as the US or Europe, operating costs are up to 35% higher than in Taiwan, due to labour, energy, and permitting delays. India faces similar issues—land acquisition hurdles, regulatory bottlenecks, and underdeveloped infrastructure contribute to elevated project risks and delays.
Material sourcing presents further complications. Advanced chips rely on rare elements like germanium, tungsten, and gallium, most of which are controlled by a few countries—China, for instance, accounts for over 80% of the global gallium supply. India must secure strategic imports and diversify supply chains, despite lacking local reserves and robust trade partnerships.
Advanced packaging is another weak link. Over 90% of global capacity is concentrated in East Asia, dominated by players such as ASE and TSMC. Talent, too, is a pressing concern. While India produces strong engineering graduates, few are specifically trained in semiconductor manufacturing.
For perspective, the US anticipates a shortfall of 70,000-90,000 skilled workers in the sector by 2030, even with reinforced training pipelines. India will need to address this workforce gap decisively if it aims to turn its semiconductor vision into reality.
Where is India then…
“India’s government incentives are quite competitive, especially for trailing-edge and compound semiconductor fabs,” says industry and policy veteran Pranay Kotasthane, Deputy Director of the Takshashila Institution.
India’s semiconductor policies, particularly the ISM, address challenges in cost, supply chain development, packaging, and talent acquisition. The ISM offers up to 50% fiscal support for approved semiconductor fabrication models. State governments such as Gujarat, Odisha, Madhya Pradesh, Andhra Pradesh, Tamil Nadu, Karnataka, Telangana and others supplement this with additional incentives, bringing total subsidies to approximately 70-75% of model costs. This makes India’s subsidy regime among the most generous globally.
The government has recognised the need to develop semiconductor-grade raw materials, including silicon wafers, high-purity gases, and speciality chemicals. In Budget 2025-26, customs duties were eliminated on waste and scrap of twelve critical minerals, including tungsten—a key material used in chipmaking. While not all are directly tied to fabrication, this step reflects a broader effort to ease access to strategic inputs and reduce dependence on imports.
To address the talent gap in semiconductor design and manufacturing, targeted initiatives such as the Design Linked Incentive (DLI) scheme and Chips to Startup (C2S) provide financial support to startups and academic institutions. For instance, Bengaluru-based Mindgrove Technologies is developing low-power chips for IoT applications under this scheme, while IIT Bombay has received funding to establish a VLSI design and training hub.
Experts believe that in contrast to the uncertain economics of fabrication, India’s chip design and talent efforts are showing clear, scalable progress, laying the foundation for sustained momentum in a turbulent global tech landscape.
According to Dr Satya Gupta, President of the VLSI Society of India and a key figure in India’s semiconductor strategy, building a globally competitive ecosystem demands a triad approach: “For India to become a strong Semiconductor Product Nation, we need to focus on Semiconductor Product Design, Semiconductor Manufacturing and Talent Development.”
Manufacturing alone will not ensure strategic autonomy in semiconductors. As India pivots to the next phase, design and innovation must also be prioritised alongside manufacturing. Dr Gupta advocates for an expanded DLI 2.0 scheme with an outlay of $1 billion, representing approximately 10% of the 2022 incentives allocated to fabrication. “This will accelerate the development of important Indian chips by Indian companies and make India Atma-Nirbhar in this critical area to create strategic autonomy,” he states.
Dr Gupta also commended the fact that India is executing the world’s largest chip design education programme under the C2S initiative. “India has done very well in terms of providing the all-important chip design tools (EDA tools) from the leading global companies under the C2S programme to more than 280 institutions,” he said. Through this, India is enabling more than 50,000 students and 1000 faculty members across 280 institutes to gain training in all aspects of chip design.
Global collaborations are accelerating workforce development and technology transfer. IMEC (Belgium) is partnering with Indian institutions on advanced manufacturing training, while companies such as Lam Research have launched local programmes to upskill engineers in chip fabrication technologies.
However, execution remains critical to bridging the gap between industry and academia.
Challenges persist in infrastructure development and in scaling domestic capabilities to meet global standards. These point to unique hurdles faced by individual models, as well as broader geopolitical influences.
Tariff, tensions, and fab
Investor caution towards semiconductor fabrication in India is closely linked to geopolitical instability. Foremost among these is the escalating tariff and technology war between the US and China, which has disrupted supply chains, increased the cost of critical inputs, and introduced long-term uncertainty in the chipmaking sector.
“Over the last few years, several fabrication models have been initiated globally. Some are not market demand-driven but are motivated by national security. Once all these fabs come online, they could face a serious underutilisation challenge. Thus, investors are wary of committing to new fabrication, especially at a time when the US and China are engaged in a tariff war that may lead to inflation and lower demand. These models do not reflect India’s competitiveness, but rather the global situation,” Kotasthane notes.
In October 2022, the US imposed export controls on advanced chips and equipment to China. In retaliation, China restricted exports of gallium and germanium—key elements in semiconductors—banning them entirely to the US by December 2024. China currently controls 90% of global gallium and 60% of germanium production.
The war has escalated. As of April 2025, the US imposed sweeping tariffs, including a 145% levy on Chinese imports, citing national security concerns. China responded with a 125% tariff on American goods.
This has made investors increasingly cautious about committing to long-term semiconductor models worldwide, including in India. This hesitation is particularly evident in the reluctance to fund new fabrication facilities due to the persistent risk of additional trade restrictions or supply disruptions. Could this explain why Zoho could not find a suitable partner and Adani had to shelve its plans?
“For semiconductor fabs, individual models not taking off is not unusual. This segment has a long gestation period; companies and investors require a robust business case before committing,” says Kotasthane.
The government remains optimistic about the semiconductor pipeline, particularly in Gujarat and Assam.
Shubha Mitra is a journalist at EFY, keenly interested in policies and developments shaping the electronics business.
