India to Roll Out First Homegrown Chip From CG Semi's Sanand plant

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India will roll out the first “Made in India” semiconductor chip later this year, communications and IT minister Ashwini Vaishnaw said this week, tying the milestone to the opening of CG Semi’s new assembly and testing facility in Sanand, Gujarat.

The minister’s comments underscore the government’s drive to show tangible progress on semiconductor manufacturing, an area where India has long lagged despite its strengths in software and design.

The announcement came as CG Semi, a subsidiary of CG Power and Industrial Solutions from the Murugappa Group, inaugurated its G1 plant on Thursday, 28 August.

“This pilot line will produce 500,000 chips per day, and our first made‑in‑India chip will come from here,” Vaishnaw said.

The site is designed as an end-to-end OSAT (outsourced semiconductor assembly and test) operation—handling assembly, packaging, testing, and reliability checks, and is expected to reach peak output of about 500,000 units per day once commercial production ramps up.

Equipped with a manufacturing execution system for automation and traceability, the plant also houses in-house failure analysis labs, aimed at meeting automotive and industrial electronics standards.

Although wafer fabrication plants take years to build and bring online, OSAT facilities such as CG Semi’s provide faster wins by adding capacity in packaging, which is critical for sectors such as autos, consumer electronics, and industrial systems.

Vaishnaw’s remark that India’s first chip will roll out soon from CG Semi’s pilot line reflects how the government wants to project early results even as larger fabs, such as Tata Electronics’ unit in Dholera, remain under construction.

Investments and partnerships

The project involves a planned investment of more than ₹7,600 crore over five years, backed by India’s Semiconductor Mission and state incentives from Gujarat.

Under the scheme, New Delhi funds up to 50% of eligible capital costs for semiconductor projects, a model designed to crowd in private capital while accelerating capacity creation.

A second plant, dubbed G2 and under construction just 3 km from G1, is slated to go live by the end of next year, ramping output to 14.5 million units a day. Together, the two plants are expected to generate more than 5,000 direct and indirect jobs once fully operational.

Leading up to the inauguration of the G1 plant, CG Semi sent hundreds of Indian engineers, operators, and technicians to Malaysia for three months of hands-on training to accelerate knowledge transfer and operational readiness.

CG Semi has partnered with Japan’s Renesas and Thailand’s Stars Microelectronics for technology transfer and expertise.

For the Murugappa Group, semiconductors represent a long-cycle bet.

“Semiconductors are the ‘new steel’ essential for building India’s economic and technological security,” CG Power chairman Vellayan Subbiah said.

Market reaction

Shares of CG Power and Industrial Solutions Ltd jumped 4% on BSE Ltd on Friday, with brokerages flagging earnings upside as the semiconductor unit scales.

Nomura noted that even packaging capacity could be earnings accretive given the shortage of trusted supply in India.

Investors also highlighted that packaging projects carry less execution risk when compared with greenfield wafer fabs, as they require smaller capex and shorter build times.

The Sanand plant is one of three semiconductor projects approved by the Union cabinet in February 2024.

Alongside Tata’s planned fab at Dholera and another OSAT in Assam, the facilities are part of the government’s promise that construction would begin within 100 days of approval.

The moves followed India’s 2021 policy that earmarked ₹76,000 crore for semiconductors, displays, and talent development. Together, the projects are intended to seed an ecosystem that includes suppliers of materials, substrates, equipment servicing, and testing capabilities.

The link to IndiaAI Mission

In March 2024, the Union cabinet approved the IndiaAI Mission with an allocation of ₹10,371.92 crore over five years.

The program initially envisioned establishing shared AI compute infrastructure through a public‑private partnership of 10,000 or more GPUs and launching a marketplace to democratize AI access and support innovation.

Officials framed the mission as a tool to democratize AI, especially in Indian languages and for public‑service applications, while reducing reliance on foreign compute platforms.

Subsequent procurement efforts have significantly expanded capacity, with national compute infrastructure surpassing 34,000 GPUs in May this year, a sign of rapid progress beyond the original pilot scale.

The IndiaAI Mission and India’s semiconductor roadmap are complementary. Robust AI compute demands secure, predictable chip supply—something local OSAT and fab facilities can help provide, reducing the risk of bottlenecks as AI scales across mobility, healthcare, manufacturing, and public administration.

By anchoring OSAT operations like CG Semi’s in Gujarat, the government hopes to secure packaging for mature-node chips widely used in cars, power management, and IoT devices, while gradually building a base for more advanced nodes.

Despite the progress, risks abound. OSAT economics depend on high utilization and sticky customer programs, and automotive clients will expect rigorous qualifications before shifting volumes.

Yield improvement and reliability testing will take years to establish credibility. India will also need to align packaging ramps with wafer supply from abroad until local fabs deliver, analysts said.