India's second chip plant opens at Sanand

Kaynes' assembly-and-test facility at Sanand begins commercial production — an OSAT unit shipping power modules abroad, even as the mission behind it pivots from fabs to equipment.

What happened

• The Prime Minister inaugurated the Kaynes Technology semiconductor plant at Sanand, Gujarat, and production has commenced.
• It is an OSAT facility — Outsourced Semiconductor Assembly and Test — meaning it packages and tests chips rather than fabricating the silicon wafers themselves.
• The unit makes Intelligent Power Modules (IPMs) for a California-based company, with much of the output already booked for export, feeding electric-vehicle and heavy-industry supply chains.
• It sits inside the India Semiconductor Mission (ISM), launched in 2021; in the same announcement the government flagged ISM 2.0, declared in Budget 2026-27, which shifts the focus to domestic equipment and materials.
• Across the mission, 10 projects worth more than ₹1,60,000 crore are underway in six states, Kaynes and Micron among them.
• The event was used to showcase the indigenous Dhruv 64 microprocessor and a wider critical-minerals push, including a Rare Earth Corridor and the National Critical Minerals Mission.

Background & context

A semiconductor is the patterned chip of silicon that switches and stores the electrical signals inside every phone, car, missile and data centre; the question of who can make one — and who controls the equipment, materials and design tools to do so — has become a first-order strategic concern. India has historically been a large consumer of chips with almost no manufacturing of its own, importing nearly the entire requirement. The India Semiconductor Mission (ISM) was set up in 2021 to change that, riding on a ₹76,000 crore incentive package approved that year. ISM is run as an independent business division under the Digital India Corporation, which in turn sits under the Ministry of Electronics and Information Technology (MeitY) — the nodal ministry for the programme. Its mandate is to build a full domestic ecosystem across the chip value chain: fabrication (fabs), assembly-test-mark-pack (the OSAT/ATMP layer), display fabs, compound semiconductors and design.

The chip value chain has three broad stages, and it is worth keeping them distinct because UPSC routinely tests the difference. Design is the front end — laying out the circuit. Fabrication is the capital-heavy middle — etching that design onto a silicon wafer in a "fab", the part that costs tens of billions of dollars and is dominated by Taiwan, South Korea and the United States. Assembly, testing and packaging is the back end — slicing the wafer into individual chips, encasing them, wiring them and testing them, which is the stage an OSAT/ATMP plant performs. Sanand's significance is that it gives India one of its first operating units in this back-end stage at commercial scale. The Sanand cluster near Ahmedabad has become the early heart of Indian chip assembly: Micron's ATMP unit was the first major project sanctioned under ISM, and Kaynes now adds a second line of capacity in the same belt — which is why this plant is commonly described as India's "second" chip facility to begin output.

The pivot to ISM 2.0 reflects a lesson from the first phase. Standing up assembly and even fabrication still leaves India dependent on imported manufacturing equipment (the lithography and deposition machinery) and process materials (ultra-pure gases, photoresists, specialty chemicals and substrates). A chip ecosystem that buys all its tools and inputs abroad is only partly sovereign. ISM 2.0, announced in the 2026-27 Budget, therefore widens the mission's aim from chips themselves to the equipment and materials needed to make them — the deepest, least-substitutable layers of the stack — so that the country is building capability rather than only assembling foreign-made parts.

It also helps to place this against the peer it is most often confused with. The Production Linked Incentive (PLI) schemes that India runs for mobile phones, electronics and other sectors reward a company for the value of finished goods it produces and sells; they pull assembly and final manufacturing into the country. ISM works differently — it is a capital-expenditure (capex) support programme that meets a share of the upfront cost of setting up a fab, a display unit or an ATMP plant, because the barrier in semiconductors is not the per-unit margin but the enormous fixed cost of building the facility in the first place. So a quick contrast to carry: PLI subsidises output, ISM subsidises the plant. The Design-Linked Incentive (DLI) track inside ISM adds a third tool, supporting Indian chip-design startups across their development and early deployment stages, which connects directly to the Chips to Startup (C2S) talent programme that seeds the design workforce.

The product Sanand makes is itself worth understanding, because it explains why this plant matters beyond symbolism. An Intelligent Power Module is a packaged power-electronics part that combines power switches with their driving and protection circuitry in a single module; it is the component that controls how electrical energy is converted and delivered inside an electric-vehicle drivetrain, an industrial motor drive or a renewable-energy inverter. Demand for exactly these parts is rising worldwide as transport and industry electrify, which is why the plant's output is largely export-booked rather than waiting on domestic uptake. Power-electronics packaging is also a sensible entry point for a back-end plant: it is technically demanding but does not require the bleeding-edge nanometre processes of a leading logic fab, so it is a realistic place for India to win business and build credibility while the deeper fabrication and equipment layers are developed in parallel.

For Prelims

• Plant: Kaynes Semicon OSAT facility, Sanand, Gujarat; production commenced on inauguration; output largely export-booked.
• Product: Intelligent Power Modules (IPMs) for a California-based firm, serving EV and heavy-industry markets.
• OSAT meaning: Outsourced Semiconductor Assembly and Test — the back-end packaging-and-testing stage, also called ATMP (Assembly, Test, Mark, Pack).
• Mission: India Semiconductor Mission (ISM), launched 2021; built on a ₹76,000 crore incentive scheme; runs under the Digital India Corporation within MeitY.
• ISM 2.0: announced in Budget 2026-27; focus on domestic semiconductor equipment and materials for a full-stack ecosystem.
• Footprint: 10 projects, more than ₹1,60,000 crore, across six states (Kaynes and Micron included).
• Indigenous chip: Dhruv 64 microprocessor, aimed at 5G, automotive and industrial-automation use.
• Talent pipeline: Chips to Startup (C2S) — design tools to ~400 universities/startups, 55+ chips designed, target of 85,000+ design professionals.
• Market: India's semiconductor demand ~$50 billion now, projected to cross $100 billion by 2030.
• Minerals layer: India's membership in Pax Silica; the National Critical Minerals Mission; a ₹1,500 crore mineral-recycling scheme; a Rare Earth Corridor linking Odisha, Andhra Pradesh, Tamil Nadu and Kerala.

Why it matters

The problem ISM addresses is concentration risk. Advanced chip fabrication is geographically narrow, and the pandemic-era chip shortage showed how a single bottleneck can stall car factories and consumer-electronics lines worldwide. For India, near-total import dependence in a component that now sits inside cars, weapons, grids and telecom is both an economic drain and a strategic vulnerability. A working back-end ecosystem — packaging, testing, power modules — is the realistic first rung India can climb without waiting for a leading-edge logic fab, and it builds the workforce, supplier base and customer relationships that a fab later needs. The fact that Sanand's output is largely export-booked matters: it signals the plant is competing on global terms rather than depending only on a captive domestic market. The accompanying minerals push — rare earths, critical-mineral recycling, the Rare Earth Corridor — recognises that chips, EV motors and clean-energy hardware all rest on the same upstream resource base, where supply is again concentrated in a few countries. Read together, the plant and the policy describe a deliberate move up the value chain: from assembling chips, to making the tools and materials that go into them, to securing the minerals beneath them all.

For Mains