US President Donald Trump's proposed new semiconductor tariffs could create an unexpected windfall for India's growing tech sector, according to industry experts.
The tariffs, while aimed at reshaping US trade relationships, may position India as a key beneficiary amid shifting global supply chains.
Strategic market shifts
Manish Rawat, a semiconductor analyst at TechInsights, highlighted the disruptive potential of such tariffs.
"The US tech industry's reliance on Taiwanese chip manufacturing faces disruptions due to higher tariffs, increasing costs and forcing companies to reconsider sourcing strategies," he said.
These developments could prompt US companies to diversify their supply chains away from traditional hubs like China and Taiwan, creating opportunities for emerging markets like India.
India's Semiconductor Mission (ISM) and associated initiatives, such as the US$10 billion Semicon India Programme, have already laid the groundwork to attract global semiconductor firms. "India stands to benefit as the US diversifies supply chains away from China and Taiwan," Rawat noted.
The country's expanding semiconductor assembly, testing, and packaging (ATP) sector is particularly well-positioned to absorb the redirected demand.
Trade relationship remains strong
GS Madhusudan, CEO of InCore Semiconductors, downplayed the direct impact of potential US tariffs on India.
"I don't think there is a fundamental tariff conflict. The only time a tariff conflict comes between India and the US is agriculture, and agriculture is a hot potato for both countries," he explained.
He emphasized that most American semiconductor products enter India tariff-free under World Trade Organization (WTO) agreements.
"All American semiconductor companies operate in India—Intel, Apple, and others have strong sales here. Apple benefits from zero tariffs in India," Madhusudan added. Even for products with tariffs, such as certain mobile phone components, the rates are relatively low.
Investment landscape
The potential tariffs could influence foreign direct investment (FDI) in India's semiconductor sector.
"These tariffs may drive foreign companies to establish local manufacturing units to bypass tariff-related costs, aligning with India's Semiconductor Mission," Rawat explained.
Increased investment in ATP operations and the development of fabs and research centers could strengthen India's semiconductor ecosystem.
However, Rawat cautioned that higher import costs for components might deter some investors.
"The financial viability of semiconductor operations in India will depend on mitigating tariff-related uncertainties," he said. Government policies, including financial incentives, infrastructure support, and R&D grants, will be critical in counterbalancing these challenges.
Infrastructure and talent gaps
Despite the opportunities, India faces several hurdles. "The country's semiconductor manufacturing ecosystem is still in its early stages, with infrastructure deficiencies, including unreliable power, water supply, and high-purity chemical access," Rawat noted.
Additionally, while India has a strong talent pool in semiconductor design, there is a shortage of skilled professionals for advanced fabrication processes.
Madhusudan echoed these concerns but remained optimistic. "Rather than looking at it as US versus India, why can't we have more joint ventures?" he suggested. Joint ventures could help mitigate risks while fostering technology transfers and investment.
Path forward
The evolving geopolitical landscape offers India a strategic opening to solidify its position in the global semiconductor supply chain.
"The US-China tech conflict and global reshoring efforts present India with a key opportunity to enhance its semiconductor sector," Rawat said.
For India to fully capitalize on this moment, swift action is needed. Infrastructure gaps must be addressed, a skilled workforce must be cultivated, and policy stability must be ensured.
As Madhusudan put it, "The issues between India and the US are very different from what the US has with China. There are lots of solutions available—we just need to sit around the table and talk more."
While the full impact of potential Trump-era tariffs remains uncertain, India's proactive policies and strategic positioning could turn global disruptions into a growth catalyst for its semiconductor ambitions.