Your phone, your car, the UPI payment you made this morning and the AI model answering questions online all depend on one thing: a sliver of silicon carrying billions of microscopic switches. That sliver is a semiconductor chip, and it has quietly become the most strategic product on Earth.
What is a semiconductor?
A semiconductor is a material, most often silicon, that conducts electricity sometimes and blocks it at other times. That "sometimes" is the whole trick. By adding tiny amounts of other elements (a process called doping) and applying a voltage, engineers can make silicon behave like a switch that turns on and off billions of times a second.
That switch is the transistor. Wire a few transistors together and you get a logic gate that can decide "yes" or "no". Wire billions of gates together and you get a processor that can run an operating system, render a video or train an AI model. A modern smartphone processor carries well over ten billion transistors on a piece of silicon smaller than a fingernail.
Where chips hide in everyday life
When people hear "chip", they think of computers. In reality, chips are almost everywhere:
- Phones and laptops: processors, memory, camera sensors, Wi‑Fi and 5G radios, power management.
- Cars: a modern car can carry well over a thousand chips, and electric vehicles carry even more for battery and motor control.
- Payments and identity: bank cards, SIM cards, Aadhaar-linked biometric devices and POS terminals.
- Healthcare: ECG machines, glucose meters, MRI scanners and hearing aids.
- Infrastructure: power grids, railway signalling, telecom towers, satellites and defence systems.
- AI and data centres: GPUs and AI accelerators, the most valuable chips being made today.
If chips stop flowing, factories stop too. The world learned this in 2021, when a global chip shortage left car makers, including in India, with half-built vehicles waiting for parts worth a few hundred rupees.
How a chip is made: four stages
Making a chip is one of the most complex things humans do. It happens in four broad stages, often in different countries:
- DesignEngineers describe the chip's behaviour in code (Verilog or VHDL), verify it exhaustively, then turn it into a physical layout of billions of shapes. India is already strong here: a large share of the world's chip-design engineers work in Indian design centres.
- Fabrication (the "fab")The layout is printed onto silicon wafers through hundreds of steps of lithography, etching, deposition and doping, inside ultra-clean factories that cost billions of dollars.
- Assembly, testing, marking and packaging (ATMP/OSAT)Wafers are cut into individual dies, tested, and sealed in packages with pins or balls that connect them to a circuit board. Advanced packaging, which stacks or joins several dies, is now a key area of innovation.
- Equipment, materials and softwareBehind all three stages sit specialised machines, ultra-pure chemicals and gases, and electronic design automation (EDA) software. Each is its own industry.
Why chips became strategic
Three things turned chips from a component into a national priority:
1. Extreme concentration
The most advanced chip manufacturing is concentrated in a handful of companies and places, especially East Asia. One factory fire, earthquake or political crisis can ripple across every industry worldwide.
2. Demand is exploding
AI, electric vehicles, 5G and connected devices all need more and better chips. According to WSTS, the global semiconductor market was worth about $796 billion in 2025 and is forecast to keep growing sharply.
3. Chips are security
Defence, telecom, power and payments all run on chips. A country that cannot design or make its own chips depends on others for its critical infrastructure.
Why it matters for India, and for you
India imports most of the chips it uses, even as it assembles more phones and electronics than ever. That is why the Government launched the India Semiconductor Mission (ISM) in 2021 and, in July 2026, approved ISM 2.0 with an outlay of ₹1.27 lakh crore. India's first assembly and test plants started producing in 2026, and the first commercial fab is under construction in Dholera, Gujarat.
Plants and policies are only half the story. Every fab, packaging line and design centre needs skilled people: process engineers, verification engineers, test engineers, technicians and researchers. India's semiconductor workforce is estimated at about 2.5 lakh professionals today, and estimates suggest it will need around 4 lakh by 2030. That gap is the opportunity for today's engineering students.
- A chip is billions of tiny switches (transistors) on silicon.
- Making one involves design, fabrication, packaging and test, plus equipment and materials.
- Chips are now strategic because supply is concentrated and demand is surging.
- India is building its own capability, and it needs lakhs of skilled engineers to do it.
Want to learn this hands-on?
ISEI runs chip design, verification and manufacturing programmes with universities and industry.