The importance of AI hardware in India’s tech growth

By Swastik Chakraborty, Vice President, Netweb Technology

India stands at a pivotal moment in its technological journey, poised to become one of the leading players in artificial intelligence (AI). With AI projected to add $450-500 billion to India’s GDP by 2025—roughly 10% of its $5 trillion economic goal, according to a NASSCOM report—its transformative potential is undeniable. However, the engine driving this revolution isn’t just software or algorithms; it’s also the hardware that powers them. From powerful processors to specialised chips, AI hardware is the backbone of India’s tech growth, enabling faster processing, fostering innovation, and unlocking economic opportunities. As India ramps up its AI ambitions, the need for robust, locally manufactured hardware is more critical than ever to fuel economic growth, create jobs, and enhance global competitiveness. In this article, we will discuss how hardware is creating unprecedented opportunities for growth and employment, the push for local manufacturing, government initiatives and its development in India.

India’s Expanding AI Hardware Market

India is set to become a major player in AI hardware manufacturing and design. Key statistics underline this growth:

• The AI semiconductor market in India is projected to reach $21 billion by 2030​.
• India is home to 20% of the global semiconductor design workforce, making it a talent powerhouse​.
• The Indian semiconductor market itself is expected to grow to $150 billion by 2030, backed by government initiatives and increasing demand​.
• With the Make in India initiative, local chip fabrication and semiconductor design are gaining traction, reducing reliance on imports​.

These figures highlight India’s potential to emerge as a leader in AI-driven hardware solutions.

The Hardware Foundation of AI Innovation

AI applications—whether in healthcare, agriculture, manufacturing, or retail—rely on immense computational power. Advanced hardware like Graphics Processing Units (GPUs), Tensor Processing Units (TPUs), ASIC (Application-Specific Integrated Circuit), FPGA (Field Programmable Gate Arrays), AI Accelerator and custom AI chips accelerate the training and deployment of complex models. For instance, the supercomputers built for developing Large Language Models (LLMs) uses thousands of GPUs to handle AI workloads, a testament to hardware’s role in scaling innovation. In India, the demand for such hardware is also surging because of rapid growth in data center servers, cloud computing and AI specific hardware. Without it, AI systems falter, slowing down everything from precision farming tools that predict crop yields to diagnostic algorithms that detect diseases early. Many Indian companies such as Netweb have been actively exploring the huge potential of AI with impressive capital investment towards building tech sovereignty.

Why Hardware is Essential for India’s Growth?

AI applications require substantial computational power, and the hardware that powers them is crucial for India’s technological evolution. The key benefits of a strong AI hardware ecosystem include:

1. Enabling AI-Driven Industries

AI hardware is the backbone of automation, data processing, and deep learning applications. Sectors such as healthcare, fintech, smart cities, and defense rely on high-performance AI chips to run critical operations efficiently. For example:

• AI-powered medical diagnostics need GPU-accelerated computing for real-time image processing.
• Financial institutions use AI-driven fraud detection and risk analysis, powered by AI processors.
• Autonomous vehicles require low-latency AI chips for real-time decision-making.

2. Boosting India’s Role in Semiconductor Manufacturing

Despite its strengths in semiconductor design, India imports nearly 95% of its semiconductor requirements, from countries such as China, Taiwan, South Korea, and Singapore leading to a massive trade deficit​. However, government-backed programs such as the Production Linked Incentive (PLI) scheme and Semiconductor Manufacturing Investment Programs are attracting global and domestic players to set up chip fabrication plants in India. Companies like Tata Group, Micron, and CG Power are making significant investments in semiconductor manufacturing​.

3. Enhancing India’s Global Competitiveness

Nations like the U.S., China, and South Korea dominate hardware production, but India has the opportunity to carve out its niche.

• AI-focused semiconductor startups like Mindgrove, Morphing Machines, and Incore are developing AI-specific chips tailored for India’s market​.
• Bengaluru, India’s semiconductor startup hub, hosts more than 63% of the country’s semiconductor startups​.
• The India Semiconductor Mission (ISM) is creating a roadmap for domestic AI chip design and manufacturing​.

4. Economic Growth & Job Creation

The rise of hardware manufacturing will:

• Generate high-value jobs, including AI chip designers, semiconductor engineers, and manufacturing specialists.
• Attract Foreign Direct Investment (FDI), with companies like Intel, NVIDIA, and Qualcomm showing increasing interest in India’s semiconductor landscape.
• Support small and mid-sized AI hardware startups, encouraging local innovation.

5. AI Hardware as a National Security Priority

Given the increasing role of AI in defense and cybersecurity, having indigenous AI hardware is a strategic necessity. The Indian defense sector is adopting AI for surveillance, cybersecurity, and autonomous weapons, requiring specialised AI processors​. Dependency on foreign AI hardware poses security risks, making local production imperative.

Challenges and the Way Forward

While India’s AI hardware sector is on an upward trajectory, there are significant challenges:

• Capital-Intensive Manufacturing – Establishing semiconductor fabrication plants requires massive investments exceeding billion per facility​.
• Skilled Workforce Shortage – Despite India’s semiconductor design talent, there is a shortage of skilled professionals in AI-specific chip development​.
• Supply Chain Dependencies – India currently imports key semiconductor raw materials, making the industry vulnerable to supply chain disruptions​.
• Limited AI-Specific Hardware Production – Most semiconductor startups in India focus on design rather than manufacturing, necessitating more incentives for chip fabrication​.

The Push for Local Manufacturing

India’s dependence on foreign hardware poses risks. If geopolitical tensions, extend to India, the fallout could cripple its AI aspirations. Local manufacturing offers a solution. Experts argue that producing GPUs and AI chips in India aligns with the “Make in India” initiative, reducing supply chain vulnerabilities and fostering self-reliance. Furthermore, India’s Semicon India policy, launched in 2021 with an outlay of INR 76,000 crore, is a pivotal initiative to establish the country as a global semiconductor manufacturing hub and reduce dependency on imports. The policy offers 50% financial support for semiconductor fabrication (fab), compound semiconductors, and ATMP (Assembly, Testing, Marking, and Packaging) units, encouraging companies to set up local production facilities. By focusing on high-end chip manufacturing, the initiative strengthens India’s position in the global technology landscape, ensuring long-term growth in AI, cloud computing, and advanced hardware solutions.

The economic stakes are high. AI hardware production could mirror the success of India’s semiconductor push, projected to bolster the AI market. Beyond economics, it’s about jobs. The AI industry is expected to create 2 million jobs by 2030, with hardware manufacturing adding high-skill roles in chip design, assembly, and testing.

Conclusion

AI hardware is the foundation of India’s digital transformation, enabling faster AI processing, enhanced cybersecurity, and self-reliance in semiconductor manufacturing. With a projected $21 billion AI semiconductor market by 2030, India has a golden opportunity to lead in AI hardware innovation​. By strengthening its AI hardware capabilities, India can not only drive economic growth and create jobs but also position itself as a global AI powerhouse.

With the right investments, policies, and industry collaborations, India’s journey toward AI hardware leadership is not just a possibility—it is an inevitability.