India vs Vietnam for Semiconductor & Chip Assembly: Incentives & Infrastructure

The Global Semiconductor Reshoring Race: Where India and Vietnam Stand

The global semiconductor industry is undergoing its most significant geographic restructuring in decades. US-China tensions, CHIPS Act legislation across multiple countries, and COVID-era chip shortages have driven a worldwide push to diversify semiconductor supply chains beyond Taiwan, South Korea, and China.

Within this restructuring, assembly, testing, marking, and packaging (ATMP) — also known as outsourced semiconductor assembly and test (OSAT) — has emerged as the fastest-growing segment for emerging manufacturing destinations. ATMP represents the back-end of semiconductor manufacturing: taking fabricated silicon wafers and packaging them into finished chips ready for use in electronics.

India and Vietnam are competing directly for ATMP investment. India brings massive government incentives and a large engineering talent pool; Vietnam brings operational track record, existing multinational facilities, and proximity to East Asian chip ecosystems. This analysis examines where each country stands in March 2026 across incentives, infrastructure, talent, and regulatory frameworks.

Government Incentives: India's INR 76,000 Crore Semiconductor Mission

India Semiconductor Mission (ISM) 2.0

India has committed one of the world's largest semiconductor incentive packages. The India Semiconductor Mission, launched initially in 2021 and upgraded to ISM 2.0 in the Union Budget 2026-27, provides:

• Total incentive framework: INR 76,000 crore (~$9 billion), offering fiscal support of up to 50% of capital expenditure for silicon fabs, compound semiconductor facilities, ATMP/OSAT units, and chip design
• Budget 2026-27 allocation: INR 8,000 crore for the Modified Programme for Development of Semiconductor and Display Manufacturing Ecosystem, plus INR 1,000 crore specifically for ISM 2.0 focused on research and training
• OSAT/ATMP specific support: 50% of capital expenditure reimbursed for compound semiconductors, silicon photonics, sensors (including MEMS), and semiconductor packaging units
• Companion scheme: Targeting nine compound semiconductor and ATMP/OSAT units with approximately INR 11,000 crore in fresh investment and 3,000 jobs

The PLI scheme for non-semiconductor electronics components, approved in March 2025 with an INR 22,919 crore outlay, complements ISM by targeting PCBs, display modules, camera modules, and passive components — the broader ecosystem that semiconductor assembly operations depend upon.

Vietnam's Semiconductor Incentive Approach

Vietnam does not have a standalone semiconductor incentive program comparable to India's ISM. Instead, it leverages its broader FDI incentive framework:

• Corporate tax: 10% preferential CIT rate for up to 15 years for semiconductor production, AI, and high-tech sectors under the new CIT law (Law No. 67/2025/QH15, effective October 2025)
• Tax holidays: 2-4 years of CIT exemption followed by 50% reduction for 4-9 years for qualifying high-tech projects
• Import duty exemptions: Duty-free import of semiconductor equipment, raw materials, and components
• CHIPS Act partnership: The US government has brought Vietnam into the CHIPS Act framework, with Synopsys and Marvell establishing chip design centers and Amkor expanding assembly operations

Existing Facilities and Operational Status

India's OSAT/ATMP Projects

As of March 2026, India has 10 approved semiconductor units including two fabrication plants and eight ATMP/OSAT facilities:

• CG Power (Sanand, Gujarat): OSAT facility in partnership with Renesas Electronics, with investment exceeding INR 7,600 crore. The G1 facility, inaugurated August 2025, can handle approximately 0.5 million units per day. Commercial production expected in 2026
• Tata Semiconductor Assembly and Test (Assam): Major ATMP facility with $3.3 billion investment. Timeline pushed to April 2026
• Micron Technology (Sanand, Gujarat): $2.7 billion investment for an assembly and test facility. Now expected to address demand in the latter half of the decade
• Kaynes Semicon (Gujarat): OSAT facility focused on automotive and industrial chips
• HCL-Foxconn JV (Uttar Pradesh): Joint venture near Jewar Airport with INR 3,706 crore investment for chip manufacturing
• Tata-PSMC (Dholera, Gujarat): India's first semiconductor fab — a joint venture with Taiwan's PSMC for 28nm chips. More than half of India's $10 billion in semiconductor incentives is allocated to this project

Most Indian projects are in construction or pre-production phases. Commercial-scale output from multiple facilities is expected between late 2026 and 2028.

Vietnam's Operational Semiconductor Facilities

Vietnam has a significant head start in operational OSAT facilities:

• Intel (Ho Chi Minh City): Intel's largest back-end factory globally, operational for over a decade, handling chip assembly, testing, and packaging at scale
• Amkor Technology (Bac Ninh): $1.6 billion investment — Amkor's largest facility globally. Supports advanced packaging for AI, 5G, and automotive chips. Fully operational
• Hana Micron: Approximately $930 million in investments by 2026 for chip packaging capacity expansion
• Samsung (multiple locations): Continued $1 billion annual investment in semiconductor-related operations
• Coherent (Dong Nai): $127 million facility opened July 2025, producing silicon carbide components, optical glass, and precision photonics for AI and cloud datacom

The critical difference: Vietnam's facilities are operational and producing at commercial scale today, while India's facilities are largely under construction or in commissioning phases.

Vietnam's Wafer Fab Ambitions

In March 2025, Vietnam approved its first wafer fabrication plant — a VND 12,800 billion (~$500 million) project targeting completion before 2030. This represents Vietnam's push to move beyond OSAT into front-end semiconductor manufacturing, though actual wafer production is still years away.

Talent and Workforce: India's Engineering Scale vs Vietnam's Specialized Pool

India's Semiconductor Talent Pipeline

India's advantage in semiconductor talent lies in its massive engineering education infrastructure:

• Engineering graduates: 1.5 million annually from 3,500+ engineering colleges, with growing specialization in VLSI design, embedded systems, and semiconductor physics
• Chip design expertise: India already has approximately 20% of the world's chip designers, with major design centers for Qualcomm, Intel, AMD, Texas Instruments, and Broadcom in Bengaluru, Hyderabad, and Chennai
• R&D capability: India's strength in chip design and verification can be leveraged by OSAT companies for co-located design-for-manufacturing optimization
• ISM 2.0 training focus: INR 1,000 crore allocated specifically for industry-led research and training centers

Vietnam's Semiconductor Workforce

Vietnam's semiconductor workforce totals approximately 15,000 people:

• IC design engineers: Approximately 7,000
• Packaging, testing, materials: 7,000-8,000 workers
• Technicians: About 10,000 across packaging, testing, and materials manufacturing
• Growth in 2025: Increased by nearly 1,000 engineers, mainly through upskilling from related fields
• Government target: 50,000-100,000 semiconductor engineers by 2030, with 237,000+ students admitted to STEM programs in 2025

Vietnam's semiconductor workforce is growing rapidly but starts from a significantly smaller base. More than 200 institutions are expected to offer semiconductor programs by 2030. The biggest challenge is that demand for skilled workers is growing faster than training capacity.

Workforce Cost Comparison for Semiconductor Roles

Semiconductor assembly operations require a specific mix of highly skilled engineers, technicians, and cleanroom operators. Here is how compensation compares across key roles:

Labor costs for semiconductor roles are broadly comparable between India and Vietnam, with India offering lower rates for entry-level and mid-level positions due to its larger talent supply, while Vietnam commands slight premiums for experienced specialists due to competitive demand from established facilities like Intel and Amkor.

Infrastructure for Semiconductor Manufacturing

India's Semiconductor Infrastructure

India is building semiconductor-specific infrastructure largely from scratch:

• Dholera Special Investment Region (Gujarat): Purpose-built for semiconductor manufacturing, with government-provided land, water, power, and connectivity. Houses the Tata-PSMC fab project
• Sanand Industrial Area (Gujarat): Hosts CG Power OSAT and Micron facilities with dedicated power supply and connectivity to Ahmedabad port
• Power reliability: Semiconductor manufacturing requires uninterrupted power. India's power grid reliability has improved significantly but is not yet at Taiwan/South Korea levels. Most approved projects include dedicated power infrastructure
• Water supply: Semiconductor fabs require ultra-pure water in large volumes. India's water availability varies by region, with Gujarat's Dholera region specifically chosen for adequate water infrastructure

Vietnam's Semiconductor Infrastructure

Vietnam benefits from established high-tech industrial zones with proven semiconductor-grade infrastructure:

• Saigon Hi-Tech Park (SHTP): Houses Intel's back-end factory, with semiconductor-grade power, water, and cleanroom infrastructure already operational
• Bac Ninh and Hai Phong: Host Samsung and Amkor operations with mature industrial park infrastructure including ready-built factories, waste treatment, and logistics connectivity
• Power stability: Vietnam's northern grid has experienced occasional shortages during peak demand, though industrial zones typically have dedicated supply agreements
• Proximity to supply chain: Vietnam's location provides 3-7 day shipping to chip-consuming electronics assembly hubs in China, Japan, South Korea, and Taiwan

FDI Framework for Semiconductor Investments

India's FDI Route for Semiconductors

Semiconductor manufacturing is classified under electronics manufacturing, which permits 100% FDI through the automatic route. The investment setup for an OSAT facility involves:

1. Incorporate a Private Limited Company via SPICe+
2. Apply for ISM incentives through the India Semiconductor Mission portal (ism.gov.in)
3. File FC-GPR with RBI within 30 days of allotment of shares to the foreign investor
4. Negotiate land allocation with state government (Gujarat, Assam, UP, or other participating states)
5. Obtain environmental clearance, factory license, and power supply agreements
6. Register for GST and IEC

The ISM application process for incentive approval adds 3-6 months but the 50% CapEx reimbursement makes this worthwhile for investments exceeding $100 million. Companies must file FLA returns annually and maintain transfer pricing documentation for intercompany transactions.

Vietnam's FDI Route for Semiconductors

Vietnam allows 100% foreign ownership in semiconductor manufacturing. The process involves:

1. Obtain Investment Registration Certificate (IRC) from the Department of Planning and Investment
2. Obtain Enterprise Registration Certificate (ERC)
3. Negotiate industrial zone tenancy with high-tech park management
4. Apply for high-tech enterprise certification for preferential 10% CIT rate
5. Import equipment under duty exemption schemes

Vietnam's process is generally faster (4-8 weeks for basic setup), but India's ISM incentives offer significantly higher financial returns for large-scale investments.

Ecosystem and Supply Chain Considerations

Proximity to Semiconductor Ecosystems

Semiconductor assembly operations do not exist in isolation. They depend on wafer fabs (upstream), electronics assembly plants (downstream), substrate and leadframe suppliers (lateral), and specialized gas, chemical, and material providers. The geographic proximity to these ecosystem elements significantly affects operational efficiency and costs.

Vietnam's strategic location in East Asia places OSAT operations within 3-7 day shipping distance of wafer fabs in Taiwan, South Korea, and China. This proximity is critical because wafer-to-chip turnaround time is a key competitive metric in the OSAT industry. Amkor's Bac Ninh facility, for example, can receive wafers from TSMC in Taiwan within 2-3 days by air freight.

India's OSAT facilities face longer logistics chains to major wafer fabs. However, the Tata-PSMC fab in Dholera, once operational, will create a domestic wafer supply for Indian OSAT operations, potentially establishing a vertically integrated semiconductor ecosystem within India. Additionally, India's large and growing electronics manufacturing sector — smartphones, laptops, EV electronics, telecom equipment — provides a significant domestic demand base for assembled chips, reducing the need to export finished packages.

Materials and Consumables

Semiconductor packaging requires specialized materials including substrates, bonding wires (gold, copper, aluminum), encapsulation compounds, flux, solder balls, and die attach adhesives. Currently, the vast majority of these materials are manufactured in Japan, South Korea, Taiwan, and China.

Vietnam has localized some material supply through investments by Japanese and Korean material companies near existing OSAT operations. India's material supply chain is still developing, though the ISM 2.0 explicitly targets semiconductor equipment and materials manufacturing as a focus area for domestic production.

Companies evaluating OSAT investments should factor in the 5-10% higher material logistics costs for India-based operations compared to Vietnam, at least until India's domestic material supply ecosystem matures over the next 3-5 years.

Advanced Packaging Technologies

The global shift toward advanced packaging — including fan-out wafer-level packaging (FOWLP), 2.5D/3D integration, and system-in-package (SiP) — is reshaping the OSAT landscape. Vietnam's Amkor facility in Bac Ninh is already producing advanced packages for AI and 5G applications, representing some of the most sophisticated packaging technology deployed outside Taiwan and South Korea.

India's OSAT facilities are initially focused on traditional packaging (wire bonding, flip-chip) and testing for automotive, industrial, and consumer applications. Advanced packaging capabilities are expected to be added in later phases as the workforce gains experience and equipment is upgraded. CG Power's partnership with Renesas provides technology transfer for automotive-grade packaging, while Tata's ATMP facility is designed to eventually support advanced packaging for 5G and IoT applications.

For companies requiring advanced packaging today — particularly for AI accelerators, high-performance computing, and advanced 5G components — Vietnam's existing capabilities provide an immediate solution. India's advanced packaging capabilities will develop over 2027-2030 as facilities ramp up and workforce expertise deepens.

Domestic Market Demand

India's semiconductor consumption is projected to reach $80-100 billion by 2030, driven by smartphone production, automotive electronics, 5G infrastructure rollout, and data center expansion. This growing domestic demand provides a built-in market for OSAT output, reducing export dependency and logistics costs. Vietnam's domestic semiconductor consumption is significantly smaller, meaning most OSAT output must be exported — primarily to China, Japan, and South Korea for integration into consumer electronics.

Strategic Assessment: Where to Invest in Semiconductor Assembly

Choose India for semiconductor assembly when:

• Your investment exceeds $500 million and you want 50% CapEx reimbursement through ISM
• You want access to India's chip design talent for co-located design-manufacturing optimization
• You are building for India's growing domestic electronics market (smartphone, EV, telecom)
• You want a competitive corporate tax rate (22% base, ~25.17% effective under Section 115BAA; the 15%/17.16% Section 115BAB rate for new manufacturers closed to entrants commencing production after 31 March 2024)
• You are willing to accept 2-3 year ramp-up timelines as infrastructure matures

Choose Vietnam for semiconductor assembly when:

• You need operational facilities immediately — Vietnam has proven OSAT infrastructure today
• Your supply chain integrates with East Asian chip ecosystems (3-7 day shipping to China, Japan, Korea)
• You prefer the 10% CIT rate for high-tech projects over India's ~25.17% effective corporate rate (Section 115BAA)
• You want to leverage existing semiconductor ecosystem knowledge from Intel, Amkor, and Samsung operations
• You are focused on advanced packaging for AI, 5G, and automotive applications where Vietnam has demonstrated capability

For companies considering India's semiconductor opportunity, our FDI advisory services can guide you through ISM application, entity setup, and FEMA-RBI compliance. For a broader manufacturing comparison, see our complete India vs Vietnam manufacturing guide.

Key Takeaways

• India offers unmatched financial incentives: ISM 2.0's INR 76,000 crore framework with 50% CapEx reimbursement for OSAT units is the most generous semiconductor incentive program available in any emerging market.
• Vietnam has operational advantage today: Intel, Amkor ($1.6B), Samsung, and Hana Micron ($930M) are producing at commercial scale, while most Indian facilities are in construction or commissioning phases.
• India's talent pipeline is larger: 1.5 million engineering graduates annually and 20% of global chip designers vs Vietnam's 15,000 total semiconductor workforce, though Vietnam is investing aggressively to reach 50,000-100,000 engineers by 2030.
• Timeline matters: Companies needing OSAT capacity in 2026-2027 should consider Vietnam; those building for 2028+ can benefit from India's maturing infrastructure and superior incentives.
• Many companies will invest in both: A dual-country strategy — Vietnam for near-term OSAT capacity and India for long-term, incentive-backed expansion — is increasingly common among global semiconductor companies.