Applied Materials Sees No Demand Risk for India's Chip Push; Ecosystem, Infrastructure the Real Tests

Applied Materials Sees Demand as Less of a Concern

India's semiconductor ambitions are unlikely to face a shortage of demand, according to Avi Avula, president of Applied Materials India.

Speaking to Economic Times during SEMICON India 2026, Avula said the larger challenge is developing the ecosystem and infrastructure required to support semiconductor fabrication facilities.

“From a demand standpoint, I do not think there is an issue,” Avula said, pointing to both India's chip consumption and global semiconductor demand. He added that the ability to build the necessary ecosystem and infrastructure would be critical.

His comments come as India is attempting to establish a broader semiconductor manufacturing ecosystem spanning chip fabrication, packaging, equipment, materials, suppliers and R&D.

India's Semiconductor Consumption Could Reach $110 Billion

The potential size of India's domestic semiconductor market is one reason Applied Materials does not see demand as the immediate constraint.

Government estimates cited by Economic Times put India's semiconductor consumption at as much as $110 billion by 2030, compared with approximately $45-50 billion in 2025.

Demand is also being supported by global trends such as artificial intelligence, data-centre expansion, electric vehicles, connected devices and increasingly sophisticated consumer electronics.

For semiconductor equipment companies, this creates opportunities both from India's eventual domestic fabs and from the much larger global market.

More Than 100 Fabs Are Being Built Globally

The semiconductor opportunity extends well beyond India.

Avula noted that more than 100 fabs are being built around the world, creating strong demand for semiconductor manufacturing equipment and related technologies.

However, the scale of global construction also creates constraints for equipment manufacturers and other suppliers.

“Even the companies that construct fabs are constrained,” Avula said, highlighting the capacity pressures across the semiconductor supply chain.

This global shortage of capacity and strong demand could provide a favourable environment for companies such as Applied Materials, which supplies equipment used in semiconductor manufacturing.

Applied Materials' $5 Billion India Investment

Applied Materials recently announced plans to invest $5 billion in India over the next decade under its India Vision 2035 programme.

The investment is built around three broad pillars identified by Applied Materials Semiconductor Products Group president Prabu Raja:

1. Deepening R&D in India

2. Accelerating India's semiconductor ecosystem

3. Developing future semiconductor talent

A proposed 140-acre advanced semiconductor research park near Bengaluru is central to the plan. The facility is expected to combine cleanroom capabilities, engineering expertise and collaborative R&D involving customers and suppliers.

Most of the Investment Will Support R&D

The $5 billion commitment is not simply a manufacturing investment.

Avula said most of the spending will go towards research-led activities, including innovation capabilities, engineering talent and ecosystem development.

Applied Materials is an equipment and technology company whose products are used in semiconductor manufacturing. Strengthening its R&D capabilities in India would therefore allow the company to develop technologies and products closer to its engineering and supplier base.

The company's existing plans include a $400 million Bengaluru engineering hub announced in 2023, which is being incorporated into the broader expansion.

New Research Park to Expand India's Semiconductor R&D

The proposed 140-acre research park is expected to become an important part of Applied Materials' India operations.

The company has already conducted research using a 300-mm cleanroom, a controlled environment used for semiconductor wafer-related work.

Avula said Applied Materials wants to scale this capability at a much larger site, with the eventual facility intended to be comparable with leading facilities globally.

The proposed campus is also expected to bring customers and suppliers closer to Applied Materials' engineering operations.

Supply Chain Is a Bigger Challenge Than Final Assembly

One of the clearest messages from Applied Materials is that India needs to develop its semiconductor supply chain before focusing heavily on final equipment assembly.

Avula said the company currently has to import components for some R&D activities because the local supplier ecosystem is still developing.

If components have to be sourced repeatedly from countries such as Japan, South Korea or the US, product-development cycles can become slower and more complicated.

This is particularly important because semiconductor equipment contains numerous specialised components and subsystems.

Why Local Suppliers Matter

A strong local supplier base can reduce the time required to develop, test and modify semiconductor equipment.

Prabu Raja has also said that placing suppliers closer to product-development operations can reduce the number of iterations required during development and speed up the process.

For India, this means that the semiconductor opportunity extends beyond operating fabs.

Indian companies could potentially participate in areas such as:

• Precision engineering

• Semiconductor equipment components

• Mechanical and electrical systems

• Advanced manufacturing

• Testing and validation

• Automation

• Equipment modules and subsystems

• Engineering services

However, suppliers must meet stringent standards for quality, reliability and consistency.

Applied Materials Expects More Than 100 Indian Suppliers

Applied Materials already sources some components locally and expects the Indian supplier ecosystem to expand.

Avula said the company expects more than 100 India-based suppliers for future collaboration.

The objective is to gradually move Indian suppliers into increasingly sophisticated roles.

This could create opportunities for domestic engineering and manufacturing companies to become part of Applied Materials' global supply chain.

But building those capabilities will take time, particularly because semiconductor equipment has demanding qualification and reliability requirements.

Why Final Assembly Is Not the Immediate Priority

Applied Materials does not currently see much value in importing almost an entire equipment system into India, assembling it locally and then exporting it to countries where the equipment is actually required.

Avula explained that final assembly, testing and shipment are relatively straightforward compared with developing the local supplier network needed to support the equipment.

The company's priority is therefore to localise the more complex supply-chain components first.

Once a deeper supplier base exists, manufacturing and assembly could become easier to scale.

India's Domestic Fab Capacity Is Still Small

Despite India's semiconductor ambitions, the country's current fabrication capacity remains limited.

Avula noted that India has announced one wafer fabrication facility, while more than 100 fabs are being developed globally.

This means India is still at an early stage of semiconductor manufacturing compared with established hubs such as Taiwan, South Korea, Japan and the United States.

India's opportunity therefore lies in building capabilities gradually across the semiconductor value chain rather than immediately matching the scale of established manufacturing centres.

Tata Electronics Fab Could Create a Major Opportunity

Tata Electronics' planned semiconductor fab is expected to become an important customer opportunity for Applied Materials.

Avula referred to Tata's planned fab and said Applied Materials would expect to participate based on its market position once the facility is fully developed.

The opportunity could expand if additional fabs are established in India.

The scale of India's future equipment market will therefore depend partly on how quickly more semiconductor fabrication projects move from announcements to actual construction and production.

India Needs More Fabs for Long-Term Scale

For the semiconductor ecosystem to become commercially sustainable, India will need more than one major fab.

A larger number of fabrication facilities could create demand for equipment suppliers while simultaneously encouraging chemical companies, component manufacturers, logistics providers and other specialised businesses to establish local operations.

This could create a positive cycle:

More fabs → greater equipment demand → more suppliers → stronger ecosystem → greater manufacturing capability.

The challenge is that each part of this cycle requires significant investment and technical expertise.

Semiconductor Manufacturing Requires a Deep Ecosystem

Building a semiconductor fab is only one part of the manufacturing process.

A functioning semiconductor ecosystem also needs:

• Ultra-pure chemicals

• Specialty gases

• Silicon wafers

• Equipment and spare parts

• Cleanroom infrastructure

• Precision engineering

• Testing and inspection

• Packaging and assembly

• Reliable power and water

• Skilled engineers and technicians

• Specialised logistics

Industry reporting has highlighted that many semiconductor-grade materials and specialised inputs are still sourced internationally, demonstrating the depth of the localisation challenge.

Talent Is Another Pillar of the Strategy

Applied Materials' India Vision 2035 also places significant emphasis on talent.

Raja described future talent development as one of the three pillars of the company's India strategy.

India already has a large engineering workforce, but semiconductor equipment and manufacturing require highly specialised expertise.

The company plans to expand engineering and R&D capabilities while developing talent capable of working on semiconductor product development.

This could eventually allow more semiconductor technologies to be developed in India for customers around the world.

Global AI Demand Is Supporting the Semiconductor Cycle

The semiconductor industry's current expansion is closely connected to artificial intelligence.

AI data centres require large quantities of high-performance processors and memory, encouraging chipmakers to expand manufacturing capacity.

This has increased demand for semiconductor manufacturing equipment.

Applied Materials has therefore entered a period in which its customers globally are investing heavily in additional capacity, while India is simultaneously attempting to establish its own semiconductor manufacturing base.

The combination could create opportunities for Applied Materials in both the Indian and global markets.

Applied Materials' India Strategy Is Bigger Than Manufacturing

The $5 billion investment represents a broader shift in the company's India strategy.

Rather than focusing solely on engineering support, Applied Materials wants India to play a larger role in:

• Semiconductor R&D

• Product development

• Engineering

• Supplier development

• Talent creation

• Customer collaboration

The company has also indicated that products developed through its Indian operations could eventually support semiconductor fabs globally.

This would give India a role in the global semiconductor equipment value chain rather than limiting its contribution to domestic manufacturing.

What Are the Main Tests for India's Chip Ambitions?

Applied Materials' comments point to several areas that will determine how quickly India's semiconductor ambitions can scale.

AreaKey challengeDemandDomestic and global demand appears substantialFabsConverting announced projects into operational capacitySuppliersDeveloping reliable local component manufacturersInfrastructureBuilding specialised facilities and supporting infrastructureTalentTraining semiconductor-specific engineers and techniciansMaterialsIncreasing access to specialised semiconductor inputsEquipmentEstablishing local support and supply capabilitiesScaleAttracting additional fabs and customers

The key distinction is between market opportunity and execution capability. Strong demand can create an opportunity, but the ecosystem must be capable of delivering products at the required quality, scale and reliability.

What Comes Next?

Applied Materials' immediate priorities will include expanding its Indian R&D infrastructure, developing the proposed Bengaluru research park and strengthening its supplier network.

The company has already acquired land for the planned research facility, although individual phases will require separate approvals and specific construction timelines have not yet been finalised.

For India, the next phase will involve turning semiconductor project announcements into operating fabs and building the supporting ecosystem around them.

The progress of Tata Electronics' fab and other semiconductor projects will be particularly important because equipment and material suppliers ultimately need operational customers.

Bottom Line

Applied Materials India president Avi Avula says demand is not the biggest risk to India's semiconductor ambitions. India's domestic semiconductor consumption is projected to reach as much as $110 billion by 2030, while global demand is also being supported by AI and expanding chip-production capacity.

The bigger tests are building the supplier ecosystem, infrastructure, talent and manufacturing scale required to support semiconductor fabs.

Applied Materials' planned $5 billion India investment over the next decade, including a proposed 140-acre semiconductor research park near Bengaluru, is designed to address several of these requirements through R&D, supplier development and talent creation.

For India, the semiconductor opportunity therefore extends beyond building fabs. The development of local equipment suppliers, specialised engineering capabilities, materials and research infrastructure could determine how deeply the country becomes integrated into the global chip value chain.