Silicon Dreams and Service Streams: India’s IT Giants Pivot to Chips and Electronics Amid Growth Headwinds

Image Source: Bisinfotech

India’s top IT services firms are no longer content with just software—they’re now eyeing the hardware that powers it. In a strategic shift aimed at diversifying revenue and future-proofing operations, companies like TCS, Infosys, Wipro, HCL, and L&T are making bold moves into the semiconductor and electronics space. With global demand for chips surging and India’s own semiconductor ambitions gaining traction, this pivot could redefine the contours of the country’s tech sector.

Here’s a comprehensive look at how India’s IT industry is recalibrating its growth strategy.

1. Why the pivot now?
- The traditional IT services model is facing pressure from global macroeconomic uncertainty, delayed client spending, and margin compression
- Semiconductor engineering is growing at over 20 percent annually, offering a high-growth alternative to legacy outsourcing
- India’s national semiconductor mission, backed by a ₹76,000 crore outlay, is creating fertile ground for domestic chip design, manufacturing, and testing
- IT firms already service global chipmakers—now they want a deeper stake in the value chain

2. Strategic investments and partnerships
- Wipro acquired a stake in Harman’s Digital Transformation Solutions business for $375 million, forming a multi-year alliance with Harman and Samsung
- HCL Group is building a semiconductor fabrication unit with Foxconn in Noida, with a ₹3,706 crore investment approved by the Union Cabinet
- Infosys acquired Bengaluru-based InSemi, a semiconductor design and embedded systems firm, to strengthen its chip engineering capabilities
- Cyient launched Cyient Semiconductors, a fully owned subsidiary focused on chip design and embedded systems
- L&T has floated L&T Semiconductor Technologies to support its group firms LTIMindtree and L&T Technology Services

3. Tata Group’s full-stack chip ambition
- TCS has introduced chiplet-based system engineering services to accelerate semiconductor innovation
- Tata Electronics, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corp, is building India’s first domestically produced chips by 2026
- Facilities are being planned in Gujarat, with a focus on 28 nm chips for consumer electronics, automotive, and wireless communication

4. Engineering meets AI
- IT firms are integrating generative AI into semiconductor workflows, offering design automation, predictive testing, and smart diagnostics
- GenAI is being positioned not just as a tech cycle but a foundational shift, with widespread adoption across chip design and manufacturing
- These capabilities allow Indian firms to offer end-to-end solutions—from design to testing to software integration

5. Risks and regulatory backdrop
- US tariffs and global trade tensions continue to weigh on India’s export-driven IT sector, prompting the need for domestic diversification
- While India’s chip ecosystem is expanding, most current projects focus on assembly and packaging rather than advanced fabrication
- Regulatory clarity, talent availability, and global partnerships will be key to sustaining momentum

6. What this means for investors and the industry
- For investors, this pivot offers exposure to the industrial backbone of the green economy and digital infrastructure
- IT firms are no longer just service providers—they’re becoming strategic enablers of India’s tech sovereignty
- The move also signals a shift from volume-based outsourcing to value-based innovation, with hardware and AI at the core

Final takeaway
India’s IT giants are no longer just riding the software wave—they’re building the boards beneath it. By entering the semiconductor and electronics space, these firms are not only hedging against growth bumps but also helping shape India’s future as a global tech powerhouse. The chips may be small, but the ambition is anything but.

Sources: MSN India