Why Japan's semiconductor consolidation is a wake-up call for India's chip ambitions

Semiconductor manufacturing may be a global village, but it remains dominated by a handful of countries. Japan has long been one of them. Once a powerhouse in chip manufacturing, it still exerts influence through its dominance in critical materials and semiconductor equipment that underpin the global supply chain.

But as new hubs emerge and countries like India push to become serious contenders, Japan itself is being forced to rethink its strategy.

In a significant shift, three of Japan’s key players, ROHM, Toshiba and Mitsubishi Electric, are exploring the integration of their chip businesses. The discussions, currently at the memorandum of understanding (MoU) stage, aim to combine power device operations and improve cost competitiveness. If successful, the move could create a scaled entity capable of becoming the world’s second-largest player in power semiconductors, behind Infineon Technologies.

From empire to erosion

The timing of this consolidation reflects how quickly the global semiconductor landscape has shifted.

In the late 1980s, Japan controlled over 50% of the global chip market. Today, Taiwan dominates manufacturing, China is rapidly expanding with state backing, and the United States is accelerating its domestic push through subsidies, export controls and supply chain realignment. In this reshaped order, Japan’s share has steadily eroded.

“Japan’s semiconductor decline was structural, not technological. The vertically integrated conglomerates like Toshiba and Mitsubishi Electric treated semiconductors as one division, making them slow and inflexible as the industry shifted to specialised models that separated fabless and foundry led by TSMC and Nvidia,” said Pareekh Jain, CEO at EIIRTrend & Pareekh Consulting.

He added that an overfocus on domestic demand, such as chips for their own VCRs, TVs and cars, led to over-engineering for a local market while losing global cost competitiveness and influence over standards.

The result was predictable. Capital rigidity limited timely investments during volatile cycles, allowing Korean and Taiwanese players to leap ahead.

Now, Japan is attempting to reverse that fragmentation. The proposed consolidation of ROHM, Toshiba and Mitsubishi Electric in power semiconductors marks a shift toward coordinated, scale-driven competitiveness. A combined entity could command roughly 10% market share, still behind Infineon’s over 20%, but significantly stronger than the current fragmented landscape.

India’s narrow window

For India, the parallels are hard to ignore.

After years of missed opportunities, from failing to revive SCL Mohali to losing Intel’s proposed packaging plant, the country is finally making tangible progress. Four years into the India Semiconductor Mission, launched in December 2021, two chip testing and packaging units, including Micron and Kaynes Semicon, have entered the commercial phase.

But the broader ecosystem remains uneven.

Of the 10 approved projects so far, India has just one mainstream silicon fab by Tata Electronics and a silicon carbide fab with packaging by SiCSem, alongside eight testing and packaging units, including those by CG Semi and HCL-Foxconn.

Against this backdrop, experts warn that India must avoid spreading itself too thin.

“India should define a clear value-chain focus, either long-term foundry scale or a faster route via design, packaging, and specialty nodes to prevent dilution of competitiveness. It should also prioritise scale over fragmentation by backing 2–3 national champions with aligned policy support, ensuring global cost competitiveness,” said Manish Rawat, semiconductor analyst at TechInsights.

Power chips: A realistic starting point

In the race for semiconductor relevance, leading-edge chips often dominate the narrative. But that may not be where India’s immediate opportunity lies.

“A lot of the real value today sits in segments that are less talked about but deeply embedded in how systems operate, such as power semiconductors,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research.

Power semiconductors are central to renewable energy systems, electric vehicles, industrial equipment and data centres, essentially any system that manages and optimises energy.

This is precisely the segment Japan is now doubling down on through consolidation.

For India, the alignment is clear. Demand for power semiconductors is already tied to domestic priorities such as clean energy and electrification. The technological barriers, while still significant, are also less extreme than those at the cutting edge, adds Gogia.

But the challenge should not be underestimated.

Companies like Infineon already have scale, deep expertise and long-standing customer relationships, advantages India will have to build from scratch.

The lesson: Focus, scale, and patience

Japan’s reset offers both a cautionary tale and a strategic blueprint.

It shows how quickly leadership can erode without scale, specialisation and sustained investment. But it also demonstrates that course correction, through consolidation and sharper focus, is still possible.

For India, the path forward is unlikely to be a leap into cutting-edge manufacturing. Instead, it will require a phased approach, building capability in select segments, strengthening the ecosystem, earning customer trust and gradually moving up the value chain.