India has slipped to seventh place in global equity market capitalisation rankings, as AI-led rallies in Taiwan and South Korea’s semiconductor stocks pushed both markets ahead. Taiwan’s market capitalisation rose to about $4.95 trillion when it overtook India, while South Korea’s has climbed above $5 trillion this year, compared with India’s $4.8 trillion, according to Bloomberg-cited data.
This milestone shows a critical gap in India’s semiconductor strategy as the AI economy reshapes global capital flows. As investors increasingly reward countries that control key AI infrastructure technologies, semiconductor capabilities are emerging as a major determinant of economic and market value creation.
The AI supply chain divide
South Korea and Taiwan have climbed market-cap rankings because they occupy critical positions in the AI supply chain, spanning semiconductors, memory chips and AI hardware. Samsung Electronics Co and SK Hynix Inc, newly minted members of the $1 trillion valuation club, have powered Korea’s equity surge.
India, despite being one of the world’s fastest-growing economies, remains largely an AI consumer. This distinction is becoming more important as value creation in the AI era shifts from software applications alone to the hardware and semiconductor ecosystem that powers them.
Easwar Rao Nandam, chief executive officer at Polymatech Electronics, said building data centres and consuming AI applications alone will not be enough. “The foundation of AI infrastructure lies in semiconductors, memory, packaging, power electronics, opto-electronics, substrates and high-reliability electronic components,” he told Business Standard.
Although India has created strong momentum in semiconductor policy, experts warn the next phase demands coordination and depth.
“Semiconductors are not an industry where speed alone can solve the problem. A fab does not operate in isolation. It needs an entire ecosystem around its specialty chemicals, gases, materials, clean water, reliable power, HVAC systems, precision equipment, trained talent, and strong process discipline,” said Rohin Y, founder and chief executive officer at LightSpeed Photonics.
“The focus should not only be on headline investments, but also on whether the supporting ecosystem is being built in the right sequence,” Rohin told Business Standard.
Can India build its own chip champions?
India has a strong opportunity on the demand side, especially in automotive. Vehicles are becoming increasingly electronics-heavy, whether it is electric vehicles, battery systems, charging circuits, onboard computers or AI-enabled features such as image recognition and voice interfaces.
“Mature and reliable nodes such as 28nm, 65nm and 90nm are highly relevant for automotive, power electronics, control systems and vehicle compute. India also has strong chip design talent. If we create local IP, manufacture it locally and drive domestic consumption through large Indian industries, we can start building real manufacturing depth,” Rohin said.
He further said that sectors such as automotive, mobility, energy and industrial systems can become anchor markets for locally designed and locally manufactured chips.
However, government caution in supporting smaller companies remains a barrier. “India must create a framework where credible mid-sized technology companies can scale under strict milestones and accountability. Otherwise, we may attract large headline investments but still remain dependent on imported components for the AI hardware stack,” Easwar Rao said.
The South Korea lesson for India
South Korea’s AI-driven market windfall is the payoff from a three-decade industrial strategy centred on semiconductors, with recent gains reflecting both investor enthusiasm around AI and long-term investments in manufacturing and supply chains.
For India, Rohin said the focus should be on stable governance, predictable policy and disciplined implementation.
Countries that have become central to the semiconductor and AI hardware supply chain did so by building patiently across multiple layers — design, manufacturing, materials, talent, infrastructure and end-market demand, he said.
Experts say India possesses the demand and strategic imperative to become more than just an AI consumer. “But to become an AI infrastructure producer, India needs to build with patience and depth. The real lesson is simple: ambition starts the journey, but consistency creates leadership,” Rohin said.
While Seoul has overtaken New Delhi in market value, India’s $4.15 trillion economy still far exceeds South Korea’s $1.93 trillion GDP. Yet the divergence highlights how the AI era is increasingly rewarding countries that control strategic technologies and critical supply chains.
For India, the challenge is no longer whether AI will drive growth, but whether its semiconductor ecosystem can capture a meaningful share of the value created by that growth.
