Riding high on the surge in semiconductor stocks fuelled by artificial intelligence (AI), South Korea and Taiwan have surpassed India in the global stock market rankings. Due primarily to two stocks, Samsung and SK Hynix, South Korea's Kospi has surpassed India to become the sixth-largest market in the world, while Taiwan last week secured the fifth position, driven primarily by Taiwan Semiconductor Manufacturing Company (TSMC).

Due to decades of lost chances in chip production, India has been left out of this global rally while having one of the fastest-growing major economies. The emergence of Taiwan and South Korea serves as an example of how long-term industrial policy and strategic state-backed investments can result in significant gains in the equities market. India is still years behind its East Asian counterparts, but it is at last stepping up its chip ambitions.

Riding the wave of AI chips
Samsung Electronics and SK Hynix, South Korea's leading memory chip manufacturers, are largely responsible for the country's surge over India. Bloomberg reports that the Kospi has increased by more than 100% this year, bringing South Korea's entire market capitalisation to $5 trillion—more than India's $4.8 trillion. Due to the increasing demand for AI memory chips, Samsung and SK Hynix have both just joined the $1 trillion valuation club. Although Korea's economic output is still lower than India's, analysts point out that the market's spectacular growth shows how concentrated exposure to in-demand computer products can produce huge investor returns.

Semiconductors, especially TSMC, which makes up 42% of the Taiwan Stock Exchange index, are also closely linked to Taiwan's rise. As a result of its unparalleled position in contract chip production for AI applications, Bloomberg reports that TSMC shares have increased 49% this year alone. By loosening limitations on fund investments in top-weighted equities, Taiwan's government has also encouraged market inflows, which has increased the value of TSMC. In both situations, a positive cycle of equity market expansion has been produced by the government's foresight, decades of industrial focus, and international investors' access to top chip businesses.
Decades lost by India
India's semiconductor journey has been characterised by a lengthy history of lost opportunities with top international companies that had previously shown a sincere desire to establish a chip-making presence in the nation.In the late 1960s, Silicon Valley pioneer Fairchild approached India about establishing a semiconductor plant. However, India rejected it due to socialist economic principles and caution over foreign investment. Instead, Fairchild decided on Malaysia, paving the way for the growth of chip production in Southeast Asia. Texas Instruments allegedly made a co-investment offer in an Indian semiconductor factory in the beginning of the 1990s. According to the design, half of the project was to be funded by the Indian government. TI abandoned the plan because to the government's lack of urgency and hesitation.

Established in Chandigarh in the 1980s, India's own Semiconductor Complex Limited (SCL) was viewed as a precursor to chip production. International companies like Matsushita, STMicroelectronics, and Motorola expressed interest in working together.However, these businesses left due to ongoing joint venture formation delays and a lack of ecosystem support. The SCL plant was completely destroyed by fire in 1989, and attempts to restore it using contemporary technology failed.
Robert Noyce, a co-founder of Intel, travelled to India in 1969 but was let down by the country's stringent laws. Decades later, in the middle of the 2000s, Intel once more considered investing in a fabrication plant, but due to government inaction, that investment ended up moving to China and Vietnam. AMD was interested in collaborating on a $3 billion semiconductor project with India's Fab City in Hyderabad. Due to difficulties in finding technological partners and a lack of consistent government funding, the initiative never took off despite initial hype and official support.

Additionally, Intellect Inc., a South Korean business, had suggested constructing a $1.6 billion factory in Andhra Pradesh. Regulatory and approval obstacles prevented it from progressing past the planning stage.
Over the course of five decades, India had several opportunities to become a major hub for semiconductor manufacture, and major players in the world were actively interested. However, each chance was lost due to a persistent pattern of policy reluctance, bureaucratic delay, and a lack of strategic clarity. Although the Vikram chip's recent release represents a major advancement, it comes after decades of expensive delay that let other nations like Taiwan, South Korea, China, and Malaysia surpass them.

Due to this historical inertia, India has no recognised leaders in the production of semiconductors. Indian equities markets lacked well-known firms that were directly profiting from the AI boom, in contrast to Korea and Taiwan. As a result, foreign investors mostly turned their focus to markets with pure-play chip leaders despite robust GDP growth.
India is making a concerted effort to establish itself in the chip manufacturing industry in an attempt to catch up. Developing a local semiconductor ecosystem is the goal of the India Semiconductor Mission, which was introduced in 2021 along with the Production Linked Incentive (PLI) and Design Linked Incentive (DLI) programs. The Vikram 32-bit processor, the first chip manufactured in India, was introduced in 2025 together with a number of test chips from projects that had been approved. In Gujarat, Assam, Uttar Pradesh, Punjab, Odisha, and Andhra Pradesh, about ten semiconductor facilities are being built.

While domestic players like Tata-Powerchip and CG Power-Renesas are developing OSAT units, major foreign corporations like Micron and AMD are opening up manufacturing or design facilities.
India is positioned at several stages of the semiconductor value chain, from fabrication to chip design and assembly, thanks to these activities. In order to further enhance the ecosystem, the government is currently planning a second phase of the Semiconductor Mission to draw in suppliers of components and manufacturers of raw materials.Due to geopolitical concerns, global supply chains are moving away from China and Taiwan, which gives India a strategic opportunity to establish a significant presence.

The strategic importance of chips
In addition to South Korea and Taiwan surpassing Indian stocks, India's delayed debut into the semiconductor industry is evident in its strategic reliance. Almost all contemporary technology, including satellites, defence systems, cars, and cellphones, is powered by semiconductors. The epidemic exposed the world economy's susceptibility to chip shortages, which have an impact on everything from the production of automobiles to the supply of weaponry. This dynamic has been amplified by the AI revolution, as high-performance CPUs are now the foundation of AI infrastructure. Semiconductors are currently regarded as vital strategic assets by nations including the US, China, and EU countries.

Due to its delayed admission, India is now reliant on foreign chip suppliers, which limits its technological and strategic independence. The current drive to increase domestic capacity is a geopolitical as well as an economic goal. Over the course of the next ten years, India might potentially create its own equity champions in the semiconductor industry, integrate into global supply chains, and lessen its reliance if the plan is carried out successfully.
The benefit of early, consistent investment in semiconductor manufacturing is demonstrated by the rise of South Korea and Taiwan above India in global stock rankings. As demand for AI increased, both nations benefited from long-term, state-backed industrial policy, creating businesses that international investors could directly purchase.

India's ability to convert its semiconductor ambitions into industry-leading businesses that can change the country's equity market profile will be determined in the upcoming years.