Software-silicon revolution: How AI and analog innovation are redefining semiconductors in 2026?

As we move towards 2026, the semiconductor industry is undergoing a fundamental transformation, one that extends well beyond advances in chip manufacturing. 

Artificial intelligence, software-defined architectures, and renewed innovation in analog and mixed-signal domains are reshaping how value is created across the semiconductor ecosystem. Silicon remains foundational, but it is no longer the sole determinant of competitiveness.

Historically, semiconductors have been viewed through the lens of cyclicality; periods of rapid expansion followed by sharp corrections. That pattern is now changing. Structural demand drivers such as artificial intelligence, cloud-scale computing, electrification of mobility, and pervasive connectivity are steadily reshaping the industry into a more growth-oriented sector. 

Looking ahead, several industry forecasts suggest the global semiconductor market is on track to exceed $1 trillion in annual value by the end of the decade, with some analyst projections indicating this milestone could be reached as early as 2027, driven largely by AI-led demand. 

Semiconductors are no longer merely responding to cycles of consumption, but are becoming a sustained growth engine for the global digital economy, reshaping investment priorities and creating sustained opportunity across the global semiconductor ecosystem. 

This shift marks a critical inflection point for India. The opportunity today is not limited to participation in the global semiconductor value chain, but lies in shaping the design, intelligence, and system-level innovation layers that increasingly define differentiation. How effectively India leverages this moment will determine its role in the industry’s next phase of growth.

The semiconductor landscape is no longer about hardware in isolation; it is the convergence of hardware and software. The automotive sector offers a clear illustration. Modern vehicles are rapidly becoming software-defined platforms, where electronics and embedded intelligence account for a growing share of value, while mechanical components steadily commoditize. 

Vehicles are, in effect, evolving into “semiconductors and software on wheels.” This broader shift is now visible across industrial automation, consumer electronics, healthcare devices, and communications infrastructure, and will define the industry through 2026 and beyond.

Foundries are becoming full-service platforms
The foundry ecosystem is undergoing fundamental evolution. What was once a manufacturing-centric model is expanding into integrated service platforms that include design enablement, advanced packaging, testing, and optimization. 

As chip complexity increases and time-to-market pressures intensify, closer collaboration between designers and manufacturers is becoming essential. This shift reflects the industry’s growing emphasis on co-innovation rather than linear handoffs.

Analog and mixed-signal semiconductors are back in focus
As IoT deployments scale and edge intelligence become more prevalent, analog and mixed-signal semiconductors are experiencing renewed importance. Sensors, connectivity modules, and power-efficient interfaces form the backbone of these applications, bridging the physical and digital worlds. 

Analog innovation is no longer a niche capability; it is central to performance, reliability, and energy efficiency across industries.

Software is redefining silicon architecture
One of the most significant shifts underway is the rise of software-defined silicon. AI and machine learning workloads are reshaping how chips are designed, favouring architectures that can be optimized, tuned, and even repurposed through software. Fixed-function hardware is giving way to adaptable platforms, where programmability and flexibility are as critical as raw compute capability.

Chiplet-based design is accelerating modularity
The industry is steadily moving toward chiplet-based, disaggregated architecture. By breaking complex systems into modular building blocks, designers can mix and match specialized components, reduce development costs, and accelerate innovation cycles. 

This approach is particularly relevant as heterogeneous computing becomes the norm and system complexity continues to rise.

AI is transforming chip design process
AI is no longer just a workload for chips—it is becoming integral to how chips are designed. Machine learning techniques are increasingly used across architecture exploration, verification, and optimization. By embedding intelligence into the design lifecycle itself, companies are improving efficiency, reducing errors, and fundamentally changing how semiconductors are conceived and developed.

India is moving up semiconductor value chain
India has recognized, at a pivotal moment, that semiconductors are central to long-term economic competitiveness. Without a resilient semiconductor ecosystem, progress across sectors—from manufacturing and mobility to digital infrastructure—remains constrained. 

Over the past two decades, Indian engineering teams and global capability centers have steadily moved from support functions to owning complex sub-modules, full system architectures, and increasingly, end-to-end chip designs.

This maturity, built through sustained collaboration with global semiconductor leaders, positions India well for the next phase of growth. Recent policy initiatives and investments in fabrication and OSAT infrastructure further strengthen this foundation. While manufacturing capacity is essential, the larger opportunity lies in integration—connecting design expertise, software capabilities, and manufacturing assets to create globally relevant products.

Analog-digital convergence is creating new opportunities
An underappreciated, but consequential shift heading into 2026 is the convergence of analog and digital innovation. As sensors proliferate across sectors such as industrial IoT, smart infrastructure, and healthcare wearables, analog design becomes increasingly strategic. In parallel, certain compute functions are moving toward analog processing to improve power efficiency, particularly at the edge.

This convergence creates meaningful opportunities for India, especially given its strengths in communications, RF design, and embedded systems, combined with growing capabilities in AI and data intelligence.

Software is primary driver of semiconductor value
The most fundamental change underway is the rise of software as the primary driver of semiconductor value. Software is shaping chip architectures, defining optimisation strategies, and enabling systems that evolve after deployment. AI-driven platforms increasingly rely on tightly co-designed hardware-software stacks that adapt dynamically to workloads and environments.

Looking ahead to 2026
As 2026 approaches, the next imperative for India lies in translating design capability into globally competitive, AI-led products. The ecosystem is maturing, but sustained progress will depend on collaboration across industry, academia, and government. If executed well, the coming years could mark India’s transition from contributor to architect in the global semiconductor story.

-- Rajiv C. Mody, Chairman & CEO, Sasken Technologies.