Artificial intelligence can do a lot these days—and will be able to do a lot more in the future. But killing a $1.2 trillion industry will be a stretch.
That is how much the world’s businesses are expected to spend on enterprise software this year, according to projections from market research firm Gartner. It is a big number, and nearly 11% higher than the $1.1 trillion that was spent last year.
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India's ambition to be a semiconductor superpower is poised to take a leap, with the Centre working on a $20 billion package to propel its chip and fab ecosystem.
The Union ministry of electronics and IT (Meity) has submitted the incentives proposal to the finance ministry, five people aware of the matter said, doubling the outlay for the first phase of the India Semiconductor Mission (ISM). Approval from the finance ministry is expected as early as October, after which the proposal will go to the Union Cabinet. The final clearance is likely before the close of 2025 when the first phase ends.
Meity is currently preparing a dossier that will outline the performance and returns of ISM’s first phase, and compare them with similar schemes in other countries, three people of the five people confirmed.
ISM dossier
“The finance ministry had asked for an economic projection document from Meity, seeking an understanding of how ISM’s first tranche’s returns will play out, and how India’s shaping up in comparison with other nations, especially the US, whose chip incentives are larger but market dynamics are undeniably trickier," one of the people cited above said.
The US Chips Act provides over $52 billion in subsidies and tax credits for the semiconductor sector, while the EU's Chips Act is mobilizing more than €43 billion in public and private investment. Other major players, including China, Japan, and South Korea, are also committing billions in direct funding, tax breaks, and grants to attract and retain key players in the industry.
Queries emailed to Meity and the finance ministry remained unanswered.
While the US Chips Act has a bigger outlay, it has been disrupted by president Donald Trump’s erratic policies, the third person said.
$10 billion package
India rolled out a $10 billion package four years ago to encourage local chipmaking and related projects. During the period, the Centre has approved an $11-billion chip fab by Tata Electronics in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Co., as well as testing facilities by US memory chip firm Micron, and homegrown firms such as the Murugappa group’s CG Semi and electronics manufacturer Kaynes Technology. According to Meity, the allocated funds have been nearly fully utilized.
"ISM’s net outlay may have been a fifth of America’s, but taking state and indirect incentives into account, the total expenditure from the government was easily over $15 billion. This is why Meity’s second tranche proposal is for around $20 billion, which increases incentives and reaffirms government backing," the second person added.
Also Read | India can be among top 5 semiconductor nations: Merck Electronics CEO
Meity has focused on four key aspects for ISM 2.0, the people cited above said. These include building more sophisticated chip fabs, setting up India's first display fab, incentivizing chip design patents, and building a robust supply chain by subsidizing components, machining, tooling and sensor suppliers to open shop in India.
“In two years, India’s second chip mission can help semiconductor startups push for indigenous chip designs catering to industrial applications, such as smart electricity metres, power grids, monitoring sensors in manufacturing, and more such use cases. India’s chip fab, which is set to produce chips ranging from 110 nanometres (nm) to 28nm in size, can build such chips within the country, giving India the kind of autonomy that it has not seen until today," the third person added.
Design boost
As part of the new plan, the Centre may expand the design-linked incentive scheme (DLI) for semiconductors fivefold to ？5,000 crore ($570 million) to promote chip design and patenting within the country, two of the five people cited above added. The DLI scheme helps Indian companies and startups design and develop semiconductor chips in the country.
Industry stakeholders said that such spending is necessary, and not optional, for India to maintain its momentum in the global semiconductor industry.
“Amid the current geopolitical balance, India stands a chance to offer itself as the only large and open economy for global chip firms to expand to. The US currently has an unstable environment in terms of its policies, while China is a closed economy that is more focused on building its own ventures. Right now, there are no large economies like India that would give global chip firms, including the topmost names as well, this kind of stable open markets," said Ankush Wadhera, managing director and partner at consultancy firm, BCG India.
Also Read | Japan's BeyondNext Ventures sets sights on Indian startups with $50 million fund
According to Kai Beckmann, chief executive of electronics for German chip supply chain firm Merck, while India can be among the world’s top-five countries for the semiconductor industry, its policy stability via support schemes would play a vital role. “For large firms, it’s not about financial incentives. But, government support is crucial for aspects such as policy stability, ease of doing business, and setting up a robust supply chain. That is where India’s next semiconductor scheme would come in," he added.
Full-stack nation
Last week, at the fourth edition of Semicon India, an annual industry conference, Prime Minister Narendra Modi underlined the philosophy of India’s chip investments.
“India is now moving from back-end operations to becoming a full-stack semiconductor nation. The day is not far when India’s smallest chip will drive the world’s biggest change. Commercial chips will start being produced from this year itself, which shows how fast India is progressing in semiconductors," he said.
“We are creating a complete ecosystem, where designing, manufacturing, packaging and high-tech devices are all available right here. Our Semiconductor Mission is not limited to just one fab or one chip manufacturing—we are creating an ecosystem that makes India self-reliant and globally competitive," Modi added.
New horizons
On 23 August, in an interview with Mint, S. Krishnan, secretary, Meity, affirmed a similar approach.
“India does not need only chip fabs and testing plants, but also equipment suppliers, material suppliers, gases and chemicals. These are all areas that were not covered under ISM’s first plan, and need attention," he said. Krishnan added that some components were previously covered under Meity’s Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (Specs), which has run its course.
P.N.S.V. Narasimhan, president and head of corporate affairs at homegrown tech services firm Cyient, welcomed the proposed increase in chip design incentives.
“Developing patents will take us some time. We need flexibility in sharing patents with partners, and milestone-based incentive payments should be replaced with upfront incentives. This would help us in buying strategic patents to build our own—buying such a patent from a chip foundry can cost up to $25 million," he told Mint last week.
Also Read | 2025 to be India’s year in semiconductors: Minister Ashwini Vaishnaw
Consulting firms over the past three years have wagered billions on the hope they would play an essential role in the AI boom, helping the world’s largest corporations transform themselves with the new technology.
Done right, it could prove to be a boon for an industry already hurting from macroeconomic pressures and layoffs. Collectively, firms made billions of dollars in artificial-intelligence-related commitments and put out aggressive campaigns designed to capitalize on corporate FOMO, or fear of missing out. “Nobody makes AI work for your business like PwC," said one PricewaterhouseCoopers ad. Their slogan: “We don’t just bring promises. We bring results."
In the early days their pitch seemed to be working. But then reality set in.
Clients quickly encountered a mismatch between the pitch and what consultants could actually deliver. They found that consultants, who often had no more expertise on AI than they did internally, struggled to deploy use cases that created real business value.
Sometimes consultants built successful proof of concepts, but couldn’t scale them across the business. That was the case at pharma company Merck, said Chief Information and Digital Officer Dave Williams.
“We love our partners, but oftentimes they’re learning on our dime," he said.
Consulting firms continue to pull in revenue from generative-AI-related work, with global spending on such consulting hitting $3.75 billion in 2024, up from $1.34 billion in 2023, according to Gartner estimates. Some believe consultants’ contributions to AI deployment could be more effective in four to five years, when the technology is more mature and they have a solidified playbook. Until then, many clients remain frustrated.
Consultants vs. the ‘kid in college’
Advisory heavyweights—including Big Four accounting firms Deloitte, PwC, KPMG and Ernst & Young and pure consulting firms McKinsey, Bain and Boston Consulting Group—for years have helped enterprises get up to speed on technologies like the cloud and perform vital but unsexy tech implementations, like enterprise resource planning systems.
That expertise hasn’t translated into a playbook for deploying something as cutting edge as generative AI in the enterprise at scale, tech leaders said.
“When you think about something that’s just so new, you can’t really buy that experience," said Greg Meyers, chief digital and technology officer at Bristol-Myers Squibb.
“If I were to go hire a consultant to help me figure out how to use Gemini CLI or Claude Code, you’re going to find a partner at one of the Big Four has no more or less experience than a kid in college who tried to use it," he said, referring to generative AI tools from Google and Anthropic.
Six months ago, the pharmaceutical company ended a yearlong engagement with a big consulting partner aimed at using generative AI to produce educational content for doctors who prescribe their medicines. The company is now pursuing the use case on its own.
Former consultants and partners from large advisory operations such as Deloitte, Bain, EY, McKinsey and PwC said the AI boom hasn’t spurred the surge of client demand they anticipated.
“They overpromised," said Magesh Sarma, chief information and strategy officer at AmeriSave Mortgage. When it came to building real use cases, he said, “we discovered that they really also had no idea how to do these things." He added, “They were just as good or as bad as what we would have been able to do in house."
“I can’t tell you how many times I heard, ‘Man, they came in, they charged us $20 million and what I feel like we got was a very long report on where AI is going without any real practical application,’" said Pat Petitti, CEO of Catalant, a platform for freelance consultants.
Consultants also are contending with the fact that enterprises today are much more digitally and technically savvy in the past.
“Healthcare is a very complex environment…and we found that our internal team is best equipped to come up with those use cases," said Tilak Mandadi, CVS Health executive vice president of ventures and chief experience and technology. “Our approach was not, let’s go hire a bunch of consultants to tell us what to do with the GenAI."
Large consulting firms are in a “position of great vulnerability," in part because they were too slow to hire enough people with AI competence, said Michael Mische, a former principal at KPMG who now teaches classes on consulting at the University of Southern California. “Overall the consulting industry is not leading AI. It’s behind AI," he said.
Some AI wins
To be sure, companies said they still see some value in engaging consultants. These firms can show them what’s working in other industry segments and act as an extra set of hands where needed.
PwC and Deloitte declined to comment for this article. Accenture, KPMG, EY, McKinsey, Bain and BCG told CIO Journal and CFO Journal they are seeing increasing demand for their AI services and said clients are getting value from them.
KPMG had $1.4 billion in potential AI-related U.S. advisory projects as of July, including biddable contracts and expansions of work for existing clients, compared with roughly $500 million two years ago, a spokesman said.
Accenture, which unlike other major consultancies is publicly traded, in its most recent quarter reported a $100 million increase in new generative AI bookings quarter over quarter. That is down from a $200 million quarter-over-quarter increase the previous two periods.
Consulting firms remain bullish on their promise. McKinsey Senior Partner and Chair for North America Eric Kutcher said he regularly tells CEOs that if they can leverage generative AI effectively, they can double their share price in the next five years.
But several firms also acknowledged that little of that promise has come to fruition yet. Kutcher said while some clients have started on the transformation journey, few are taking advantage of AI’s full potential today.
Deloitte is a sponsor of CIO Journal and CFO Journal.
The AI acid test
Both corporate executives and their outside advisers generally agree that with or without consultants, businesses haven’t fully transformed with generative AI. Deploying enough use cases at scale to drive meaningful efficiencies that translate into cost savings as well as increased revenue is hard work that will take time, which could, ultimately work in the consulting industry’s favor.
Generally, large companies will be willing to pay consultants to deploy technologies that are reliable and predictable and less relevant to competitive advantage. Generative AI isn’t in that category today, but some uses of it could be in four to five years, said Fiona Czerniawska, CEO of Source Global Research, which tracks the consulting industry.
“You’ve got a generation of CIOs that are going to be quite skeptical about consultants’ ability to deploy AI…However, from the consulting firms’ point of view, there will be a second wave and this is where they will make most of their money," she said.
“The problem at the moment is that consulting firms have tried to put themselves at the cutting edge," she said, “and it’s not really where they belong."
Write to Isabelle Bousquette at isabelle.bousquette@wsj.com and Mark Maurer at mark.maurer@wsj.com