India Semiconductor Mission 2.0 (2026)

Policy Update
Sneha Kohli

Background

The India Semiconductor Mission, launched in 2021 aims to develop a strong semiconductor ecosystem for enhancing India’s position in the global electronics manufacturing and design hub. The successful implementation of the first phase has led to the development of the Semicon India Programme 2.0 in 2026.

Semiconductor chips are the building blocks of electronic technology. The dependence on the chip industry and its growing market are shaped around various technological challenges. Thus, India has invested in R&D of semiconductors to contribute to the global supply chain through its initial outlay of Rs. 76,000 crores followed by the recent fiscal outlay of Rs. 1,27,500 crores in the Semicon India Programme 2.0.

The key objective of the programme is to build a comprehensive semiconductor ecosystem ensuring multi-fold growth, hence promoting indigenous Intellectual Property (IP). This will ensure significant development of the domestic and global supply chain with increase in domestic value addition over the period of time.

Functioning

India’s Semicon Mission 2.0 aims at building a holistic semiconductor ecosystem under the following six major pillars:

Design: Semicon 2.0 will deepen the chip design ecosystem through the development of semiconductor IPs(Intellectual Property cores), chips and systems. Building blocks such as compute, memory, power, networking, RF and sensors have been identified for strategic requirements. Startups/MSMEs will receive seed money (Risk Capital), IPs tools support and deployment-linked incentives to offset higher costs of tape-outs, with Indian companies and companies owned by OCIs also allowed to participate.
Machines and Materials: Companies involved in the manufacturing and R&D of machines and manufacturing of materials, chemicals and gases essential for semiconductor manufacturing will be incentivized. This will support sustainable growth of the semiconductor industry, develop the precision manufacturing industry and enable domestic companies to become part of global supply chains.
Setting up More Fabs: Efforts will be made to attract more manufacturers to India to set up silicon fabs, compound semiconductor fabs, discrete component fabs and display fabs. Complementary Metal oxide Semiconductors(CMOS-based) silicon fabs will receive financial support of 40% of Capex on a pari-passu basis, while other fabs will be eligible for 35% of Capex on a pari-passu basis. Here, pari-passu basis refers to the government sharing the capital cost with the company in the specified proportion, releasing its support alongside the company’s investment as the project progresses.
Strengthening ATMP/OSAT Industry: Capacity additions in ATMP(Assembly, Testing, Marking and Packaging) and OSAT(Outsourced Semiconductor Assembly and Test) units will be actively encouraged, with a focus on bringing advanced packaging technologies to India. Advanced packaging will receive financial support of 35% of Capex on a pari-passu basis, while conventional packaging will be eligible for 25% of Capex on a pari-passu basis.
Research and Development: With the semiconductor journey starting with the 28nm–110nm node, the focus will now be on developing more advanced nodes and other advanced technologies in collaboration with leading R&D centres within and outside India.
Talent Development: Building on the training of around 70,000 students across 320 universities using the latest Electronic Design Automation (EDA) tools, training will be expanded to more institutes and colleges. The industry will also be actively engaged in deepening clean room, fab construction and other ecosystem training.

The pillars form the implementation structure of the programme. Recently on 15th July, 2026 the Union Cabinet has approved the framework of Semicon 2.0. Additionally, the Semicon India Programme 2.0 is designed to catalyze cross-sectoral economic advancement, bolster national security by fostering resilient supply networks, and secure strategic technological sovereignty within essential industries.

Performance Assessment

The progress of ISM 1.0, 2021 can be assessed so far as the following on the basis of the Press Information Bureau release:

Manufacturing: As of July 2026, twelve (12) manufacturing units have been approved with a cumulative investment of over Rs.1.64 Lakh Crore. These include one Silicon fab, one Silicon Carbide fab, an integrated Gallium Nitride Micro LED Display Fab and nine (9) packaging units expected to cater to chip requirements of sectors such as consumer appliances, industrial electronics, automobiles, power electronics, telecommunications, aerospace, etc.
Design: Twenty-four (24) semiconductor design projects from start-ups and MSMEs have been approved for financial support, while 105 start-ups/MSMEs have been granted access to industry-standard Electronic Design Automation (EDA) tools. These companies are at different stages of design and development and will enter the deployment stage after successful prototyping.

*The above PRS assessment is based on programme progress reported up to December 2025 and therefore reflects an earlier stage of implementation.

Source: PRS Legislative Research, Demand for Grants 2026–27 Analysis: Electronics and Information Technology

The data indicates substantial progress in attracting investment and developing semiconductor manufacturing capacity, with ten projects involving a cumulative investment of ₹1.6 lakh crore and an expected capacity of over 24 billion units annually. However, the Design-Linked Incentive Scheme shows relatively limited uptake, with 23 companies and 24 designs supported as of December 2025.

Financial Utilisation Graph

Source: PRS Legislative Research, Demand for Grants 2026–27 Analysis: Electronics and Information Technology

The data indicates significant underutilisation of funds under the Semicon India Programme, with actual expenditure less than the Budget Estimate. The underutilisation may be partly attributed to the structure of the programme, as financial incentives are disbursed only after the approved companies achieve specified milestones, reflecting the long implementation period of semiconductor projects.

The Operationalisation Status of the programme: Twelve semiconductor manufacturing units have been approved under the first phase, commercial production has commenced in three units including Micron, CG Semi and Kaynes. The first semiconductor fab is scheduled to be commissioned in 2028. This indicates a gradual transition from project approvals and investment commitments towards actual semiconductor production.

ISM 1.0 shows mixed but significant progress. It has successfully attracted large investment commitments, established manufacturing and packaging projects, and expanded the domestic chip-design ecosystem. At the same time, low fund utilisation during the initial years and the gap between approved projects and operational capacity indicate implementation challenges. The improvement in expenditure during 2025–26 and commencement of commercial production by some units indicate movement from project approval towards actual production. Semicon 2.0 is in its early stages of implementation; therefore, its performance cannot yet be evaluated.

Projected Impacts

Strengthening the Domestic Semiconductor Ecosystem: Semicon 2.0 is expected to deepen India’s semiconductor ecosystem by expanding capabilities across chip design, fabrication, packaging, equipment, materials, research and talent development. The programme seeks to increase domestic value addition while promoting indigenous semiconductor IP.
Technological Self-Reliance and Innovation: The emphasis on semiconductor IP, advanced nodes, R&D collaborations and indigenous innovation is expected to reduce technological dependence over the long term while strengthening India’s research and design capabilities.
Employment and Skill Development: Expansion of semiconductor manufacturing, packaging, research and design activities, together with the Talent Development pillar, is expected to generate demand for specialised engineers, researchers and technicians while strengthening India’s semiconductor workforce.

Emerging Issues

Low Fund utilisation and implementation delays: Despite substantial budgetary allocations, utilisation under the first phase remained low. The much larger scale of Semicon 2.0 raises questions about the programme’s capacity to translate higher allocations into timely implementation and expenditure.
Dependence on Global Semiconductor Supply chain: Semicon 2.0 aims to develop domestic manufacturing of machines, materials, chemicals, and gases, which itself indicates India’s continuing dependence on global supply chains for critical semiconductor inputs and equipment. Developing fabs domestically does not automatically ensure domestic value addition or technological self-reliance if critical equipment, materials, and technologies continue to be imported.
Advance technology and R&D: Semicon 2.0 proposes developing more advanced nodes and technologies through collaboration with R&D centres within and outside India. The challenge, therefore, extends beyond establishing manufacturing capacity to developing advanced technological capabilities, indigenous IP, and R&D capacity.
Operationalisation of approved projects: Only a limited number of approved units have entered commercial production. Approved investment and projected capacity should, therefore, be distinguished from realised manufacturing output when evaluating the programme.

Way Forward/Policy Recommendations

Techno-Industrial Policy and Mission-driven innovation: India should integrate industrial expansion with technological development and indigenous innovation capabilities. Innovation in critical semiconductor technologies should be pursued on a mission mode through coordinated efforts of the government, industry, and research institutions, with a short-, medium-, and long-term approach.
Strengthen ATMP, design and selective fabrication: India should continue strengthening assembly, testing, marking and packaging (ATMP) and semiconductor design, while selectively and strategically pursuing fabrication aligned with domestic demand and ecosystem readiness. Given the high capital intensity and technological complexity of fabs, expansion should be supported by the development of complementary capabilities and industries.
Leverage foreign technology while building indigenous capacity: Technology transfer and partnerships with global semiconductor firms can support India’s capabilities in the initial stages. However, emphasis should be placed on building absorptive capacity by training Indian engineers and technicians to learn, adapt and improve upon imported technologies. Over time, indigenous capabilities in semiconductor equipment, materials, process technologies and advanced manufacturing should be developed to reduce dependence on global supply chains.
Diversify semiconductor trade and supply chains: India should diversify its sources of semiconductor equipment, materials, chemicals, gases and technologies to reduce overdependence on any single country or external supplier. This should complement indigenous capacity building, enabling greater supply-chain resilience while domestic capabilities are gradually developed.
Develop skilled workforce: Semiconductor facilities should be developed within or near established electronics manufacturing clusters, supported by dedicated utilities, logistics and infrastructure. Investment in foundational STEM education and specialised semiconductor training should also be expanded, including industry-relevant training and opportunities for engineers to gain hands-on experience.
Strengthen the R&D and Industry: Policies should incentivise collaborative R&D between industry, universities, researchers and students through industry-funded university projects. Strong intellectual property protection and enabling conditions for private investment in applied and frontier R&D can further support the development of indigenous technologies and IP.
Align fabrication expansion with ecosystem maturity: Further expansion of fabrication capacity should be aligned with the development of a strong industrial base, skilled workforce and supplier ecosystem. In the long term, India should build capabilities in high-value upstream segments, including semiconductor manufacturing equipment, materials and process technologies, supported by sustained investment in precision engineering, materials science and advanced manufacturing.

References

India Semiconductor Mission. (2026). India Semiconductor Mission. Ministry of Electronics and Information Technology, Government of India. Semicon 2.0 | India Semiconductor Mission

Press Information Bureau. (2026). India Semiconductor Mission 2.0: A major push in Budget 2026 towards semiconductor self-reliance. Government of India. Press Release Page | Press Information Bureau

Press Information Bureau. (2026). Cabinet approves Semicon 2.0 – Government delivers on its commitment for a long-term policy support to semiconductors in India. Government of India. Press Release Page | Press Information Bureau

PRS Legislative Research. (2022). Science & Technology Policy Brief: Semiconductor Chip Manufacturing. PRS Legislative Research. Science and Technology Policy Brief

PRS Legislative Research. (2026). Demand for Grants 2026–27 Analysis: Electronics and Information Technology. PRS Legislative Research. prsindia.org/files/budget/budget_parliament/2026/DFG_Analysis_2026-27_MeITY.pdf

R.K., H. N. (2026). The Semiconductors Race – Understanding the challenges in India’s technology and industrial ecosystem, and learning from global strategies. Kautilya School of Public Policy. Pg 78-91 https://kspp.edu.in/capstone-project/the-semiconductors-race-understanding-the-challenges-in-india-s-technology-and-industrial-ecosystem-and-learning-from-global-strategies

About the Contributor

Sneha Kohli is a third-year B.A. (Hons.) Political Science student at Jesus and Mary College, University of Delhi. She has a keen interest in public policy, governance, and policy research, with prior experience in research projects, policy analysis, and academic writing. She values curiosity, critical thinking, and collaborative learning, and looks forward to contributing to and learning from IMPRI’s research ecosystem.

Acknowledgement

The author extends sincere gratitude to the IMPRI team for their expert guidance and to Vishal Kumar and Paridhi Passi for their valuable feedback and support.

Disclaimer: All views expressed in the article belong solely to the author and do not necessarily represent the views or policies of the organisation.