India Launches Semiconductor Mission 2.0 With $13.21B Push

India Commits $13.21 Billion to Semiconductor Mission 2.0

The Expenditure Finance Committee has cleared a proposal for India Semiconductor Mission (ISM) 2.0 with a total allocation of ₹1.25 lakh crore, approximately US$13.21 billion, announced formally in the Union Budget 2026-27. The new programme builds on ISM 1.0, which had an outlay of ₹76,000 crore (approximately US$8.03 billion), and represents a near-doubling of committed government funding for India's semiconductor industrial push. For the fiscal year 2026-27, ₹1,000 crore has been made available immediately, with the remainder disbursed over the programme's full duration.

A Broader Mandate Than ISM 1.0

ISM 1.0 was primarily structured around attracting investment into wafer fabrication facilities, compound semiconductor plants, and outsourced semiconductor assembly and test units through capital subsidy commitments. ISM 2.0 significantly widens its scope to cover semiconductor manufacturing equipment, specialty chemicals and materials, indigenous intellectual property creation, chip design and productisation support, talent development initiatives, and supply chain resilience. The shift reflects a recognition that a complete semiconductor ecosystem requires more than fabs and packaging plants; it also needs the surrounding layers of tooling, chemistry, design IP, and human capital to function at a globally competitive level.

Key Targets Under ISM 2.0

The programme sets a target of 75 percent domestic self-sufficiency in semiconductor demand by 2030, alongside goals of at least one new front-end wafer fab, nine compound semiconductor or ATMP units, and a significant expansion of the Design Linked Incentive scheme for fabless startups. The programme also allocates specific funding for industry-led research and training centers intended to build the workforce pipeline for chip design, fab operations, and packaging engineering across Indian universities and technical institutions.

Design and IP: A New Priority

One of the most significant shifts in ISM 2.0 is the explicit prioritisation of indigenous chip design and product IP ownership. Under ISM 1.0, the primary incentive was capital subsidy for manufacturing investment. ISM 2.0 adds product development grants, EDA tool funding, foundry access support, and market linkage programs to help Indian startups move from chip design to commercial production and customer engagements. Twenty-four semiconductor design startups have already been supported under the DLI scheme, attracting nearly ₹430 crore in venture capital funding, and ISM 2.0 aims to scale that cohort to over 100 companies.

Equipment and Materials: Filling the Gap

India currently imports essentially all of its semiconductor equipment and most specialty materials. ISM 2.0 introduces a dedicated equipment manufacturing incentive to encourage domestic or joint-venture production of wafer handling systems, etch tools, deposition equipment, and related hardware, with materials incentives targeting photoresists, process gases, and slurries used in wafer fab operations. These upstream segments have attracted little policy attention in ISM 1.0 but are viewed as critical to long-term supply chain resilience and cost competitiveness.

What ISM 2.0 Signals

ISM 2.0 signals that India views semiconductor manufacturing not as a short-term industrial project but as a decade-long strategic commitment, with the scale of investment now comparable to national semiconductor programmes in South Korea, Taiwan, and Japan. For companies considering India as a manufacturing or design base, the programme's expanded scope and significantly larger outlay provide a more comprehensive incentive landscape and a clearer signal of long-term government commitment.