The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the second phase of the India Semiconductor Mission with a total outlay of ₹1.27 lakh crore, extending a programme the government credits with turning India from a chip importer into an emerging manufacturing hub. Union Electronics and Information Technology Minister Ashwini Vaishnaw said the scheme has been designed around six pillars covering the entire semiconductor value chain, from chip design and raw materials to fabrication, packaging, research and talent development.
Building on a Foundation Laid Since 2021
Semicon 2.0 follows the original India Semiconductor Mission, launched in December 2021 with a budget of ₹76,000 crore. Under that first phase, the government approved 12 manufacturing projects with cumulative investments exceeding ₹1.64 lakh crore, spanning a silicon fab, a silicon carbide fab, a gallium nitride Micro LED display fab and nine packaging units. Three of those projects, run by Micron, Kaynes and CG Semi, have already begun commercial production, with a fourth expected to come online later this year and the country’s first full silicon fab scheduled for commissioning in 2028.
To reassure long-term institutional investors betting on capital-intensive projects like fabs, the government has extended the programme’s lifecycle from five years to 12, a structural change meant to give companies planning decade-long investment cycles more policy certainty than the original scheme’s shorter runway allowed.
Six Pillars, One Broader Ambition
The new phase shifts emphasis toward vertical integration rather than simply building capacity. Its first pillar strengthens India’s chip design ecosystem, building on the roughly 105 startups and MSMEs already developing semiconductor chips domestically. The second pillar incentivises companies manufacturing the equipment, chemicals, gases and materials that feed fabrication, an unglamorous but critical layer of the supply chain that India has historically imported almost entirely.
The third and fourth pillars focus on expanding fabrication capacity and strengthening India’s assembly, testing, marking and packaging industry, an area where the country has already built credibility with global manufacturers. The fifth pillar targets research and development to push India’s chip technology beyond the 28 to 110 nanometre nodes it currently operates at toward more advanced processes, while the sixth pillar backs talent development, building on a network of 315 universities that have already trained roughly 68,000 students in advanced chip design using industry-standard tools.
Betting on Memory Chips Amid a Global Shortage
Officials expect Semicon 2.0 to draw around ₹4 lakh crore in fresh investment and generate semiconductor production worth ₹2 lakh crore over the scheme’s duration, arriving at a moment when the world is grappling with a memory chip shortage driven partly by surging AI demand. A central strategic thrust of the new phase is High Bandwidth Memory, the specialised, high-speed RAM architecture that powers AI data centres and is currently dominated by a small handful of global players including SK Hynix, Samsung and Micron. By incentivising domestic HBM production, India is positioning itself to capture a slice of the AI supply chain currently concentrated almost entirely outside the country.
Vaishnaw pointed to growing international confidence in India’s semiconductor ambitions, citing strategic partnerships established with the United States, the European Union, Japan, Singapore, the Netherlands and Germany, alongside firm investment commitments from global players including Applied Materials and AMD at $400 million each, Lam Research at $1.1 billion, and KLA at $400 million. Equipment giant ASML and materials firm Merck have separately signed memoranda of understanding with the Tata Group to support India’s semiconductor ecosystem.
What Success Would Actually Look Like
The government’s stated ambition is for India to design and manufacture 70 to 75 per cent of the chips required for its own automotive, telecommunications and consumer electronics sectors by 2029, with an eventual goal of ranking among the world’s top five semiconductor nations by 2035. Whether that timeline holds will depend heavily on how quickly the newly incentivised fabs and packaging units can scale beyond the initial wave of projects, and on how India’s chip ambitions weather a global industry defined as much by geopolitics and supply shocks as by manufacturing capability.
