India Semiconductor Mission 2.0

India Semiconductor Mission (ISM) 2.0 has been launched to deepen India’s Tech Sovereignty. Read here to learn more.

The Union Budget 2026-27 marks a decisive shift in India’s semiconductor strategy with the launch of India Semiconductor Mission (ISM) 2.0.

While ISM 1.0 focused on ecosystem creation and attracting anchor investments, ISM 2.0 signals a move towards technological depth, value-chain integration, and strategic autonomy in semiconductors, one of the most geopolitically sensitive sectors globally.

What is India Semiconductor Mission (ISM) 2.0?

India Semiconductor Mission 2.0 aims to position India as a reliable, competitive, and trusted player in the global semiconductor value chain. It aligns with the broader vision of:

• Aatmanirbhar Bharat
• Make in India, Make for the World
• Strategic supply-chain resilience amid geopolitical uncertainties

A budgetary allocation of ₹1,000 crore for FY 2026-27 has been provided to operationalise the next phase of the Mission.

Key Focus Areas of ISM 2.0

1. Indigenous Manufacturing of Equipment & Materials

Unlike ISM 1.0, which focused primarily on fabrication units (fabs) and packaging facilities, ISM 2.0 aims to strengthen upstream capabilities, including:

• Semiconductor manufacturing equipment
• Speciality chemicals and process gases
• Silicon wafers and compound semiconductor materials

This reduces import dependence, especially critical given global supply chain vulnerabilities and concentration of semiconductor tools in a few countries.

2. Full-Stack Intellectual Property (IP) Development

A major emphasis of ISM 2.0 is the creation of end-to-end Indian semiconductor IP, covering:

• Processor architecture
• Chip design
• System integration
• Security frameworks

Developing indigenous IP enhances strategic security, reduces licensing costs, and enables India to compete in advanced chip segments globally.

3. Research & Skill Development

To address the talent and technology gap, ISM 2.0 proposes:

• Industry-led research and training centres
• Applied R&D hubs
• Advanced manufacturing skill development programs

Given that semiconductor manufacturing demands highly specialized skills, this focus aims to build a sustainable talent pipeline.

4. Supply Chain Resilience

Global chip shortages during COVID-19 and geopolitical tensions highlighted the risks of concentrated production. ISM 2.0 seeks to:

• Diversify supply chains
• Integrate India into global semiconductor networks
• Strengthen domestic resilience

This also aligns with friend-shoring strategies adopted by major economies.

India Semiconductor Mission 1.0

The ISM 1.0, approved in December 2021, had a financial outlay of ₹76,000 crore, offering up to 50% fiscal support for eligible projects.

Progress (as of December 2025):

• 10 projects approved
• Total investment of ₹1.60 lakh crore
• Spread across six states
• Includes:
  • Silicon fabrication units (fabs)
  • Compound semiconductor facilities
  • Advanced packaging and testing plants

This marked India’s first serious entry into semiconductor fabrication and packaging.

India’s Semiconductor Market Outlook

India’s semiconductor market is expanding rapidly:

• $38 billion (2023)
• $45-50 billion (2024-25)
• Projected $100-110 billion by 2030

India aims to achieve:

• 70-75% self-sufficiency in domestic chip demand by 2029
• Advanced manufacturing capabilities in 3 nm and 2 nm nodes by 2035

If achieved, this would place India among the leading semiconductor-producing nations.

Complementary Ecosystem Support

The Mission is backed by the Modified Programme for Development of Semiconductor and Display Manufacturing Ecosystem, with an allocation of ₹8,000 crore for 2026-27.

Objectives include:

• Accelerating fabrication and packaging capacity
• Attracting global semiconductor investments
• Generating high-quality employment
• Supporting display manufacturing

Key Semiconductor Initiatives Supporting ISM

1. Design Linked Incentive (DLI) Scheme

• Encourages fabless semiconductor companies
• Supports chip design and IP development
• Expands India’s design talent pool

2. Digital India RISC-V Programme

• Promotes open-source processor architecture
• Eliminates costly licensing fees
• Enables domestic processor innovation

3. Chips to Startup Programme

• Provides universities and startups access to:
  • Design tools
  • Fabrication facilities
• Strengthens innovation at the grassroots level

4. Indigenous Microprocessor Development

• Development of processors such as DHRUV64
• Reduces reliance on imported chips
• Strengthens digital sovereignty

Strategic Significance of ISM 2.0

1. Economic Security: Reduces vulnerability to global chip shortages.
2. National Security: Ensures secure chips for defence and critical infrastructure.
3. Industrial Competitiveness: Positions India in high-value manufacturing.
4. Geopolitical Leverage: Enhances India’s role in trusted semiconductor supply chains.
5. Employment & Innovation: Boosts high-skilled job creation.

Challenges Ahead

Despite progress, challenges remain:

• High capital intensity of fabs
• Technology gaps in advanced nodes
• Dependence on foreign semiconductor equipment
• Water and energy requirements of fabs
• Need for sustained policy support

Conclusion

India Semiconductor Mission 2.0 represents a strategic evolution, from attracting investment to building technological sovereignty and supply-chain resilience.

By focusing on indigenous IP, upstream manufacturing, skill development, and global integration, ISM 2.0 seeks to transform India from a major semiconductor consumer into a trusted and competitive global producer.

If executed effectively, ISM 2.0 could become one of the most transformative industrial policy initiatives in India’s technological history.

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