India Semiconductor Mission 2.0 Launched in Union Budget 2026-27

Finance Minister Nirmala Sitharaman announced the launch of India Semiconductor Mission (ISM) 2.0 while presenting the Union Budget 2026-27 in Parliament.

About the India Semiconductor Mission 2.0

• ISM 2.0 builds on the progress of the first phase and aims to create a self-reliant, end-to-end semiconductor ecosystem in India.
• Budget: 1000 Crore for FY 2026-27

Key focus areas

• Manufacturing of equipment & materials used in chipmaking
• Development of full-stack Indian semiconductor IP
• Strengthening semiconductor supply chains
• Industry-led R&D and training centres to build skilled manpower

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India Semiconductor Mission 1.0

• Launch: 2021 with an outlay of ₹76,000 crore
• Aim: Financial support for semiconductor fabs, display manufacturing & chip design, integrating India into global electronics value chains
• Nodal Ministry: Ministry of Electronics and Information Technology (MeitY)
• Key Schemes under ISM:
  • Semiconductor Fabs Scheme: Up to 50% fiscal support for wafer fab units
  • Display Fabs Scheme: Up to 50% project cost support for display fabs
  • Design Linked Incentive (DLI) Scheme: Financial support across design, development & deployment stages
  • Semicon India: Flagship platform bringing industry, policymakers, academia & startups for collaboration and investment.
• Key Achievements:
  • 10 Semiconductor Projects Approved: Across six states, with cumulative investments exceeding ₹1.6 lakh crore.
  • These include a mix of fabrication plants, OSAT/ATMP units, compound semiconductor facilities (e.g., Silicon Carbide), and advanced packaging.

About Semiconductors

• Semiconductors are materials with electrical conductivity between that of conductors (e.g., metals like copper) and insulators (e.g., glass or rubber).
• Semiconductors are called the “brains” of modern electronics. Without them, the digital world (computing, AI, internet, smartphones, clean energy tech, etc.) would not exist.
• Core Property: Their conductivity can be precisely controlled and changed by:
  • Adding impurities (doping)
  • Temperature
  • Light
  • Applied voltage or electric field
  • This makes them ideal for switching, amplifying, or processing electrical signals.
• Most Common Material: Silicon (Si) is the dominant material for semiconductors. It is abundant, stable, and easy to process.
  • Others include germanium (Ge), gallium arsenide (GaAs), silicon carbide (SiC), and gallium nitride (GaN).

Key Devices Made from Semiconductors

• Transistors: Act as switches/amplifiers (building blocks of modern electronics)
• Diodes: Allow current in one direction
• Integrated Circuits (ICs) / Microchips: Contain billions of transistors
• Microprocessors (CPU), memory chips, sensors, LEDs, solar cells etc.

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Opportunities for India in the Semiconductor Sector

• Global Supply Chain Realignment: China+1 strategy and geopolitical risks open space for India as a trusted alternative semiconductor base.
  • The China+1 strategy is a supply chain approach where companies maintain manufacturing in China but diversify by adding at least one other country for sourcing and production.
• Strong Policy & Fiscal Support: India Semiconductor Mission provides ~50% fiscal support for fabs, ATMP/OSAT units, and chip design.
• Design & Talent Advantage: India hosts around 20% of global semiconductor design engineers, enabling leadership in chip design and IP creation.
• Low-Barrier Entry via Packaging & Testing: Assembly, Testing, Marking and Packaging (ATMP) offers faster scalability, lower costs, and early export potential.
• Rising Domestic Demand: Rapid growth in EVs, 5G, AI, defence, and electronics manufacturing ensures a stable internal market for chips.
  • The semiconductor market in India is expected to rise to $100-110 Billion by 2030.

Challenges in Semiconductor Manufacturing in India

• High Capital Intensity & Technology Gap: Setting up advanced semiconductor fabrication (fab) plants requires multibillion-dollar investments and cutting-edge production technology, which India currently lacks.
• Shortage of Specialized Skilled Workforce: While India has a large engineering base, specialised skills for wafer fabrication, process tech, and semiconductor manufacturing are insufficient, affecting industrial execution.
• Underdeveloped Supply Chain & Raw Material Dependence: India depends heavily on imported semiconductor equipment, specialty gases, and raw materials, making the ecosystem vulnerable to supply disruptions and foreign export-control risks.
• Lack of Integrated Infrastructure: Semiconductor fabs need advanced infrastructure (reliable power, water, logistics, clean rooms, testing facilities).
• Global Competition: India competes with established hubs such as Taiwan, South Korea and China that have economies of scale, mature ecosystems, and deeper supplier networks.

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Way Forward

• Fast-track Fab Implementation: Expedite construction and commissioning of approved 10 semiconductor fabrication (fab) projects to move from incentive commitment to commercial chip production.
• Build Domestic Supply Chain: Strengthen local manufacturing of semiconductor equipment, materials, chemicals and tools to reduce heavy import dependence.
• Scale Design & IP Capabilities: Promote chip design houses, R&D centres, and indigenous IP development through focused incentives and industry–academic collaboration.
• Develop Skilled Workforce: Expand targeted training programs and specialised courses to produce skilled engineers in fabrication, process technology, and advanced packaging.
• Enhance Partnerships & Exports: Attract global semiconductor players for technology transfer, co-investment and export-oriented manufacturing, integrating India into global supply chains.

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