The Union Cabinet on Wednesday approved two flagship manufacturing programmes with a combined outlay of nearly Rs 1.9 lakh crore, marking the government’s shift from attracting electronics assembly to building a complete domestic ecosystem spanning semiconductor design, fabrication, components and mobile phone manufacturing.
The Cabinet approved the Rs 1.27 lakh crore India Semiconductor Mission (ISM) 2.0 and a Rs 62,500 crore Mobile Phone Manufacturing Scheme (MPMS), both of which build on the first generation of incentive programmes but significantly widen their scope to deepen domestic value addition, strengthen supply chains and position India as a global manufacturing base for critical electronics.
Announcing the decisions, Electronics and IT Minister Ashwini Vaishnaw said the semiconductor programme would make India self-reliant in indigenous chip production by the end of the scheme period. The government expects ISM 2.0 to attract investments of around Rs 4 lakh crore and generate semiconductor production worth nearly Rs 2 lakh crore.
Expanding the Chip Value Chain
Unlike the first phase, which largely focused on attracting fabrication and packaging projects, ISM 2.0 will cover six segments of the semiconductor value chain — chip design, semiconductor equipment and materials, fabrication facilities, advanced packaging and testing, research and development, and talent development. The scheme will also support companies manufacturing semiconductor equipment, chemicals, gases and materials while encouraging development of commercial and strategic semiconductor intellectual property and attracting more fabrication facilities.
In a key departure from the earlier Design Linked Incentive (DLI) scheme, which was limited to startups, large companies will now also be eligible for support to accelerate indigenous chip design. The government also plans to move up the technology curve from manufacturing 28 nanometre (nm) chips currently to 7 nm and eventually 2 nm chips over the course of the programme.
A government statement said the programme is aimed at making India a trusted semiconductor design and manufacturing destination while improving supply chain resilience. The country’s first semiconductor fabrication unit is expected to become operational in 2028.
The government said the first phase of the semiconductor mission has already approved 12 projects involving investments of more than Rs 1.64 lakh crore. These include one silicon fabrication plant, a silicon carbide facility, an integrated gallium nitride micro-LED display unit and nine assembly, testing, marking and packaging (ATMP) and outsourced semiconductor assembly and test (OSAT) facilities catering to sectors such as automobiles, telecommunications, consumer electronics, aerospace and industrial equipment.
Three projects promoted by Micron, Kaynes and CG Semi have already commenced commercial production, while another facility is expected to begin operations next year. The programme has also supported 24 semiconductor design projects by startups and MSMEs, with 105 companies receiving access to industry-standard electronic design automation tools.
Shifting Focus
Alongside the semiconductor package, the Cabinet approved a new five-year Mobile Phone Manufacturing Scheme for FY27-FY31 with an outlay of Rs 62,500 crore. The scheme succeeds the earlier production-linked incentive programme that helped make India the world’s second-largest mobile phone manufacturer by volume and turned mobile phones into the country’s largest export product category in 2025.
The new scheme seeks to move beyond assembly-led growth by encouraging higher domestic value addition and component manufacturing. Companies will receive incentives ranging from 2.25% to 5% on eligible mobile phone sales over five years, with an additional incentive for manufacturers sourcing domestically produced components and for Indian companies investing in product design and research. The government expects the scheme to nearly double domestic value addition in mobile phone manufacturing from the current 23-24% to around 44-45% during the scheme period.
The government expects MPMS to generate cumulative production worth around Rs 39 lakh crore during the scheme period, substantially raise exports and create nearly 60,000 direct jobs. The broader objective is to increase India’s share in global mobile phone production to around 30%, while industry estimates place the longer-term potential at 35-40%.
India currently manufactures 99.2% of mobile phones sold in the domestic market. Electronics manufacturing has expanded sharply over the past decade, with production increasing sevenfold and exports rising elevenfold since 2014-15, driven primarily by smartphone manufacturing under the Make in India programme.
Industry welcomed the continuity in policy support. Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA), said ISM 2.0 builds on the foundation created by the first phase by expanding support to design, research and development, equipment, materials and the broader supply chain, helping position India as a globally competitive semiconductor hub.
On the mobile manufacturing scheme, Mohindroo said MPMS provides the policy certainty required for the next phase of industry growth by encouraging deeper localisation of components and strengthening the domestic supplier ecosystem. He said the scheme would help India raise its share in global mobile phone production to 35-40% over time while reinforcing the country’s position in global electronics value chains.