The government’s semiconductor ambitions are set for a major expansion, with the expenditure finance committee (EFC) under the finance ministry clearing a proposal for a Rs 1.25 lakh crore outlay under India Semiconductor Mission (ISM) 2.0, significantly higher than the Rs 76,000 crore allocated under the first phase of the programme. The proposal, however, will require Cabinet approval before the second phase of the incentive scheme is formally rolled out.
Officials in the ministry of electronics and information technology (MeitY) said discussions are still underway with the finance ministry on the final outlay and subsidy structure. The proposal will be placed before the Union Cabinet once those are finalised.
Building a complete chip ecosystem
The higher allocation underscores the government’s intent to move beyond attracting a handful of fabrication and packaging units to building a broader semiconductor ecosystem spanning chip design, materials, equipment, packaging and talent development.
The proposed outlay is about 64% higher than the Rs 76,000 crore corpus approved for ISM 1.0 in December 2021. Under the first phase, the Centre offered fiscal support of up to 50% of eligible project costs for semiconductor fabs, display fabs, compound semiconductor facilities and assembly, testing, marking and packaging (ATMP/OSAT) units.
The programme has so far resulted in the approval of 12 semiconductor projects involving investments of around Rs 1.64 lakh crore, including Tata Electronics‘ semiconductor fab in Gujarat, Micron Technology‘s ATMP facility, and multiple chip packaging and compound semiconductor projects across Gujarat, Assam, Odisha, Uttar Pradesh, Punjab and Andhra Pradesh. Much of the original incentive corpus has already been committed, necessitating a second phase of the programme.
Focus shifts beyond manufacturing
Electronics and IT Minister Ashwini Vaishnaw has indicated that ISM 2.0 will shift the focus from merely attracting manufacturing projects to strengthening India’s position across the semiconductor value chain. The next phase is expected to prioritise indigenous chip design, productisation, attracting ecosystem partners and developing skilled talent, while also extending support to critical inputs such as semiconductor-grade materials, specialty chemicals, industrial gases, capital equipment and ancillary suppliers. The government expects these interventions to reduce import dependence and help India meet a larger share of its domestic semiconductor demand over the coming years.
The expanded mission comes as India seeks to capitalise on global efforts by chipmakers to diversify supply chains beyond traditional manufacturing hubs. Since launching ISM 1.0, the government has secured commitments from global and domestic players across fabrication, assembly and packaging, but officials have maintained that the next phase must focus on creating an integrated ecosystem rather than isolated manufacturing facilities. The proposed Rs 1.25 lakh crore outlay is expected to provide the financial firepower for that transition. Sources said that the final contours of the scheme, including the subsidy framework and eligibility criteria, will only become clear after the Cabinet considers the proposal.