India’s semiconductor programme is entering a broader phase, with the government placing greater emphasis not just on chip manufacturing but also on packaging, equipment, materials, design, research and talent. CLSA says the second phase of the India Semiconductor Mission (ISM) has a larger financial commitment than the first phase and is designed to build capabilities across the semiconductor value chain.
The brokerage describes the new programme as a move towards ecosystem development, with support being extended to areas that had received less participation under the first phase. CLSA said, “Government shifts focus to ecosystem development”, while noting that incentives for fabrication and packaging have become more targeted.
Semicon 2.0: Rs 1.27 lakh crore outlay, wider coverage
The second phase carries an outlay of Rs 1,27,500 crore, compared with Rs 76,000 crore under Semicon 1.0. The government’s support now covers the entire semiconductor value chain, including chip design, fabrication, equipment and raw materials, testing infrastructure, research and development, and talent development.
CLSA said the new framework has been designed after assessing participation under the first phase. As a result, some incentives for large fabrication and packaging projects have been reduced, while new categories have been added to address gaps further upstream.
For silicon fabrication, fiscal support has been reduced to 40% of eligible capital expenditure from 50% under the first phase. Support for compound fabrication has been reduced to 35% from 50%, while the minimum capex requirement has increased to Rs 500 crore from Rs 100 crore. A minimum revenue threshold of Rs 200 crore has also been introduced.
The display segment will receive fiscal support of 35%, down from 50%, while a separate category has been created for microLED projects. The minimum capex requirement for microLED has been set at Rs 1,500 crore, with a minimum revenue threshold of Rs 600 crore.
For OLED and LCD fabrication, the revenue threshold has been reduced to Rs 5,000 crore from Rs 7,500 crore.
The packaging segment has also been reworked. The scheme differentiates between legacy and advanced packaging, offering fiscal support of 35% and 25%, respectively, compared with 50% earlier. The minimum capex requirement has increased sharply to Rs 1,000 crore from Rs 50 crore.
Upstream semiconductor ecosystem gets dedicated support
One of the major additions under Semicon 2.0 is dedicated support for upstream materials and equipment. CLSA said projects in this category can receive 30% capex support, along with production-linked incentive benefits of 10%, 8%, 6%, 4% and 2% over five years starting FY28.
Chip design has also received stronger support, including a 9% deployment-linked incentive, access to electronic design automation tools, multi-project wafer support, seed funding and equity co-investment.
The programme also provides support of up to 75% for research and development and talent development, broadening the focus beyond manufacturing facilities.
CLSA said the new incentives are aimed at the “entire value chain covering chip design, fab, equipment and raw materials, testing infrastructure, R&D and talent development.”
Government raises semiconductor-related allocations
The FY27 allocation for semiconductor and display manufacturing has been increased to Rs 8,000 crore from the revised FY26 allocation of Rs 4,300 crore. Within this, the allocation for ISM 2.0 stands at Rs 1,000 crore in FY27.
The government has also allocated Rs 1,500 crore for electronics components manufacturing and another Rs 1,500 crore for large-scale electronics manufacturing and IT hardware PLI schemes. Railway signalling and telecom-related allocation stands at Rs 7,500 crore.
The higher allocation comes as projects approved during the first phase move closer to commercialisation. CLSA said three approved projects had already commenced production, while more facilities are expected to come online.
The brokerage described the first phase positively, saying, “Semicon 1.0 was a success, with three approved projects already commencing production and more facilities expected to come online soon.”
Seven semiconductor projects are in CLSA’s project list
CLSA’s project table names seven entities associated with projects approved under ISM 1.0. Therefore, the semiconductor push is not limited to three companies.
Micron Technology has a Rs 22,500 crore ATMP project in Sanand, Gujarat, where commercial production started in February 2026.
Tata Electronics has a Rs 91,000 crore fabrication project in Dholera, Gujarat. Construction is underway and commercial production is likely by 2028.
Tata Semiconductor has a Rs 27,000 crore OSAT project in Morigaon, Assam, which is nearing final commissioning.
CG Power has a Rs 7,600 crore OSAT project in Sanand, Gujarat. Its mini factory became operational in July 2026, while the main facility is expected by FY27.
Kaynes Technology has a Rs 3,300 crore OSAT project in Sanand, Gujarat, which is in the commercial production and ramp-up phase.
#HCL-Technologies has a Rs 3,700 crore OSAT project in Jewar, Uttar Pradesh, with operations expected to start by 2027.
SicSem Private Limited has a Rs 2,100 crore compound fabrication and ATMP project in Bhubaneshwar, Odisha, with operations expected in 2027-28.
Why the focus is on three listed Indian companies
The “3 companies to watch” reference is specifically about listed Indian companies among the seven project entities. Those three are CG Power, Kaynes Technology and HCL Technologies.
The distinction is important because CLSA’s company disclosure also lists Micron Technology, Tata Electronics, Tata Semiconductor and SicSeM Private Limited, alongside CG Power, HCL Tech and Kaynes.
CLSA’s disclosure shows Kaynes Technology with a Hold rating and a target of Rs 3,580 in its August 9, 2026 recommendation history. HCL Technologies was rated Hold with a target of Rs 1,281 on August 18, 2026. Micron Technology was rated Outperform with a target of $1,700 on June 25, 2026. These are recommendation-history figures and are not fresh targets issued as part of the Semicon 2.0 report.
CG Power is also among the listed Indian companies covered in CLSA’s report, while the project table identifies its semiconductor packaging facility in Sanand.
What changes under Semicon 2.0
The second phase therefore goes beyond simply offering higher government spending. The larger programme brings upstream suppliers, chip design, research and talent into the policy framework while making the eligibility and incentive structure more targeted for fabrication, display and packaging projects.
For companies already building semiconductor facilities, the next stage will depend on execution and the transition from approved projects to operating capacity. The project pipeline shows that progress is already at different stages, ranging from commercial production at Micron’s facility to projects still under construction or awaiting commissioning.
CLSA’s assessment is that the first phase established the initial manufacturing base, while the second phase is intended to build a broader domestic ecosystem around it. That wider coverage is the central feature of the new semiconductor programme.
Disclaimer: This article is based on CLSA’s India Semiconductor Mission 2.0 report dated August 31, 2026. Ratings, price targets, estimates and brokerage views are subject to change and aren’t guarantees of future performance. This article is for informational purposes only and shouldn’t be treated as investment advice or a recommendation to buy or sell any security.