The Cabinet’s approval of Semicon 2.0 and the new Mobile Phone Manufacturing Scheme (MPMS) is more than the announcement of another Rs 1.9 lakh-crore incentive package. It marks a decisive shift in the manufacturing strategy. For much of the past decade, the government’s objective was to persuade global electronics companies to make in India. That effort has delivered measurable results.
India is today the world’s second-largest mobile phone manufacturer by volume, 99.2% of the phones sold domestically are produced locally, mobile phones have emerged as the country’s largest export category, and electronics production and exports have grown seven-fold and eleven-fold, respectively, since 2014-15. The first phase of the semiconductor mission has also succeeded in attracting a dozen projects across fabrication and packaging. Yet these achievements came with an important caveat. India became a preferred location for assembly, but not necessarily for technology ownership or value creation. The new schemes acknowledge that distinction. Their objective is no longer merely to expand production but to capture a larger share of the economic value embedded in electronics manufacturing.
That change in emphasis is evident in both schemes. The first semiconductor mission was primarily about attracting fabrication plants and packaging facilities. Semicon 2.0 broadens the canvas to include chip design, semiconductor equipment, materials, research, talent development, and intellectual property (IP). Equally significant is the decision to open the Design Linked Incentive scheme to large companies alongside startups, recognising that building globally competitive chip design capabilities requires participation across the industry.
The ambition to move from the current 28 nanometre technology to 7 nm and eventually 2 nm chips underscores the government’s intent to climb the technology ladder rather than remain confined to mature nodes. The same thinking is visible in the mobile manufacturing scheme. The focus is no longer simply on producing more handsets but on encouraging domestic sourcing of components, supporting Indian design and R&D, and almost doubling value addition from the current 23-24% to 44-45%.
Assembly creates jobs and exports, but it is components, materials, machinery, design, and IP that generate the highest economic returns. Much of the value in electronics still accrues outside India because semiconductor equipment, specialty chemicals, wafers, and several critical components continue to be imported. Raising domestic value addition will therefore require far more than generous incentives. It will demand globally competitive suppliers, reliable infrastructure, skilled engineers, sustained research spending, and close coordination between the Centre, states, and industry. It will also require policy stability over a much longer horizon than a five-year incentive cycle.
The two schemes therefore deserve to be judged not by the size of their outlay but by whether they help Indian companies move from assembling products designed elsewhere to creating technologies that the world buys. The government’s willingness to shift its focus from output to value addition, from factories to ecosystems, and from manufacturing to innovation is a welcome recognition that the next phase of industrialisation demands different policy tools. But incentives can only catalyse change; they cannot substitute for competitiveness. The real test of Semicon 2.0 and MPMS will come a decade from now, when the question is no longer whether India makes more phones or packages more chips, but whether it owns more IP, supplies more critical components, and commands a larger share of the global electronics value chain. That, rather than another production milestone, will determine whether India has truly moved beyond assembly.