India Semiconductor Mission 2.0: Finance Ministry Clears ₹1.2 Lakh Crore Boost

A Major Push for India's Tech Ambitions

In a significant development for India's technology sector, the Finance Ministry has cleared an allocation of approximately ₹1.2 lakh crore for the second phase of the India Semiconductor Mission (ISM 2.0). This move signals the government's strong intent to deepen the country's capabilities in the critical semiconductor industry. Following this clearance, a Cabinet note is expected to be moved shortly, with final approval anticipated before the end of April 2026. The enhanced funding aims to position India as a formidable player in the global semiconductor value chain, reducing its reliance on imports amid ongoing geopolitical and supply chain disruptions.

Strategic Focus of ISM 2.0

Unlike its predecessor, which focused on establishing a foundational ecosystem, ISM 2.0 adopts a more ambitious and comprehensive strategy. The second phase will prioritize strengthening India's capabilities in research and development (R&D), chip design, and innovation. A key objective is to offer incentives for the development of advanced semiconductor nodes, including cutting-edge 3-nanometre and 2-nanometre technologies. Furthermore, the mission will concentrate on building a full-stack value chain by encouraging the domestic production of semiconductor equipment and materials, designing Indian intellectual property (IP), and fortifying supply chains for essential components like chemicals and gases.

Building on the Foundation of ISM 1.0

The groundwork for this expansion was laid by the first phase of the India Semiconductor Mission, approved by the Union Cabinet in December 2021. With an initial outlay of ₹76,000 crore, ISM 1.0 successfully attracted cumulative investments of around ₹1.60 lakh crore. As of December 2025, the government had approved 10 projects across six states. These projects span various segments, including silicon fabrication units, compound semiconductor facilities, advanced packaging, and specialized assembly and testing infrastructure. The funds allocated under the first phase have been committed to these projects, necessitating fresh funding for the expanded scope of ISM 2.0.

Budgetary Allocations for FY 2026-27

The Union Budget for 2026-27 has already provisioned significant financial support to bolster the semiconductor ecosystem, reflecting the government's commitment. A specific provision of ₹1,000 crore has been made for ISM 2.0 for the fiscal year 2026-27. This is part of a broader push that includes increased funding for related schemes.

Nurturing a Fabless Design Ecosystem

A central pillar of ISM 2.0 is the expansion of the Design Linked Incentive (DLI) scheme. The government intends to support at least 50 fabless semiconductor companies, fostering domestic innovation and creating a vibrant ecosystem for chip design. The DLI scheme has already supported 24 startups, helping bridge the gap between academic research and industrial application. This focus on nurturing fabless companies is crucial for developing indigenous IP and moving up the value chain from manufacturing to high-value design and innovation.

Long-Term Vision and Market Impact

The overarching goal of India's semiconductor strategy is to achieve self-reliance and global competitiveness. By 2029, India aims to have the capability to design and manufacture chips for approximately 70-75% of its domestic applications across key sectors like consumer electronics, automobiles, telecommunications, and defence. The long-term vision is for India to be among the top semiconductor nations globally by 2035. This strategic push is expected to generate high-quality employment, attract significant private investment, and secure India's position in the global technology landscape.

Conclusion

The approval of ₹1.2 lakh crore for India Semiconductor Mission 2.0 marks a pivotal moment in the country's journey to become a semiconductor powerhouse. By shifting focus to advanced manufacturing, R&D, and a full-stack value chain, the government is laying the groundwork for a resilient and self-sufficient electronics industry. With final Cabinet approval on the horizon, the mission is set to accelerate India's progress in the high-stakes global chip race.