India Semiconductor Mission 2.0: ₹1.2 Lakh Cr in 2026

Policy has moved closer to production

India’s semiconductor push is shifting from announcements to on-ground execution, as project approvals under the India Semiconductor Mission (ISM) build and the government prepares a second phase. Officials have positioned this as an effort to reduce import dependence while attracting fabrication and advanced packaging investments. The ISM framework has also become the core channel for appraising projects and providing fiscal support. Recent approvals underline that the pipeline spans fabrication, compound semiconductors, and packaging and testing capacity. Parallelly, the Union Budget 2026-27 introduced ISM 2.0, signalling a broader scope beyond manufacturing incentives.

What has been approved under ISM so far

Under the India Semiconductor Mission, 12 semiconductor manufacturing projects have been approved with an investment pipeline of about ₹164,000 crore. This approved set includes one semiconductor fabrication unit, two compound semiconductor fabrication units and nine packaging units. Separately, the Ministry of Electronics and Information Technology (MeitY) has said the Semicon India Programme attracted investment commitments of around ₹160,000 crore (US$17.31 billion). As of March 2026, 10 semiconductor units had been approved, including two fabrication plants and eight ATMP/OSAT facilities. These figures reflect different cut-off dates and programme reporting, but they point to an expanding funnel of projects.

Two more projects cleared by the Union Cabinet

India’s Union Cabinet approved two additional semiconductor projects under ISM on May 5, 2026. The projects include the country’s first commercial mini or micro-LED display manufacturing facility based on Gallium Nitride (GaN) technology. The Cabinet also cleared a semiconductor packaging and testing unit as part of the same decision. The approvals are being framed as part of a push to deepen capabilities across the electronics value chain. They also add to the pipeline of packaging-led projects that have dominated early approvals.

What ISM is, and how fiscal support works

ISM is a specialised agency under the Digital India Corporation tasked with implementing India’s ₹76,000 crore semiconductor and display manufacturing programme launched in 2021. The 2021 programme is formally called the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India, with an outlay of ₹76,000 crore (INR 760 billion, around US$10 billion). ISM appraises proposals for fabs, compound semiconductors, ATMP/OSAT units, and design projects. For eligible projects, the central government provides fiscal support of up to 50% of project cost or capital expenditure for fabs, compound semiconductor units, and ATMP/OSAT facilities, on a pari-passu basis. The framework also includes up to 50% reimbursement of design costs, subject to caps, under the DLI scheme.

Project count has continued to rise across states

As of May 18, 2026, the central government had approved 13 semiconductor projects across seven states under ISM and SPECS, according to the information provided. These approvals include one large logic or power fab, multiple OSAT/ATMP units, and new silicon carbide and substrate-focused projects. The count highlights that India’s early momentum is not limited to one geography. It also signals a mix of mainstream semiconductor manufacturing and adjacent areas such as substrates and compound semiconductors.

ISM 2.0: the Budget signal and the planned scale-up

In the Union Budget 2026-27, the central government announced ISM 2.0 as the next phase of the initiative. The Budget document mentions a ₹1,000 crore provision for ISM 2.0, while reports cited in the provided information suggest a much larger outlay is being planned. A separate report said inter-ministerial consultations were underway and MeitY was awaiting final approval from the Finance Ministry. Sources cited across reports put the proposed outlay in the ₹100,000 crore to ₹120,000 crore range, higher than the ₹76,000 crore earmarked for the first phase. Finance Minister Nirmala Sitharaman also said in the Budget speech that the scheme already has investment commitments at double the target, and that it had been proposed to increase the outlay to ₹40,000 crore to build on momentum.

What changes in ISM 2.0 compared with phase one

ISM 2.0 is being positioned as a deepening of the national commitment to chip manufacturing, with a sharper focus on upstream and ecosystem building blocks. The stated priorities include semiconductor equipment and materials manufacturing, expanding full-stack design capabilities, developing indigenous intellectual property, and improving supply chain resilience. Reports also describe a likely tilt towards R&D, chip design, deep-tech startups, skilled talent, and supply chains, compared with a largely manufacturing-incentive driven first phase. This reframing matters because equipment and materials are critical dependencies for fabs and advanced packaging plants. It also aligns with the broader goal of moving from assembly-heavy capabilities to more integrated value creation.

Key figures at a glance

Why this matters for markets and industry execution

The steady rise in approved units indicates that India’s strategy is leaning on parallel tracks: fabrication, compound semiconductor capability, and packaging-led scale. Packaging and testing capacity can bring faster commissioning timelines than large fabs, and it can support domestic electronics manufacturing demand if projects move to execution. The planned ISM 2.0 pivot towards equipment, materials, IP, and resilient supply chains is also a response to structural gaps that can slow manufacturing even when plants are sanctioned. At the same time, the public reporting shows multiple numbers for approvals and commitments across different dates, suggesting investors should track official cut-offs and scheme definitions carefully. The next concrete milestone for ISM 2.0, as reported, is movement through consultations and approvals, including consideration by the Union Cabinet.

Conclusion

India’s semiconductor policy is now being supplemented by a growing list of approved manufacturing, packaging, and display-related projects, including Cabinet-cleared additions in May 2026. With ISM 2.0 announced in Budget 2026-27 and reports pointing to a significantly larger outlay than phase one, the next phase is expected to widen focus to equipment, materials, R&D, design and supply chain resilience. The key near-term watchpoints are the formal approvals process for ISM 2.0 and further clarity on the final outlay and implementation structure.