Union Budget 2026: Pre-Budget Expectations for Electronics and Semiconductor Manufacturing in India

India’s path towards technology sovereignty depends on building a resilient, globally competitive electronics and semiconductor manufacturing ecosystem. As global supply chains diversify and geopolitical risks rise, India has a strategic opportunity to position itself as a trusted manufacturing hub within global value chains (GVCs).

Union Budget 2026 must therefore go beyond fabs alone and focus on ecosystem depth, MSME participation, R&D, skilling, and exports to ensure long-term sustainability and competitiveness.

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Strengthening the Electronics and Semiconductor Supply Chain Ecosystem

To improve supply chain resilience and reduce import dependence, India must achieve readiness across critical supporting industries.

Budget priorities should include:

• Continued policy push for electronic components and semiconductor manufacturing.
• Development of a complete ecosystem to reduce lead times and improve reliability.
• Support for participation in global value chains through predictable policy and infrastructure readiness.

A strong component and supplier ecosystem is essential to make semiconductor investments viable at scale.

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Scaling MSME Support in Electronic Components Manufacturing

MSMEs contribute an estimated 25–35% of India’s electronics manufacturing industry, yet incentive outlays for this segment remain limited.

Union Budget 2026 should focus on:

• Enhanced capital support for MSMEs engaged in electronic components manufacturing.
• Continued access to advanced technologies and skilled talent.
• Targeted schemes to help MSMEs scale production and meet global quality standards.

Strengthening MSMEs is critical to building a robust and diversified component ecosystem.

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Expanding Focus Beyond Fabs to Critical Input Materials

Sustaining semiconductor manufacturing in India requires extending focus beyond fabs to critical input materials.

Key expectations include:

• Incentive support for domestic production of gases, chemicals, substrates, and other key inputs.
• Infrastructure readiness for handling high-purity and sensitive materials.
• Promotion of long-term strategic partnerships with global suppliers willing to localise production in India.

Domestic availability of inputs can significantly reduce logistics costs and supply risks for manufacturers.

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Building World-Class Semiconductor Infrastructure and Utilities

In line with the Atmanirbhar Bharat vision, semiconductor manufacturing requires more than power and water.

Budget priorities should include:

• Reliable power supply and ultra-pure water infrastructure.
• Establishment of industry benchmarks for road connectivity to fabs.
• Cold-chain logistics for high-precision equipment.
• Safe and efficient transportation systems for high-purity gases and chemicals.

Integrated infrastructure standards are essential for attracting global semiconductor players.

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Incentivising R&D, IP Creation, and Industry–Academia Collaboration

India must strengthen its innovation base to move up the semiconductor value chain.

Union Budget 2026 should provide:

• Incentives to increase R&D expenditure in electronics and semiconductors.
• Support for IP creation, protection, and retention within India.
• Programmes to deepen industry–academia collaboration for advanced research and applied innovation.

A strong R&D and IP ecosystem will enhance long-term technological competitiveness.

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Building a Robust Semiconductor Talent Pipeline

Talent availability remains a critical constraint for semiconductor manufacturing.

Budget expectations include:

• Focused skilling programmes for semiconductor and electronics manufacturing.
• Establishment of dedicated training fabs and cleanroom simulation facilities.
• Structured workforce development across design, fabrication, testing, and maintenance.

A skilled workforce is foundational to sustaining high-tech manufacturing.

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Boosting Electronics and Semiconductor Exports

India’s electronics export potential remains underutilised despite recent policy progress.

Union Budget 2026 should support exports through:

• Incremental incentives such as tax and duty rationalisation.
• Export subsidies or duty drawback mechanisms.
• Improved access to low-cost capital for exporters.
• Rationalisation of import duties on essential components, raw materials, and equipment to reduce production costs.

With 46 applicants approved under the ECMS scheme, effective integration of tier-2 and tier-3 suppliers will be critical to increasing domestic value addition.

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Encouraging Backward Integration in Consumer Electronics Manufacturing

Backward integration can significantly strengthen value chain localisation.

Budget priorities should include:

• Continuing and expanding incentives such as PLI for white goods.
• Encouraging domestic manufacturing of compressors, copper tubes, and controller units.
• Supporting in-house design and engineering capabilities for finished goods manufacturers.

Backward integration will help Indian firms achieve efficiency gains, reduce imports, and overcome learning curve barriers.

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Conclusion: Building a Self-Reliant and Globally Competitive Electronics Ecosystem

Union Budget 2026 must take a systems-level approach to electronics and semiconductor manufacturing.

By strengthening MSMEs, deepening supply chains, investing in R&D and skilling, and boosting exports, India can move closer to true technology sovereignty and establish itself as a reliable global manufacturing partner in the electronics and semiconductor space.