Cabinet approves Rs 1.27 lakh crore for Semicon Mission 2.0
The Union Cabinet approved the second phase of the India Semiconductor Mission (ISM 2.0) with a total outlay of Rs 1.27 lakh crore
The scheme is projected to catalyse around Rs 4 lakh crore in additional private investment and generate semiconductor production worth Rs 2 lakh crore
ISM 2.0 is structured around six pillars, with chip design as the foundation, and covers the full value chain including fabrication and packaging
New provisions extend incentives to suppliers of raw materials such as specialty minerals and gases used in chip manufacturing, an expansion beyond the manufacturing-only focus of the first phase
The move follows the first phase (ISM 1.0), under which 10 projects worth a cumulative Rs 1.6 lakh crore of investment had been approved across six states
India Semiconductor Mission (ISM)
The India Semiconductor Mission was launched in December 2021 with an outlay of Rs 76,000 crore under the Ministry of Electronics and Information Technology (MeitY). It was set up as an independent business division with administrative and financial autonomy within the Digital India Corporation, tasked with driving India's long-term strategy for semiconductor and display manufacturing as well as the design ecosystem.
Key Details
- ISM 1.0 outlay: Rs 76,000 crore; approved as part of the broader Semicon India Programme
- Covers Silicon Semiconductor Fabs, Display Fabs, Compound Semiconductor/Silicon Photonics/Sensor (MEMS) Fabs, ATMP/OSAT packaging units, and chip design
- Offers fiscal support of up to 50% of project cost for fabs, compound semiconductor units, and ATMP/OSAT facilities
- Ten projects worth Rs 1.6 lakh crore of cumulative investment approved across six states under ISM 1.0
ISM 2.0's Rs 1.27 lakh crore outlay is roughly 67% larger than the original ISM 1.0 corpus, reflecting the shift from setting up initial fab capacity to building a self-reliant, full-spectrum chip ecosystem including raw material supply.
Production Linked Incentive (PLI) Framework
The semiconductor PLI, launched in December 2021 with the Rs 76,000 crore outlay, was the first PLI-style national programme targeting the chip industry specifically and remains the government's single largest sectoral incentive commitment. It operates alongside 13-14 other sector-specific PLI schemes (electronics, pharmaceuticals, textiles, specialty steel, and others) first introduced in April 2020.
Key Details
- PLI schemes across sectors now have a combined outlay of roughly Rs 1.97 lakh crore, with over 800 applications approved across 14 sectors
- PLI ties incentive disbursal to actual incremental production/sales, unlike traditional capital subsidies
- Semiconductor incentives target Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) facilities as lower-capex entry points compared to fabs
ISM 2.0 continues the PLI logic of tying fiscal support to actual value-chain build-out, but broadens it upstream to raw materials, addressing a gap in ISM 1.0 where fabs depended on imported precursor chemicals and gases.
Semiconductor Value Chain and Strategic Rationale
The semiconductor value chain runs from chip design, through wafer fabrication (fabs), to ATMP/OSAT packaging and testing. India has historically been strong in design (home to major global design centres) but had almost no domestic fabrication or packaging capacity before ISM 1.0. Global chip shortages during 2021-22 and the concentration of advanced fabrication in Taiwan and South Korea have pushed countries, including India, to pursue "chip sovereignty" strategies.
Key Details
- India accounts for a significant share of global chip design talent but historically had negligible fab/ATMP capacity
- Tata Electronics is among the largest investors under ISM 1.0, building fab and OSAT capacity
- Global memory chip shortages and rising AI-driven chip demand are cited as part of the strategic rationale for scaling up ISM 2.0
By explicitly targeting "self-reliance in production of indigenous chips," ISM 2.0 aims to convert India's design strength into full-stack manufacturing capability, reducing dependence on a concentrated global supply chain.
- ISM 2.0 outlay: Rs 1.27 lakh crore
- Expected additional private investment: ~Rs 4 lakh crore
- Expected semiconductor production value: ~Rs 2 lakh crore
- ISM 1.0 outlay (2021): Rs 76,000 crore
- ISM 1.0 approved projects: 10 projects, Rs 1.6 lakh crore cumulative investment, across 6 states
- Nodal ministry: Ministry of Electronics and Information Technology (MeitY); ISM housed within Digital India Corporation
- Fiscal support under fab/ATMP incentives: up to 50% of project cost