Cabinet approves ₹1.27 lakh crore for Semiconductor Mission 2.0: Here's what's new
The Union Cabinet approved the India Semiconductor Mission (ISM) 2.0 with an outlay of ₹1.27 lakh crore, expanding the incentive framework for the country's chip ecosystem.
The scheme extends support to suppliers of raw materials and specialty chemicals used in semiconductor manufacturing, an upstream segment not covered under ISM 1.0.
ISM 2.0 succeeds the first phase of the India Semiconductor Mission, which was approved with a ₹76,000 crore outlay in December 2021.
The Ministry of Electronics and Information Technology (MeitY) is the nodal ministry implementing the mission through the India Semiconductor Mission (ISM) body set up under the Digital India Corporation.
India Semiconductor Mission (ISM) — Origin and Structure
The India Semiconductor Mission was approved by the Union Cabinet on 15 December 2021 with an outlay of ₹76,000 crore to build a sustainable semiconductor and display ecosystem in India. It operates as a nodal agency under MeitY, housed within the Digital India Corporation, and offers fiscal support of up to 50% of project cost for silicon fabs, compound semiconductor/display fabs, and Outsourced Semiconductor Assembly and Test (OSAT) units, on a pari passu basis with state governments.
Key Details
- Approved: 15 December 2021; outlay ₹76,000 crore (ISM 1.0)
- Covers four pillars: semiconductor fabs, display fabs, compound semiconductors/sensors/ATMP (Assembly, Testing, Marking, Packaging) units, and semiconductor design (Design Linked Incentive scheme)
- As of the latest approvals, multiple semiconductor and packaging projects have been sanctioned across states including Gujarat, Assam, and Uttar Pradesh, with a combined committed investment exceeding ₹1.5 lakh crore
- Implementing body: India Semiconductor Mission, under the Digital India Corporation (an MeitY-promoted not-for-profit)
ISM 2.0, at ₹1.27 lakh crore, is a larger second phase that widens the scope of incentives beyond fabs and packaging to the raw-material and specialty-chemical supply chain — addressing a key upstream gap identified during the rollout of ISM 1.0.
Design Linked Incentive (DLI) Scheme
The DLI Scheme, launched alongside ISM 1.0 in December 2021, supports domestic companies and startups engaged in semiconductor chip design across various nodes. It provides financial incentives as well as design infrastructure support to encourage indigenous Intellectual Property (IP) generation.
Key Details
- Product Design Linked Incentive: reimbursement of up to 50% of eligible expenditure, capped at ₹15 crore per application
- Deployment Linked Incentive: 4-6% of net sales turnover over five years, capped at ₹30 crore per applicant
- Aims to build a "fabless" chip design ecosystem — India already has a significant share of global chip design talent but historically low domestic IP ownership
ISM 2.0 builds on the design-and-manufacture continuum started by the DLI scheme, aiming to convert India's chip-design talent base into a fuller manufacturing and supply-chain ecosystem.
Semiconductor Manufacturing Process — Fabs, OSAT, and the Supply Chain
Semiconductor manufacturing involves distinct stages: chip design (fabless), wafer fabrication (fab, capital-intensive, involving photolithography), and Assembly, Testing, Marking and Packaging (ATMP/OSAT). India's initial thrust under ISM 1.0 was on attracting fabs and OSAT units; ISM 2.0 extends incentives further upstream to raw materials such as specialty gases, chemicals, and photoresists, which are currently imported almost entirely.
Key Details
- India's first commercial semiconductor fab was sanctioned in 2024 under ISM 1.0 (Dholera, Gujarat, in partnership with a global foundry)
- Global semiconductor supply chains are concentrated in Taiwan, South Korea, and the US for advanced nodes; India's initial focus is on mature/legacy nodes and packaging
- The PLI (Production Linked Incentive) framework — used across 14 sectors since 2020 — is distinct from ISM's fiscal-support model, which is project-specific pari passu support rather than output-linked incentive
By incentivising raw-material and specialty-chemical suppliers, ISM 2.0 targets a structural weakness — India's near-total import dependence on semiconductor-grade chemicals and gases — that could otherwise limit the scale-up of the fabs and OSAT units approved under ISM 1.0.
- ISM 2.0 outlay: ₹1.27 lakh crore (approx. US$15 billion)
- ISM 1.0 outlay (December 2021): ₹76,000 crore
- Nodal ministry: Ministry of Electronics and Information Technology (MeitY)
- Implementing agency: India Semiconductor Mission, under Digital India Corporation
- DLI product incentive cap: ₹15 crore per application; deployment incentive cap: ₹30 crore per applicant
- Fiscal support under ISM for fabs/display/compound semiconductor units: up to 50% of project cost, shared with state governments