What goals does Semicon 2.0 aim to achieve? | Explained
The Union Cabinet cleared the second phase of the India Semiconductor Mission (ISM 2.0) with an outlay of ₹1,27,500 crore (₹1.27 lakh crore), and a separate Mobile Phone Manufacturing Scheme (MPMS) with an outlay of ₹62,500 crore
ISM 2.0 widens the scope of support to chip design talent, capital machinery used in fabs, semiconductor-grade chemicals and gases, and research and development, areas only partially covered in the first phase
Capital subsidies under the new phase are set to be trimmed to 30-40%, down from up to 50% in phase 1, on the reasoning that the sector has become more commercially attractive
The government expects the combined programme to draw about ₹4 lakh crore in investment, ₹2 lakh crore in production, and ₹1 lakh crore in exports over a five-year tenure
The Gazette notification with full scheme details is expected the following month; a formal notification will fix eligibility and disbursement rules
India Semiconductor Mission (ISM) — Phase 1 vs Phase 2
The India Semiconductor Mission was approved in December 2021 with an outlay of ₹76,000 crore to build a semiconductor and display manufacturing ecosystem in India, offering fiscal support of up to 50% for silicon fabs, compound semiconductor units, assembly/testing/marking/packaging (ATMP) facilities, and chip design. It is implemented by the Ministry of Electronics and Information Technology (MeitY) through a dedicated India Semiconductor Mission body under the Digital India Corporation.
Key Details
- Phase 1 approved: December 2021, outlay ₹76,000 crore; amended in 2022 to allow up to 50% capital subsidy for large projects such as Micron's chip packaging facility in Sanand, Gujarat
- 12 manufacturing/packaging units were approved under phase 1 with combined committed investment of ₹1.64 lakh crore, spread across Gujarat, Uttar Pradesh, Punjab, Assam, Odisha, and Andhra Pradesh; includes a silicon fabrication unit and a gallium-nitride Micro LED display fab
- Phase 2 (Semicon 2.0/ISM 2.0) approved July 15, 2026, with outlay ₹1,27,500 crore, extending support to design talent, capital equipment, semiconductor-grade chemicals/gases, and R&D
- India's targeted "legacy" chip process node under ISM is 28nm, distinct from "frontier" nodes of 7nm or below used in flagship smartphones
Semicon 2.0 is explicitly framed by the government as the follow-through phase of ISM, broadening its ecosystem coverage while lowering direct capital subsidies as the industry matures.
Design Linked Incentive (DLI) Scheme
The DLI Scheme is a MeitY initiative under the broader Semicon India Programme that incentivises domestic, fabless semiconductor chip design by startups and MSMEs, aiming to build indigenous intellectual property rather than leaving design work to foreign-owned entities.
Key Details
- Offers reimbursement of up to 50% of eligible expenditure (capped at ₹15 crore) for product design, and 4-6% of net sales turnover over five years (capped at ₹30 crore) for deployed designs
- 24 chip-design projects have been sanctioned so far, spanning video surveillance, drone detection, energy meters, microprocessors, and IoT system-on-chips
- The government has also provided free access to costly semiconductor design software (EDA tools) to universities and startups; the revamped Semiconductor Laboratory (SCL), Mohali, supports "tape-out" of student- and researcher-designed chips
ISM 2.0's expanded focus on "chip design talent" builds directly on the DLI scheme's objective of moving India up the semiconductor value chain from assembly to intellectual property.
Production Linked Incentive (PLI) for Mobile Manufacturing — from 2020 scheme to MPMS 2.0
The original PLI Scheme for Large Scale Electronics Manufacturing (mobile phones and specified components) was launched in April 2020 with an incentive outlay of about ₹40,951 crore, offering 4-6% incentive on incremental sales over a base year for five years, to boost domestic mobile assembly and component manufacturing.
Key Details
- The 2020 scheme helped generate mobile phone production worth over ₹11.6 lakh crore and exports crossing ₹6.4 lakh crore, with about ₹19,090 crore disbursed as incentives
- The successor Mobile Phone Manufacturing Scheme (MPMS), approved alongside ISM 2.0, has an outlay of ₹62,500 crore and will run for five years
- MPMS provides incentives ranging from 2.25% to 5%, calibrated to the level of local design content in the handsets, shifting emphasis from pure assembly to domestic design and R&D
- Reduced government land support is planned, as State governments increasingly offer land at token prices with their own incentives layered on top of Union support
MPMS is positioned as PLI 2.0 for mobile manufacturing, moving the incentive structure from volume-based assembly subsidies toward rewarding domestic component design.
- ISM 2.0 outlay: ₹1,27,500 crore; MPMS outlay: ₹62,500 crore (approved July 15, 2026)
- ISM phase 1 outlay: ₹76,000 crore (December 2021); phase 1 committed investment: ₹1.64 lakh crore across 12 units
- Targeted legacy process node under ISM: 28nm; frontier nodes: 7nm and below
- DLI scheme: 24 chip-design projects sanctioned; incentive up to 50% of expenditure (capped ₹15 crore) or 4-6% of net sales (capped ₹30 crore)
- 2020 mobile PLI scheme outcomes: ₹11.6 lakh crore production, ₹6.4 lakh crore exports, ₹19,090 crore incentives disbursed
- MPMS incentive range: 2.25% to 5%, based on local design content