Semicon 2.0 Explained: ₹1.27 Lakh Crore Chip Mission and ₹62,500 Crore Mobile Scheme

Meaning of a semiconductor: A semiconductor is a material, most commonly silicon, whose electrical conductivity lies between that of a conductor (like copper) and an insulator (like glass). By adding controlled impurities to silicon — a process called doping — engineers can precisely control the flow of electric current through it. This property makes semiconductors the foundation of all modern electronics.

Chips and integrated circuits: A semiconductor chip, or integrated circuit (IC), packs millions or even billions of tiny transistors onto a small piece of silicon. These chips act as the "brain" of every electronic device — smartphones, computers, cars, washing machines, missiles, satellites, medical equipment and AI data centres.

Strategic importance: Semiconductors are often called the "new oil" of the global economy because no modern industry can function without them. The COVID-19 pandemic exposed the fragility of global chip supply chains when a worldwide chip shortage halted automobile and electronics production. Since advanced chip manufacturing is concentrated in a few geographies — Taiwan alone produces the bulk of the world's most advanced chips — nations now treat semiconductor capability as a matter of national security and strategic autonomy, not merely commerce.

Why India wants domestic capability: India imports the overwhelming majority of the chips it consumes, creating both a large import bill and a strategic vulnerability. Domestic manufacturing reduces dependence on foreign suppliers, insulates critical sectors like defence and telecom from geopolitical disruptions, and allows India to capture value in one of the world's fastest-growing industries.

Design: Chip design is the intellectual stage where the architecture and circuitry of a chip are created using specialised software called Electronic Design Automation (EDA) tools. Companies that only design chips and outsource manufacturing are called "fabless" companies. India already has a large chip design workforce serving global firms; the goal now is to create Indian-owned chip intellectual property (IP).

Fabrication (Fab): A fab or foundry is the ultra-clean, capital-intensive factory where chips are actually manufactured on silicon wafers. Fabs are described by their "node" size (e.g., 28 nanometre) — smaller nodes mean more powerful, efficient chips. Setting up a fab can cost billions of dollars, which is why very few countries have them.

ATMP/OSAT: After fabrication, chips must be assembled, tested, marked and packaged — this is the ATMP (Assembly, Testing, Marking and Packaging) stage. When this work is outsourced to specialised firms, they are called OSAT (Outsourced Semiconductor Assembly and Test) units. This is a less capital-intensive entry point into the industry, and India's early successes (Micron, Kaynes, CG Semi) are in this segment.

Equipment and materials: Chip-making requires highly specialised machines (like lithography equipment), ultra-pure chemicals, speciality gases and materials. This upstream supply chain has so far been entirely imported — and it is precisely this gap that Semicon 2.0 seeks to fill.

Launch and outlay: The India Semiconductor Mission (ISM) was launched in December 2021 under the Semicon India Programme with an outlay of ₹76,000 crore, administered by the Ministry of Electronics and Information Technology (MeitY). ISM functions as the nodal agency for implementing semiconductor and display manufacturing schemes.

Components of Semicon 1.0: The programme offered fiscal support through four schemes — for silicon fabs, display fabs, compound semiconductor/ATMP/OSAT facilities, and the Design Linked Incentive (DLI) scheme supporting chip design startups. Initially, differing subsidy rates applied, but from September 2022 the Government offered a uniform 50% capital expenditure subsidy across all categories, which proved instrumental in attracting the first wave of projects.

Manufacturing achievements: Twelve manufacturing units have been approved with cumulative investments of over ₹1.64 lakh crore. These include one silicon fab, one silicon carbide fab, an integrated gallium nitride Micro LED display fab and nine packaging units. Out of these, three companies — Micron, Kaynes and CG Semi — have begun commercial production, and one more unit is expected to start in 2026.

Design achievements: Twenty-four semiconductor design projects from startups and MSMEs have been approved for financial support, while 105 startups/MSMEs have been given access to industry-standard EDA tools. These firms are designing chips for satellite communications, drones, IoT devices, AI systems, telecom equipment and smart meters.

Talent achievements: Around 68,000 students have been trained in complex chip design across 315 universities using the latest EDA tools.

International partnerships: India has signed semiconductor cooperation agreements with the United States (2023, followed by the Pax Silica framework in 2026), the European Union (2023), Japan (2023), Singapore (2024), the Netherlands (2025) and Germany (2026).

First pillar — Design: Building on the 105 startups already designing chips, Semicon 2.0 aims to develop Indian-owned intellectual property, full chip designs and complete systems, positioning India as a key semiconductor chip design IP nation rather than just a design services hub.

Second pillar — Machines and materials: For the first time, companies manufacturing and doing R&D on semiconductor machines, materials, chemicals and gases will be incentivised. This lays the foundation for a self-sustaining supply chain and develops India's precision manufacturing industry. Reports indicate support of up to 30% of project cost for such upstream units.

Third pillar — Setting up more fabs: With India's first fab scheduled for commissioning in 2028, the mission will attract more silicon fabs, compound semiconductor fabs, discrete component fabs and display fabs.

Fourth pillar — Strengthening ATMP/OSAT: With the success of existing packaging units, global players increasingly view India as an alternative ATMP/OSAT location. The focus will be on bringing the most advanced packaging technologies to India.

Fifth pillar — Research and Development: India's semiconductor journey began at the 28nm–110nm node range. Semicon 2.0 will push towards more advanced nodes and technologies in collaboration with leading R&D centres in India and abroad.

Sixth pillar — Talent development: Training will be deepened at the university level and extended, with industry participation, to clean room operations, fab construction and other ecosystem skills.

Strategic objectives: According to the Government, Semicon 2.0 will support economic growth across sectors, strengthen national security through supply chain resilience, and help establish technological leadership in critical sectors. The Union IT Minister stated that India aims to be self-reliant in the production of indigenous chips by the end of the programme.

From plants to ecosystem: ISM 1.0 focused on subsidising individual manufacturing plants; Semicon 2.0 subsidises the entire ecosystem around them — equipment makers, material and chemical suppliers, gas producers, designers and researchers — so that fabs coming up in India can source inputs domestically.

Recalibrated subsidies: As reported in the press, the uniform 50% capex subsidy of ISM 1.0 has been replaced with differentiated support — around 40% for silicon fabs and 35% for other fabs; in packaging, about 35% for advanced packaging and 25% for conventional packaging. The higher rate for advanced packaging is designed to pull cutting-edge technology into India.

Design incentives restructured: Reports indicate the design pillar will use grants and equity support for smaller startups, and co-investment or royalty-linked models for larger companies, with the emphasis on keeping chip IP ownership within India.

Scale of ambition: The outlay has risen from ₹76,000 crore to ₹1,27,500 crore. Press reports indicate India aims to develop domestic capability for a large majority of its chip requirements by the end of the decade and to rank among the top semiconductor nations globally.

Nature and tenure: MPMS is a production-linked incentive scheme with a budgetary outlay of ₹62,500 crore, implemented over five years from FY 2026-27 to FY 2030-31. It succeeds the PLI-LSEM scheme, which concluded on 31 March 2026.

Incentive structure: Manufacturers will receive incentive support on eligible sales of mobile phones produced in India at differentiated rates ranging from 2.25% to 5%. An additional incentive of up to 1.5% is linked to domestic sourcing of key components and sub-assemblies — directly attacking the low-value-addition problem. A further 3% incentive on eligible sales is offered for product design and R&D, aimed at building Indian brands, achieving technological sovereignty and creating Indian patents.

Shift in focus from PLI: While the PLI scheme rewarded production volumes and exports, MPMS shifts the emphasis towards domestic value addition, component localisation, supply chain resilience and homegrown intellectual property. India's local value addition in mobile manufacturing has reached about 24%, compared to China's rate of around 38% — MPMS is designed to close this gap.

Targets: Cumulative mobile phone production of approximately ₹39 lakh crore during the scheme period, a substantial rise in exports, and around 60,000 direct jobs.

The launch: The PLI Scheme for Large Scale Electronics Manufacturing was launched in 2020 as one of the first PLI schemes, offering sales-linked incentives of 3–6% to companies manufacturing mobile phones and specified electronic components in India. It attracted global contract manufacturers such as Foxconn, Pegatron and Tata Electronics (which assemble iPhones), alongside Samsung and Indian firms.

Production growth: India is now the world's second-largest mobile phone manufacturer by volume, and 99.2% of mobile phones used in the country are made domestically. Mobile phone production rose from about ₹2.14 lakh crore in FY 2019-20 to around ₹5.5 lakh crore in FY 2024-25.

Export transformation: Smartphone exports grew from roughly ₹27,000 crore in FY 2019-20 to about ₹2 lakh crore in FY 2024-25. In calendar year 2025, smartphones became India's single largest exported product category, overtaking diesel fuel and cut diamonds.

Fiscal and employment gains: According to figures cited by the Union Minister in press reports, more than ₹19,000 crore was disbursed as PLI incentives during the scheme's tenure, while the Government collected around ₹25,000 crore in direct taxes and about ₹1.64 lakh crore in GST from the smartphone industry; nearly 2 lakh jobs were created. Since FY 2014-15, India's overall electronics manufacturing has grown seven-fold and electronics exports eleven-fold.

Silicon fab: Tata Electronics in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC) is building India's first commercial silicon fab at Dholera, Gujarat, targeted for commissioning in 2028.

Assam: Tata Semiconductor Assembly and Test Pvt. Ltd. (TSAT) is setting up a major ATMP facility at Jagiroad, Assam — the Northeast's first semiconductor plant.

Gujarat OSAT cluster: Micron Technology's ATMP unit, the CG Power–Renesas Electronics–STARS Microelectronics OSAT unit, and the Kaynes Semicon OSAT unit are all located at Sanand, Gujarat.

Uttar Pradesh: The HCL–Foxconn joint venture display driver chip plant has been approved at Jewar, Uttar Pradesh, near the Noida International Airport.

Odisha: SicSem Pvt. Ltd. is setting up a silicon carbide (compound semiconductor) facility in Odisha; other units have also been approved in states including Andhra Pradesh.

Global equipment makers entering India: Applied Materials and AMD have each announced investments of about USD 400 million, Microchip Technology about USD 300 million, Lam Research about USD 1.1 billion and KLA about USD 400 million, while ASML and Merck are among the firms that have signed MoUs with the Tata Group for ecosystem development.

Capital intensity and long gestation: A single advanced fab costs several billion dollars and takes years to build and stabilise, with uncertain returns; sustained fiscal support across political cycles is essential.

Technology gap: India's fabs are starting at mature nodes (28nm–110nm), while global leaders are producing at 3nm and below. Advanced-node technology transfer is tightly controlled by a few companies and jurisdictions.

Supply chain dependence: Chip manufacturing needs ultra-pure water, uninterrupted power, speciality chemicals and gases, and precision equipment — most of which India currently imports. Semicon 2.0's second pillar directly addresses this gap.

Talent at scale: While India has strong design talent, manufacturing-floor skills — clean room operations, process engineering, equipment maintenance — need rapid scaling.

Global competition: The United States (CHIPS and Science Act), the European Union, Japan, China and others are offering massive subsidies for chip manufacturing, making the competition for global investment intense.

India's semiconductor strategy has moved from proving intent under Semicon 1.0 to building depth under Semicon 2.0. The immediate priority is timely commissioning of the Dholera fab in 2028 and the remaining approved units, since credibility with global investors depends on execution. The supply chain pillar must be operationalised quickly through clear guidelines so that equipment, chemical and gas manufacturers co-locate near fab clusters. On mobiles, MPMS incentives for domestic sourcing and R&D should be paired with component ecosystem schemes so that value addition rises steadily towards global benchmarks. Deepening university-industry linkages for fab-floor skills, securing technology partnerships for advanced nodes, and maintaining policy stability over the long gestation periods typical of this industry will determine whether India converts subsidy-led momentum into a self-sustaining semiconductor and electronics ecosystem.