What Happened
- Finance Minister Nirmala Sitharaman announced the India Semiconductor Mission 2.0 (ISM 2.0) in Budget 2026-27, with an expanded allocation under the Electronics Component Manufacturing Scheme (ECMS) raised to Rs 40,000 crore (from Rs 22,919 crore in the earlier scheme).
- ISM 1.0 focused primarily on attracting semiconductor fabrication (fab) plants and assembly, testing, marking and packaging (ATMP) units. ISM 2.0 broadens support to the upstream and downstream ecosystem: semiconductor equipment, specialty chemicals, industrial gases, wafers, chip design, and intellectual property.
- Rs 1,000 crore has been allocated for ISM 2.0 in FY 2026-27 specifically, with the broader Rs 40,000 crore ECMS supporting the wider electronics manufacturing ecosystem.
- By 2029, India aims to design and manufacture chips for 70–75% of domestic applications; by 2035, to rank among the top global semiconductor nations, with roadmap targets for 3-nanometre and 2-nanometre chip manufacturing nodes.
Static Topic Bridges
Semiconductor Supply Chains: From Sand to Chip
A semiconductor chip (integrated circuit) is made from silicon, refined and processed through a global supply chain involving dozens of specialised steps across multiple countries. The value chain has four key segments: (1) Design — creating the chip's architecture and layout using electronic design automation (EDA) tools (dominated by US firms: Cadence, Synopsys); (2) Fabrication (Fab) — manufacturing the chip on silicon wafers using photolithography and chemical processes (dominated by TSMC/Taiwan, Samsung/South Korea); (3) ATMP — Assembly, Testing, Marking and Packaging, the final stage before chips are used (India has some capacity here); (4) Equipment and Materials — the machinery and specialty chemicals (lithography machines, ultra-pure gases) used in fabrication, dominated by ASML (Netherlands), Applied Materials, Lam Research (US), and Tokyo Electron (Japan). ISM 2.0 expands India's ambition from primarily ATMP to design, equipment, and materials — the higher-value segments.
- ASML: sole manufacturer of Extreme Ultraviolet (EUV) lithography machines needed for sub-7nm chips; each machine costs ~$380 million.
- Taiwan: accounts for ~60% of global chip fabrication; ~90% of advanced (sub-10nm) chips.
- Semiconductor shortage of 2021-22: caused by COVID-19 disruptions and exposed global supply chain fragility.
- India's semiconductor consumption: estimated at $26 billion in 2024, expected to reach $100 billion by 2030.
- ISM 1.0 achievements: Tata Electronics (Dholera, Gujarat) — fab project approved; CG Power (ATMP unit); Kaynes Technology; Micron Technology (ATMP unit in Sanand, Gujarat, first to break ground).
Connection to this news: ISM 2.0's expansion "beyond fabs" is significant because fabrication alone does not create technological sovereignty — it creates manufacturing capacity that remains dependent on foreign equipment, materials, and IP. Building the complete ecosystem is India's longer-term strategy.
India's Electronics and Semiconductor Policy Architecture
India's approach to semiconductor development operates through multiple layers. The Semicon India Programme (2021): Rs 76,000 crore outlay for semiconductor and display fabs, with 50% fiscal support for qualifying projects. The ISM (India Semiconductor Mission) under MeitY (Ministry of Electronics and Information Technology) serves as the nodal agency. PLI for electronics (Rs 41,000 crore) incentivises mobile phone assembly and IT hardware. The ECMS (Electronics Component Manufacturing Scheme) targets the broader electronics component ecosystem. ISM 2.0 adds a specific focus on design intellectual property (IP) and equipment — the segments where India has existing engineering talent advantages.
- Ministry of Electronics and Information Technology (MeitY): nodal ministry for semiconductor policy.
- Semicon India Programme: Rs 76,000 crore, announced 2021; approves projects via ISM.
- Fiscal support structure: 50% central government support for greenfield semiconductor fabs; 30% for display fabs.
- India has ~20% of the world's chip design engineers — a competitive advantage in the design segment.
- IIT Bombay, IIT Madras, IISc Bangalore: designated as chip design hubs under ISM 1.0.
- Design Linked Incentive (DLI) scheme: launched alongside ISM 1.0 to support semiconductor design start-ups.
- ECMS raised to Rs 40,000 crore in Budget 2026-27 from Rs 22,919 crore.
Connection to this news: ISM 2.0 is the recognition that India's chip design talent pool — while globally significant — is being under-utilised because India lacked the policy infrastructure to anchor chip design companies domestically and create full-stack Indian semiconductor IP.
Geopolitics of Semiconductors and India's Strategic Positioning
Semiconductors are the foundational technology of the modern economy and military — every advanced weapons system, communication network, AI model, and consumer device depends on them. This has made semiconductor supply chains a central arena of US-China strategic competition. The US CHIPS Act (2022) allocated $52.7 billion for domestic chip manufacturing and research, and created export controls (including FDPR — Foreign Direct Product Rule) restricting advanced chip exports to China. Japan, EU, and South Korea have launched parallel programs. India is being actively courted as a trusted semiconductor manufacturing destination by the US and its allies, given its large pool of chip design engineers, democratic governance, and strategic alignment.
- US CHIPS and Science Act (2022): $52.7 billion for domestic semiconductor production; also restricts companies receiving funds from expanding in China.
- Export Administration Regulations (EAR) + FDPR: US tools to control semiconductor technology access.
- QUAD Semiconductor Supply Chain Initiative: India, US, Japan, Australia coordinating on semiconductor supply chain resilience.
- India-US Initiative on Critical and Emerging Technology (iCET): covers semiconductors, AI, quantum computing, space, and advanced telecom.
- India's target: top global semiconductor nation by 2035; 3nm and 2nm capability in the roadmap.
- Micron Technology (Sanand, Gujarat): first semiconductor project to break ground under ISM; $2.75 billion investment in ATMP.
Connection to this news: ISM 2.0 is India's response to this geopolitical opportunity — going beyond being an assembly destination (ATMP) to building full-stack capability including indigenous chip design IP, which is what the US and allies need to truly trust India as a semiconductor partner.
Key Facts & Data
- India Semiconductor Mission 2.0 (ISM 2.0): announced Budget 2026-27; Rs 1,000 crore allocation for FY 2026-27.
- ECMS: raised to Rs 40,000 crore (from Rs 22,919 crore); covers broader electronics component ecosystem.
- ISM 1.0 total outlay: Rs 76,000 crore under Semicon India Programme (2021).
- India's chip design engineer pool: ~20% of global total.
- Micron Technology (Sanand, Gujarat): first ISM project to break ground; $2.75 billion ATMP investment.
- Tata Electronics (Dholera, Gujarat): approved fab project under ISM 1.0.
- India's semiconductor consumption: ~$26 billion (2024); projected $100 billion by 2030.
- India's 2029 target: design and manufacture chips for 70–75% of domestic applications.
- India's 2035 target: top global semiconductor nation; 3nm and 2nm manufacturing capability.
- US CHIPS and Science Act (2022): $52.7 billion for domestic semiconductor manufacturing.
- MeitY: nodal ministry for ISM; ISM is the implementing agency.
- Design Linked Incentive (DLI): scheme to support Indian chip design start-ups (launched alongside ISM 1.0).