SEMICON India 2026 & ISM 2.0: India's ₹1.27 Lakh Crore Chip Plan

Why in News

The India Semiconductor Mission (ISM) 2.0 — the second phase of India's flagship chip initiative — was approved by the Union Cabinet on 15 July 2026 with a budgetary outlay of ₹1.27 lakh crore (approximately US$ 15 billion). Simultaneously, the fifth edition of SEMICON India 2026, themed "Silicon to Systems: Building the Ecosystem," is scheduled for 17–19 September 2026 at Yashobhoomi (India International Convention and Expo Centre, Dwarka, New Delhi), with Prime Minister Narendra Modi set to inaugurate the event. The conference will feature more than 500 exhibitors, over 290 overseas companies, and delegations from more than 40 countries — underscoring India's emergence as a serious player in the global semiconductor value chain.

Background

Semiconductors — tiny chips that control everything from smartphones to missiles, medical devices to satellites — are the foundational technology of the 21st century. The global semiconductor market was valued at over US$ 600 billion in 2024 and is projected to exceed US$ 1 trillion by 2030. India's consumption of semiconductors is substantial (over US$ 40 billion annually) but its domestic manufacturing was virtually absent until the 2020s.

India's semiconductor vulnerability was starkly exposed during the COVID-19 chip shortage (2020–22), which disrupted automotive, electronics, medical equipment, and consumer goods production globally, including in India. The government responded by launching the Semicon India Programme in December 2021 under ISM 1.0, with an initial outlay of ₹76,000 crore.

India's Semiconductor Design Strength

India already accounts for approximately 20% of the world's semiconductor design workforce, with over 125,000 engineers working in chip design at companies including Qualcomm, Intel, Texas Instruments, Samsung, and AMD across Bengaluru, Hyderabad, Pune, and Noida. However, design talent did not translate into domestic fabrication — a gap ISM 1.0 and ISM 2.0 directly address.

Current Developments

ISM 1.0 — What Was Achieved (2021–2026)

Under ISM 1.0, the government approved 12 semiconductor projects across six states — Gujarat, Assam, Odisha, Uttar Pradesh, Punjab, and Andhra Pradesh — with cumulative investments exceeding ₹1.64 lakh crore. Key milestones include:

Tata Electronics (Dholera, Gujarat): India's first semiconductor fabrication facility — a greenfield foundry for 28-nm chips, in collaboration with Taiwan's PSMC.
CG Power / Renesas / Stars Microelectronics (Sanand, Gujarat): Outsourced Semiconductor Assembly and Test (OSAT) plant for advanced packaging.
Kaynes Semicon (Sanand): OSAT plant for compound semiconductor and silicon carbide devices.
5–6 projects expected to commence commercial production by end-2026, per the Ministry of Electronics and Information Technology (MeitY).

ISM 2.0 — The Next Phase (2026 onward)

ISM 2.0 builds on ISM 1.0's foundation by moving beyond chip assembly toward the full semiconductor value chain. The ₹1.27 lakh crore programme rests on six strategic pillars:

Chip Design: Scaling up India's existing design strength; supporting domestic fabless chip companies and EDA (Electronic Design Automation) tool access.
Semiconductor Equipment and Materials: Developing a domestic supply chain for specialty chemicals, gases, photomasks, and lithography components — currently 90%+ imported.
Fabrication Facilities (Fabs): Expanding India's fab capacity beyond the first Tata/PSMC facility; targeting advanced-node fabs.
Advanced Packaging: Chiplet integration, 2.5D/3D packaging — the cutting edge of semiconductor assembly where India is building expertise.
Research and Development: Funding academic and industry R&D in compound semiconductors (GaN, SiC), photonics, and future node technologies.
Talent Development: Training 85,000 semiconductor engineers over five years; integrating chip courses into IITs, NITs, and engineering colleges.

SEMICON India 2026 — Key Details

Edition: 5th edition of the annual SEMICON India conference.
Date: September 17–19, 2026.
Venue: Yashobhoomi (IICC), Dwarka, New Delhi.
Theme: "Silicon to Systems: Building the Ecosystem."
Organizers: India Semiconductor Mission (ISM) + SEMI (global semiconductor trade association).
Scale: 500+ exhibitors, 290+ overseas companies; country pavilions for Japan, South Korea, Singapore, Malaysia, Germany, and the Netherlands; 40+ country delegations.
Exhibition area: ~18,000 sq m, including a 360 sq m workforce development zone.
PM meetings: PM Modi expected to meet global semiconductor CEOs on the sidelines.

Key Facts

ISM 1.0 outlay: ₹76,000 crore (December 2021).
ISM 2.0 outlay: ₹1.27 lakh crore (July 2026) — a 67% increase.
India's semiconductor consumption: ~US$ 40 billion/year (2025).
India's target: US$ 200 billion semiconductor ecosystem by 2030 (per MeitY).
Design workforce: ~125,000 engineers (~20% of global chip design talent).
Projects approved under ISM 1.0: 12, across six states.
First fab in India: Tata Electronics, Dholera (Gujarat) — 28 nm process, PSMC collaboration.
SEMI: Global industry association representing 3,000+ companies in the semiconductor supply chain.

Constitutional Provisions

Article 246 (Seventh Schedule, List I — Union List, Entry 52): Industries declared by Parliament to be in the public interest under the Industries (Development and Regulation) Act — semiconductor manufacturing has strategic national interest dimensions.
Article 51A(h) — Fundamental Duty: To develop scientific temper, humanism, and spirit of inquiry — a constitutional value that underpins India's science and technology investment mandate.
Article 39(b) and (c) — Directive Principles: Direct the State to ensure that the material resources of the community serve the common good and that wealth is not concentrated — relevant to ensuring semiconductor benefits reach domestic industry and not just foreign multinationals.

Legal Framework

Industries (Development and Regulation) Act, 1951 (IDR Act): Strategic industries including electronics manufacturing fall under central regulation; semiconductor fabrication units require central licences and environmental clearances.
Electronics Policy 2019 and National Policy on Electronics 2019 (NPE 2019): Parent policy framework targeting a US$ 400 billion electronics manufacturing ecosystem — semiconductors are a critical sub-sector.
Production Linked Incentive (PLI) Scheme: Broader incentive architecture under which semiconductor-adjacent sectors (IT hardware, telecom, electronics) receive output-linked incentives; Semicon India Programme has its own dedicated fiscal incentives (up to 50% of project cost as capital subsidy).

Institutional Framework

India Semiconductor Mission (ISM): Autonomous body under MeitY; functions as the nodal agency for implementing the Semicon India Programme. Its mandate covers project approvals, ecosystem development, talent building, and global partnerships.
Ministry of Electronics and Information Technology (MeitY): Nodal ministry for semiconductor policy; coordinates with the Ministry of Finance for fiscal incentives and Ministry of Commerce for trade policy.
SEMI: Global trade body; co-organizes SEMICON India; facilitates global supply-chain connections for Indian players.
IITs and NITs: Academic partners in talent development; chip design curricula being integrated under the National Semiconductor Education Initiative.
ISRO, DRDO: Strategic consumers of domestic chips; their procurement commitments can de-risk private semiconductor investment.

Economic Dimensions

Semiconductors are at the intersection of manufacturing, digital economy, and national security. India's US$ 200 billion semiconductor ambition by 2030 would add significantly to GDP, generate high-value employment, and reduce the import bill. Each dollar of semiconductor output generates approximately $6–10 in downstream value across electronics, automobiles, defence, and consumer goods.

India's import dependency on chips — primarily from Taiwan (TSMC), South Korea (Samsung), the Netherlands (ASML for lithography machines) — creates vulnerabilities akin to India's previous oil dependency. Domestic fabrication reduces this strategic risk.

Banking and financial angle: ISM 2.0's ₹1.27 lakh crore involves blended finance — government capital subsidy (up to 50% of project cost for fab facilities), equity participation by PSUs, and debt financing by banks including SBI and other PSBs. The PLI-semiconductor model generates multiplier effects across MSME ancillary suppliers. SEBI has also been updating disclosure norms for semiconductor companies listing on Indian exchanges.

International Relations

The semiconductor supply chain is inherently geopolitical. India's semiconductor strategy intersects with several multilateral and bilateral frameworks:

Quad (India-US-Japan-Australia): A semiconductor supply chain resilience partnership — the Quad committed in 2023 to mapping each member's chip production and demand vulnerabilities.
India-EU Trade and Technology Council (TTC): Bilateral cooperation on semiconductor standards, R&D, and supply-chain diversification from China.
India-Japan semiconductor partnership: Japan's government has provided technology-transfer support for advanced packaging at Indian facilities.
US CHIPS and Science Act (2022): While primarily a US domestic programme, it has catalysed allied governments including India to match investments in chip sovereignty — the "friendshoring" trend India is leveraging.
China's dominance in mature-node chips (28 nm and older): India's entry into 28-nm fabrication (Tata/Dholera) directly competes in a segment where China has significant overcapacity, raising WTO and bilateral trade questions.

Challenges

Technology gap: Leading-edge fabs (sub-5 nm) use ASML's Extreme Ultraviolet Lithography (EUV) machines — US export controls restrict their sale to India currently. India's first fabs are positioned in mature nodes (28 nm+).
Water and power intensity: Semiconductor fabs are among the most resource-intensive industrial facilities — a 28-nm fab consumes ~5–10 million gallons of ultra-pure water daily and requires uninterrupted power. India's infrastructure must be upgraded accordingly.
Skilled manpower pipeline: Designing for advanced packaging and fab process control requires highly specialised engineers; India's semiconductor talent pipeline is currently weighted toward design rather than process engineering.
Global competition: The US, EU, South Korea, Japan, and China are all subsidising chip manufacturing simultaneously — India competes with sovereign wealth funds and highly developed ecosystems.
Long gestation: A greenfield semiconductor fab typically takes 4–7 years from groundbreaking to commercial production; capital is at risk over a long period before revenue generation.

Government Initiatives

Semicon India Programme (ISM 1.0, 2021): ₹76,000 crore with 50% capital subsidy for fabs; 30% for OSAT/ATMP units.
ISM 2.0 (2026): ₹1.27 lakh crore; expands support to equipment, materials, R&D, and talent across the full supply chain.
Design Linked Incentive (DLI) Scheme: Financial support for domestic fabless chip design startups — up to ₹30 crore per company over five years.
CHIPS to Startups (C2S) Programme: Academic programme by MeitY to train chip design engineers at 120+ institutions across India.
National Quantum Mission (2023): Overlaps with semiconductor R&D for quantum computing chips.

Way Forward

India must move beyond assembly and test (OSAT) toward advanced-node fabrication, requiring continued R&D investment and international technology partnerships. Access to ASML's EUV machines through diplomatic channels is a medium-term strategic priority.
The NITI Aayog's India Innovation Index and semiconductor-specific roadmaps should be institutionalised with quarterly monitoring to track fab project timelines against commitments.
A National Semiconductor Research Centre — analogous to IMEC in Belgium — could serve as a neutral R&D platform for academia-industry collaboration on compound semiconductors, photonics, and advanced packaging.
India should negotiate preferential technology access provisions in its bilateral trade agreements, especially with the EU, Japan, and South Korea — countries with advanced semiconductor process know-how.

Possible Mains Questions

"Semiconductors are the new oil. Critically examine India's strategy under ISM 2.0 to build domestic chip manufacturing capability in a highly competitive geopolitical environment." (GS-III, 250 words)
"India's strength in chip design has not translated into fabrication capacity. Analyse the structural barriers and the role of government policy in bridging this gap." (GS-III, 250 words)

Possible Prelims MCQs

Q: The India Semiconductor Mission (ISM) operates under which ministry?
A: Ministry of Electronics and Information Technology (MeitY).
Q: What is the theme of SEMICON India 2026?
A: "Silicon to Systems: Building the Ecosystem."
Q: Under ISM 1.0, what is the maximum capital subsidy offered for setting up a semiconductor fabrication (fab) unit?
A: 50% of project cost.
Q: India's first semiconductor fab is being established at Dholera, Gujarat, in collaboration with PSMC of which country?
A: Taiwan.
Q: The Design Linked Incentive (DLI) Scheme supports which category of semiconductor companies?
A: Domestic fabless chip design companies and startups.

Essay Dimensions

Semiconductor sovereignty: why chip manufacturing is the defining industrial challenge of the 21st century.
Geopolitics of technology: how chip wars between the US and China are reshaping global supply chains and India's strategic opportunities.
Can India replicate the East Asian semiconductor miracle? Lessons from Taiwan's TSMC and South Korea's Samsung for India's ISM 2.0.
Science, technology, and national security: the convergence of semiconductor policy and strategic autonomy.
Balancing speed and sustainability: the environmental cost of semiconductor manufacturing and India's green growth imperative.

Interview Questions

India has a 20% share of global chip design talent but negligible fabrication capacity. As a policymaker, what would be your top three priorities to bridge this gap under ISM 2.0?
How does the US CHIPS and Science Act affect India's semiconductor strategy — is it a threat (competing for investment) or an opportunity (friendshoring)?
What are compound semiconductors (GaN, SiC) and why are they strategically important for India's defence and clean energy sectors?
Explain the concept of "fabless vs. foundry" in the semiconductor industry. Where does India currently stand and where should it aim to be by 2035?
EUV lithography machines from ASML are currently restricted from sale to India. What diplomatic and R&D pathways does India have to access advanced chip manufacturing technology?

FAQ

What is ISM 2.0 and how does it differ from ISM 1.0?: ISM 1.0 (2021, ₹76,000 crore) focused on attracting initial investments in chip fabrication and assembly. ISM 2.0 (2026, ₹1.27 lakh crore) deepens the ecosystem across all six pillars — design, equipment, materials, fabrication, packaging, R&D, and talent — targeting a complete domestic semiconductor value chain by 2030.
What is a semiconductor fab and why is it important?: A semiconductor fabrication facility (fab) is a factory that manufactures integrated circuits (chips) on silicon wafers. It is capital-intensive (a leading-edge fab costs US$10–20 billion), technology-intensive, and strategically critical — controlling fab capacity confers technological leverage across industries from defence to consumer electronics.
What is SEMICON India and who organises it?: SEMICON India is India's annual flagship semiconductor conference jointly organised by the India Semiconductor Mission (ISM) and SEMI (the global semiconductor trade association). The 2026 edition — the 5th — is at Yashobhoomi, New Delhi, with PM Modi inaugurating on September 17.
What is India's semiconductor consumption and what share is domestically produced?: India consumes over US$ 40 billion in semiconductors annually. Until the ISM 1.0 projects come online in 2026, virtually 100% was imported — largely from Taiwan, South Korea, Japan, and China. ISM 2.0 aims to shift a significant share to domestic production by 2030.

SEMICON India 2026 and India Semiconductor Mission (ISM) 2.0: ₹1.27 Lakh Crore Push — Silicon to Systems Strategy

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