India Semiconductor Mission 2.0: ₹1.25 Lakh Crore Mega Push Gets EFC Nod — India's Boldest Bet on Chip Self-Reliance

In what is being described as the most consequential industrial policy decision of the decade, the Expenditure Finance Committee (EFC) of the Government of India has cleared the India Semiconductor Mission 2.0 (ISM 2.0) with a staggering outlay of ₹1.25 lakh crore ($14.8 billion). The approval, which came on June 30, 2026, represents a quantum leap from the ₹76,000 crore allocated under ISM 1.0 — a 64% increase that signals the Narendra Modi government's unwavering commitment to making India a global semiconductor powerhouse.

The proposal will now be forwarded to the Union Cabinet for final approval, which officials say is expected within weeks. If greenlit, ISM 2.0 will position India to meet 75% of its domestic semiconductor demand by 2030 — a target that, if achieved, would fundamentally reshape the global chip supply chain and reduce the nation's dependence on imports from Taiwan, South Korea, and China.

What Is the India Semiconductor Mission?

The India Semiconductor Mission (ISM) was launched in December 2021 under the aegis of the Ministry of Electronics and Information Technology (MeitY) as the government's flagship programme to build a comprehensive semiconductor ecosystem within India. At its core, ISM is a recognition that semiconductors — the tiny silicon chips that power everything from smartphones and automobiles to defence systems and medical devices — are the foundational building blocks of the modern digital economy.

India currently imports nearly all of its semiconductor requirements, spending an estimated $40 billion annually on chip imports. This dependency was laid bare during the global chip shortage of 2020–2023, when automotive manufacturers, electronics companies, and defence establishments scrambled for supply, causing production delays, price spikes, and economic disruption worth billions of dollars.

The original ISM 1.0, backed by ₹76,000 crore in government incentives, was designed to kickstart India's semiconductor manufacturing capabilities from near-zero. Over the past four years, it has achieved remarkable early success, approving 12 major projects with a combined investment of ₹1.64 lakh crore across the semiconductor value chain.

"Semiconductors are the new oil. The nation that controls chip manufacturing controls the future of technology, defence, and economic sovereignty. ISM 2.0 is India's declaration that we will not be left behind in this race." — Senior MeitY Official

ISM 1.0: The Foundation That Made 2.0 Possible

To understand the significance of ISM 2.0, one must first appreciate the groundwork laid by its predecessor. When ISM 1.0 was launched, sceptics questioned whether India — a country with no existing semiconductor fabrication infrastructure — could realistically compete with the likes of TSMC, Samsung, and Intel. Four years later, the results have silenced many of those critics.

Under ISM 1.0, the government approved 12 manufacturing projects worth ₹1.64 lakh crore in total investment (combining both government incentives and private capital). These projects span the full semiconductor value chain:

• 1 Semiconductor Fabrication Plant (Fab): The crown jewel of ISM 1.0 is the Tata Electronics–PSMC (Powerchip Semiconductor Manufacturing Corporation) fab in Dholera, Gujarat. This facility, with an investment exceeding ₹91,000 crore, is designed to manufacture chips at 28nm and 40nm process nodes — workhorses of the automotive, industrial IoT, and consumer electronics sectors. Construction is well advanced, and pilot production is expected by late 2026.
• 2 Compound Semiconductor Fabs: These facilities, being built by CG Power (in partnership with Renesas Electronics of Japan) and Tata Electronics (in partnership with Teledyne FLIR), will manufacture gallium nitride (GaN) and silicon carbide (SiC) chips. Compound semiconductors are critical for 5G infrastructure, electric vehicles, defence radar systems, and renewable energy power electronics — high-growth sectors where India's demand is exploding.
• 9 ATMP (Assembly, Testing, Marking, and Packaging) Units: These facilities handle the back-end of semiconductor manufacturing — taking fabricated silicon wafers and turning them into finished, packaged chips ready for integration into electronic products. Companies like Micron Technology, Kaynes Technology, and Murugappa Group have set up ATMP operations in states including Gujarat, Assam, and Karnataka.

The Micron Technology ATMP unit in Sanand, Gujarat — built with an investment of over ₹22,500 crore — is already operational and has begun commercial production, marking a historic milestone as India's first modern semiconductor packaging facility run by a global chipmaker.

ISM 2.0: What's New and Why It Matters

While ISM 1.0 focused primarily on getting the basics right — attracting anchor investments in fabs and ATMP units — ISM 2.0 dramatically expands the scope to cover the entire semiconductor supply chain ecosystem. This is where the ₹1.25 lakh crore outlay becomes transformative.

The key new focus areas under ISM 2.0 include:

• Semiconductor Equipment Manufacturing: This is perhaps the most strategic addition. Currently, the global semiconductor equipment market — worth over $100 billion — is dominated by a handful of companies: ASML (Netherlands), Applied Materials (US), Tokyo Electron (Japan), and Lam Research (US). Without domestic equipment manufacturing capability, India would remain permanently dependent on these foreign suppliers for the machines needed to run its fabs. ISM 2.0 allocates significant incentives for Indian companies (and foreign firms setting up in India) to manufacture lithography systems, etching tools, deposition equipment, wafer inspection systems, and clean-room infrastructure.
• Specialty Chemicals: Semiconductor manufacturing requires ultra-high-purity chemicals — photoresists, etchants, CMP slurries (chemical-mechanical planarization), developers, and solvents — that must meet specifications measured in parts per billion. Today, this market is almost entirely controlled by Japanese (Shin-Etsu, Tokyo Ohka Kogyo), German (Merck KGaA), and American (DuPont, Entegris) companies. ISM 2.0 will incentivize domestic production of these critical inputs, reducing supply chain vulnerabilities.
• Industrial Gases: Fabs consume enormous quantities of ultra-pure gases — nitrogen, argon, hydrogen, helium, and specialty gases like silane, nitrogen trifluoride, and tungsten hexafluoride. These gases are used in processes ranging from wafer etching and chemical vapour deposition to clean-room atmosphere management. Building domestic industrial gas supply chains will reduce costs and ensure uninterrupted fab operations.
• Advanced Packaging Technologies: Beyond traditional ATMP, ISM 2.0 will push into cutting-edge packaging technologies like chiplet architectures, fan-out wafer-level packaging (FOWLP), 2.5D/3D packaging, and heterogeneous integration — techniques that are increasingly defining chip performance as Moore's Law scaling slows down.
• Design Ecosystem Expansion: India already has a significant presence in chip design, with over 80,000 VLSI engineers working for companies like Qualcomm, Intel, AMD, Texas Instruments, and Broadcom at their Indian R&D centres. ISM 2.0 aims to convert this design prowess into home-grown chip products by supporting Indian fabless semiconductor startups and design houses.

The 75% Domestic Demand Target: Is It Realistic?

The headline target of ISM 2.0 — meeting 75% of India's domestic semiconductor demand by 2030 — is ambitious, but government officials argue it is grounded in a pragmatic assessment of India's consumption profile.

Unlike the US, South Korea, or Taiwan, where demand is heavily weighted toward cutting-edge chips (sub-7nm nodes used in smartphones, data centres, and AI accelerators), India's semiconductor consumption is dominated by mature-node chips. Roughly 70-80% of India's chip demand comes from:

• Automotive electronics: Engine control units, infotainment systems, ADAS (Advanced Driver Assistance Systems), electric vehicle power electronics
• Consumer electronics: LED TVs, washing machines, refrigerators, set-top boxes
• Industrial applications: Smart meters, telecom equipment, solar inverters, railway signalling
• Defence and space: Radar systems, communication equipment, satellite subsystems

These applications predominantly use chips manufactured at 28nm and above — exactly the process nodes that the Dholera fab and future fabs under ISM 2.0 are designed to produce. By focusing on mature-node chips rather than trying to compete head-on with TSMC's 3nm fab in Taiwan, India is playing to its strengths and targeting a market where it can realistically achieve self-sufficiency.

India's semiconductor consumption is projected to reach $110 billion by 2030, according to the India Electronics and Semiconductor Association (IESA). Meeting 75% of that demand domestically would translate to roughly $82 billion in domestic semiconductor production — a figure that would place India among the top five semiconductor-producing nations globally.

Geopolitical Tailwinds: Why the World Wants India to Succeed

ISM 2.0 does not exist in a vacuum. The global semiconductor landscape has been fundamentally reshaped by geopolitical tensions, particularly the US-China technology war. The weaponization of chip supply chains — with the US imposing export controls on advanced semiconductor equipment and chips to China — has made every major economy acutely aware of the risks of concentrated chip production.

Today, Taiwan alone accounts for over 60% of the world's semiconductor foundry production and over 90% of the most advanced chips. A conflict in the Taiwan Strait — a scenario that defence analysts increasingly warn about — could cripple global technology supply chains overnight. This existential risk has driven massive semiconductor investment initiatives worldwide:

• United States: The CHIPS and Science Act (2022) committed $52.7 billion in subsidies, with additional funding now exceeding $100 billion when state-level incentives are included.
• European Union: The EU Chips Act has mobilized over €43 billion in public and private investment.
• Japan: Has committed over ¥4 trillion ($26 billion) to attract TSMC and Rapidus fabs.
• South Korea: Samsung and SK Hynix have announced combined investments exceeding $450 billion through 2047.

In this context, India's ₹1.25 lakh crore commitment under ISM 2.0 is not merely a domestic industrial policy — it is a geopolitical statement. India is positioning itself as a credible "China+1" and "Taiwan+1" alternative for global semiconductor supply chains, and the timing could not be more favourable.

State-Level Competition: The Race to Become India's Chip Hub

One of the most fascinating sub-plots of India's semiconductor journey is the intense competition among state governments to attract chip investments. Gujarat, which houses both the Tata-PSMC fab in Dholera and the Micron ATMP unit in Sanand, has emerged as the early leader, but other states are aggressively positioning themselves.

Karnataka has leveraged its existing electronics manufacturing ecosystem around Bengaluru, Assam has attracted Tata's ATMP unit to Jagiroad, and states like Tamil Nadu, Telangana, Odisha, and Uttar Pradesh have announced dedicated semiconductor policies offering land, power subsidies, tax incentives, and single-window clearance mechanisms. ISM 2.0 is expected to accelerate this state-level competition, potentially creating multiple semiconductor corridors across India.

Challenges and Risks Ahead

Despite the optimism, experts caution that India's semiconductor ambitions face significant hurdles:

• Talent Gap: Operating a semiconductor fab requires thousands of highly specialized engineers and technicians — process engineers, yield engineers, equipment maintenance specialists — roles that India has never trained for at scale. Massive investment in semiconductor-specific education and training programmes will be essential.
• Water and Power Infrastructure: A modern semiconductor fab consumes between 30-50 million litres of ultra-pure water per day and requires uninterrupted, high-quality power supply. Ensuring this infrastructure at fab sites is critical.
• Ecosystem Maturity: Building a semiconductor ecosystem is not just about the fab — it's about hundreds of ancillary suppliers, service providers, and logistics networks that need to be developed in parallel.
• Execution Risk: India's track record on large industrial projects has been mixed. Timely execution, avoiding cost overruns, and maintaining technology partnerships will be critical to ISM 2.0's success.

What Happens Next: The Road to Cabinet Approval

With the EFC clearance secured, the ISM 2.0 proposal will now be placed before the Union Cabinet, headed by Prime Minister Narendra Modi, for final approval. Given the strategic importance of the semiconductor sector and the Prime Minister's personal involvement in championing ISM 1.0, industry observers expect Cabinet approval to come swiftly — possibly within the next two to four weeks.

Once approved, MeitY and the India Semiconductor Mission office will begin the process of issuing detailed guidelines, inviting applications from companies, and evaluating proposals for incentives under the expanded scheme. Companies across the semiconductor value chain — from fab operators and equipment manufacturers to specialty chemical producers and design houses — are expected to submit proposals worth multiples of the government's outlay, leveraging the incentives to make large-scale investments in India.

Frequently Asked Questions (FAQ)

Conclusion

The EFC approval of ₹1.25 lakh crore for India Semiconductor Mission 2.0 is more than a budgetary allocation — it is a statement of national intent. In a world where semiconductors have become instruments of geopolitical power, India's decision to invest aggressively in chip manufacturing is both a strategic imperative and an economic opportunity of generational proportions.

If executed well, ISM 2.0 has the potential to create hundreds of thousands of high-quality jobs, attract billions of dollars in foreign direct investment, spawn an entire ecosystem of ancillary industries, and fundamentally alter India's position in the global technology value chain. The stakes are high, the challenges are real, but the opportunity — and the political will — has never been greater.

Stay tuned to BoyX for continued coverage of India's semiconductor journey and its impact on the global technology landscape.