Finance Ministry Approves ₹1.25 Lakh Cr Outlay For Semiconductor Mission 2.0

The Centre has moved a step closer towards launching the India Semiconductor Mission 2.0 (ISM 2.0) after the finance ministry’s expenditure finance committee (EFC) cleared a ₹1.25 Lakh Cr proposal for the programme. 

According to a PTI report, the programme will be taken to the Union cabinet for the final approval following the EFC’s nod.

Notably, the outlay for ISM 2.0 is significantly higher than the ₹76,000 Cr allocated under the first phase of the India Semiconductor Mission.

The move comes as India looks to reduce its dependence on imported chips and position itself as a trusted global semiconductor manufacturing hub amid rising geopolitical tensions and an increasingly fragmented global technology supply chain.

Building On ISM 1.0

Since its launch in 2021, the government has approved 12 semiconductor projects under the India Semiconductor Mission, with cumulative investments of around ₹1.64 Lakh Cr committed across the ecosystem. 

Most recently, the cabinet approved two additional semiconductor projects, taking the total number of approved facilities under the Mission to 12.

While the government is supporting 24 semiconductor design projects under the Design Linked Incentive (DLI) scheme of ISM, 105 companies have been given access to advanced chip design tools, the PTI report said.

So far, 23 chip tapeouts have been completed across various foundries, including those using advanced technology nodes, marking steady progress in India’s semiconductor design ecosystem. 

In the Union Budget for FY27, finance minister Nirmala Sitharaman proposed the launch of ISM 2.0 to focus on manufacturing semiconductor equipment and materials, developing full-stack Indian IP, strengthening supply chains, and creating industry-led research and training centres.

What To Expect From ISM 2.0

While the government is yet to announce the detailed contours of ISM 2.0, the next phase is expected to broaden India’s semiconductor ambitions beyond fabrication and chip packaging. 

Unlike ISM 1.0, which largely focused on attracting investments in fabrication and assembly, ISM 2.0 is likely to support the wider semiconductor ecosystem by encouraging domestic production of chipmaking equipment, speciality chemicals, industrial gases and other key raw materials.

According to a report by The Indian Express, the government may reduce the current 50% capital expenditure subsidy for Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) facilities in ISM 2.0. 

Instead, the scheme is expected to provide support for equipment and other materials required at assembly and testing plants like gases, chemicals, and raw materials. It is also expected to place a stronger emphasis on semiconductor design by linking incentives to the capital raised by the companies from the market.

Earlier, electronics and IT minister Ashwini Vaishnaw said the next phase of ISM will focus on helping Indian semiconductor design companies grow, building a local supply chain for chipmaking equipment and materials, and training more skilled talent by working with universities and research institutions. 

Meanwhile, industry stakeholders told Inc42 that ISM 2.0 should go beyond manufacturing incentives and address structural challenges. They called for greater access to patient capital, stronger support for domestic electronic design automation (EDA) tools, and local production of semiconductor equipment and materials. 

Several of them also urged the government to become an early customer for indigenous semiconductor technologies to help young companies bring their products to market. 

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