India Unveils Massive 'ISM 2.0' Overhaul: Semiconductor Ambition Jumps to ₹1.2 Lakh Crore to Challenge Global Giants

India Unveils Massive 'ISM 2.0' Overhaul: Semiconductor Ambition Jumps to ₹1.2 Lakh Crore to Challenge Global Giants​

The Indian government is preparing to launch a significantly expanded version of the India Semiconductor Mission (ISM 2.0). This major industrial push proposes an unprecedented outlay ranging between Rs 1 lakh crore and Rs 1.2 lakh crore.

This massive expansion represents a substantial hike compared to the initial Rs 76,000 crore allocated for the first phase of the mission. Inter-ministerial consultations are currently underway, with the Ministry of Electronics and Information Technology (MeitY) awaiting final approval from the Finance Ministry.

Expanding Scope Beyond Chip Fabrication​

ISM 2.0 aims to drastically widen the program’s scope. It moves far beyond mere chip fabrication and design. The new framework includes support for semiconductor equipment, raw materials, and other critical inputs necessary for the entire ecosystem.

A key focus is building full-stack intellectual property and strengthening supply chain resilience. This revised approach ensures that ancillary players—including gas suppliers, specialty chemical manufacturers, and MSMEs—will play a central role in India's manufacturing value chain.

The mission is set to accelerate innovation and support the emergence of up to 50 fabless semiconductor design firms in the coming years.

Driving Investment through Revamped Incentives​

A major cornerstone of the second phase is the introduction of a revamped design-linked incentive (DLI 2.0) scheme. This crucial mechanism is expected to facilitate partnerships, allowing foreign firms to collaborate with Indian companies on semiconductor research and development within the country.

The move is positioned to bolster India's self-reliance. Officials note that ISM 2.0 aligns with the long-term objective of reducing the nation's dependence on imported chips.

Previously, the first phase of the mission had approved 10 semiconductor projects worth about Rs 1.6 lakh crore across six states. These projects cover the entire spectrum, including fabrication, assembly, testing, and packaging facilities.

Targeting Global Ambition and Future Milestones​

The domestic demand market presents a massive opportunity, projected to grow up to $110 billion by 2030. Based on this trajectory, India is projected to develop capabilities to meet nearly 75 per cent of its domestic semiconductor demand by 2030.

The ambitious roadmap also targets highly advanced manufacturing nodes, such as 3-nanometre and 2-nanometre technologies. By 2035, the nation aims to position itself among the top semiconductor nations globally.

This strategic push comes amidst increasing geopolitical uncertainties and global supply chain disruptions. Major economies, including the US, European Union, Japan, and South Korea, are themselves ramping up efforts to localize semiconductor production and diversify away from concentrated global hubs.

Government Commitments and Financial Backing​

The commitment to scaling up this sector was highlighted by Finance Minister Nirmala Sitharaman. While she previously announced an initial outlay for the scheme in the Union Budget 2026–27, the proposal now underscores a massive capital injection.

In the Budget speech, FM Sitharaman noted that although the initial outlay was discussed, it was subsequently proposed to increase the allocation significantly to capitalize on the immense momentum building in the sector.

These investments underscore a decisive effort by the government to make India a self-sufficient and dominant force in the global semiconductor value chain.