India’s government has approved Semicon 2.0, a program allocated with 1.275 trillion rupees, approximately $13.3 billion, to attract new semiconductor factories, support chip design, and develop local suppliers of machinery, materials, and chemicals. The initiative expands on the plan launched in 2021 and aims to reduce dependence on imports.
The key points of Semicon 2.0 in 20 seconds
- India will allocate about $13.3 billion to its second semiconductor strategy.
- The program will fund design, manufacturing, packaging, materials, research, and training.
- Semicon 1.0 resulted in 12 approved plants and 24 design projects.
- The remaining challenge is to move from packaging to large-scale wafer fabrication.
The Indian Council of Ministers announced Semicon 2.0 in February’s budget, but funding details and the final approval of the program were pending. The new allocation exceeds the roughly $10 billion assigned to the first phase and confirms that New Delhi views semiconductors as a long-term industrial policy, not just a campaign to attract one or two factories.
India has significant advantages. It has a growing internal market, a large electronics industry, and tens of thousands of engineers dedicated to chip design. However, it still depends heavily on foreign sources for most of the semiconductors it consumes and lacks wafer production comparable to Taiwan, South Korea, the US, China, or Japan.
Six lines of support to build the complete supply chain
Semicon 2.0 broadens the range of incentives. The first phase mainly focused on subsidizing factories, packaging plants, and design projects. The new program aims to also cover equipment, gases, chemicals, intellectual property, research, and skilled professionals needed to operate these facilities.
India’s budget had already outlined three main goals in February: manufacturing equipment and materials, developing domestic intellectual property, and strengthening supply chains. The final approval organizes this strategy around six pillars.
| Semicon 2.0 Pillar | What it aims to develop |
|---|---|
| Chip Design | Intellectual property, chipsets, and Indian fabless companies |
| Machines and Materials | Equipment, gases, chemicals, wafers, and components for fabs |
| New Factories | Silicon plants, compound semiconductors, discrete components, and displays |
| Advanced Packaging | Expanded ATMP and OSAT capacity, including advanced integration |
| Research & Development | More advanced processes and international collaboration |
| Training | Electronics design, clean rooms, and factory operation |
ATMP refers to assembly, testing, marking, and packaging, while OSAT denotes companies that perform these tasks for third parties. These phases are essential because they transform processed wafers into components ready to be integrated into phones, cars, servers, or industrial systems.
India has progressed more rapidly in packaging than in wafer fabrication. Packaging plants require substantial investments but are less costly and complex than a foundry capable of producing logic chips through advanced processes.
The government intends to leverage this base to move up the value chain. Semicon 2.0 will encourage factories for silicon, silicon carbide, and other compound semiconductors, along with local producers of materials and machinery.
This last part is particularly important. A factory does not operate solely with the building and lithography machines. It needs wafers, ultrapure gases, photoresists, cleaning products, masks, measurement systems, spare parts, and a stable supply network. Importing nearly all these elements would sustain external dependence even if chips were manufactured locally.
Semicon 1.0 leaves 12 projects, but majority are packaging plants
The initial program, approved in 2021 with an allocation of 760 billion rupees, offered subsidies up to 50% of certain projects’ costs. By July 2026, India had approved 12 manufacturing units with a cumulative investment exceeding 1.64 trillion rupees, along with 24 financed design initiatives.
| Indicator | Semicon 1.0 | Semicon 2.0 |
|---|---|---|
| Approval Year | 2021 | 2026 |
| Public Funding | Approximately $10 billion | Approximately $13.3 billion |
| Initial Focus | Factories, packaging, and design | Complete supply chain |
| Manufacturing Projects Approved | 12 | Pending selection |
| Design Projects Funded | 24 | To be expanded |
| Companies with EDA Tool Access | 105 | Program expansion planned |
| Training | Initial programs | Design, clean rooms, and industrial operation |
The 12 projects include a silicon plant, a silicon carbide facility, an integrated gallium nitride plant, Micro LED displays, and nine units related to semiconductor packaging.
Micron Technology, Kaynes Semicon, and CG Semi have already started commercial production, according to the government’s report. Micron’s plant in Sanand, Gujarat, handles assembly and testing of memories produced elsewhere. While this boosts Indian industry activity, it does not yet mean domestically produced memory wafers.
The first major silicon wafer factory supported by the program is expected to open in 2028. Tata Electronics’ project in Dholera, also in Gujarat, aims to produce chips for automotive, telecommunications, consumer, and other sectors using technology from Taiwan’s Powerchip Semiconductor Manufacturing Corporation.
Meeting the schedule will be crucial to gauge the success of the first phase. Semiconductor projects need several years to build facilities, install and calibrate equipment, train staff, qualify processes, and achieve yields that allow profitable production.
India aims to turn its domestic demand into industrial capacity
India’s semiconductor market grew from around $38 billion in 2023 to an estimated $45–50 billion in 2024-2025. Projections from the government and industry suggest it could reach between $100 billion and $110 billion by 2030, with some recent estimates even raising this to $130 billion. These are forecasts, not guaranteed sales.
Demand comes from mobile phones, cars, telecommunications, data centers, industrial devices, smart meters, defense, and consumer electronics. India already assembles a significant portion of the smartphones it sells and exports, but many high-value components still come from abroad.
Semicon 2.0 seeks to capitalize on this demand to persuade manufacturers to build within India. It is complemented by a new program of 625 billion rupees for mobile phone manufacturing, offering incentives tied to sales and additional percentages when companies use domestically sourced components.
Proximity between chip manufacturing, packaging, and assembly plants can reduce logistics delays and facilitate local supplier orders. It also enables companies to test new designs near the final assembly plants.
However, public funding alone cannot eliminate all hurdles. Factories need a continuous power supply, large volumes of ultrapure water, reliable logistics, specialized technicians, and administrative processes capable of managing projects that may cost over $10 billion.
Competition for these investments is fierce. The US, the EU, Japan, South Korea, and China have their own support programs. TSMC, Samsung, Intel, Micron, and other manufacturers compare subsidies but also consider customer base, talent, suppliers, and IP protection.
India does not need to compete immediately for the most advanced processors. It can grow through chips for automotive and energy, compound semiconductors, sensors, analog components, advanced packaging, and proprietary designs—markets less flashy than AI accelerators but essential to industry.
Semicon 2.0 recognizes that focusing only on building factories is insufficient. The real test will be how many projects reach production, how much of their materials are sourced domestically, and whether Indian companies can develop intellectual property for international markets.
Frequently Asked Questions
How much will India invest in Semicon 2.0?
The program has a budget of 1.275 trillion rupees, roughly $13.3 billion based on the exchange rate at the time of announcement.
What are the main differences between Semicon 1.0 and Semicon 2.0?
The first phase focused on factories, packaging, and design. The second expands support to machinery, materials, research, IP, and specialized training.
Does India currently manufacture semiconductors commercially?
Yes, several assembly, testing, and packaging plants have started production. Large-scale silicon wafer fabrication is still developing, with the first major foundry scheduled for 2028.
Which companies have started production under the program?
The government identifies Micron Technology, Kaynes Semicon, and CG Semi as companies already operating commercially.
Sources:
- India Semiconductor Mission, official allocation, six pillars, and evolution of Semicon 1.0.
