Introduction
The Union Budget 2026–27 marked a decisive moment for India’s technology ambitions with the announcement of India Semiconductor Mission 2.0. The new phase signals a clear policy push to deepen domestic semiconductor capabilities at a time when chips underpin every critical digital and industrial system. ISM 2.0 will focus on producing semiconductor equipment and materials in India, designing full stack Indian semiconductor intellectual property, and fortifying both domestic and global supply chains. A provision of Rs. 1,000 crore has been made for ISM 2.0 for FY 2026–27, with a strong emphasis on industry led research and training centres to drive technology development and create a future ready skilled workforce.
Semiconductors are the backbone of modern electronics, powering computers, mobile devices, telecommunications, automobiles, defence systems and artificial intelligence. India has made steady progress in consolidating earlier investments into a full-stack value chain of its semiconductor ecosystem under ISM 1.0, expanding design capabilities and advancing fabrication, assembly and testing infrastructure across the country. This momentum reflects the broader vision of Aatmanirbhar Bharat and India’s transition from policy formulation to production readiness. Building on these gains, ISM 2.0 seeks to consolidate India’s position as a reliable and competitive participant in the global semiconductor network.
Sectoral Outlook: India’s Semiconductor Ecosystem
India is gradually becoming an important player in the global semiconductor industry. Increasing investments, growing manufacturing capacity, and events like SEMICON India 2025 show that global companies are gaining confidence in India’s potential. The domestic semiconductor market is expanding quickly—from about $38 billion in 2023 to around $45–50 billion in 2024–25, and it is expected to reach $100–110 billion by 2030. This growth is driven by the vision of “Make in India” and “Make for the World,” aiming to make India both a manufacturing hub and a global supplier.
The base for this progress was set with India Semiconductor Mission (ISM) 1.0, approved in December 2021, with a support package of ₹76,000 crore. This scheme provides up to 50% financial support for semiconductor units like chip fabrication plants, packaging units, and design facilities. By December 2025, 10 major projects worth ₹1.60 lakh crore had already been approved across six states, covering areas like silicon fabrication, advanced packaging, and testing. These efforts are helping build a strong and self-reliant semiconductor ecosystem in India.
Looking ahead, India is expected to be able to design and manufacture chips for about 70–75% of its domestic needs by 2029. The next phase, Semicon 2.0, will focus on more advanced technologies, aiming to produce cutting-edge chips like 3 nm and 2 nm nodes. By 2035, India aims to become one of the top semiconductor countries in the world.
These semiconductor facilities will help meet the rising demand for chips in important sectors like consumer electronics, automobiles, telecom, industrial equipment, aerospace, and power systems.
Importantly, many of the approved projects are using home-grown (indigenous) technologies for assembling, testing, and packaging chips. This shows that India is not just manufacturing, but also building its own technological capabilities. As a result, India is becoming less dependent on foreign technologies and strengthening its position in the global semiconductor supply chain.
Anticipated Impact of Semiconductor Programme in 2026–27
India has updated its semiconductor strategy to keep up with increasing global competition, as only a few countries currently dominate advanced chip technology. Since many of these countries are offering strong incentives to attract investments, India has also adjusted its approach to remain competitive.
The revised programme focuses on providing better financial support for key areas like semiconductor manufacturing, display fabrication, and chip design. For the year 2026–27, the government has allocated ₹8,000 crore under this scheme.
The aim is to speed up investments, create high-quality jobs, and strengthen India’s capabilities in areas such as chip fabrication, packaging, and design, helping the country build a more self-reliant and competitive semiconductor ecosystem.
Projected Targets under ISM for 2026–27
| Scheme | Key Indicator | Projected Target |
|---|---|---|
| Modified Scheme for Semiconductor Fabs (1 Fab to be supported) | Investment during the year | ₹4,000 crore |
| Employment generated | 1,500 persons | |
| Modified Scheme for Compound Semiconductors, Silicon Photonics, Sensors, Discrete Fabs and ATMP/OSAT (9 units to be supported) | Investment by units during the year | ₹11,000 crore |
| Employment generated by supported units | 3,000 persons | |
| Design Linked Incentive (DLI) Scheme (30 design companies to be supported) | Semiconductor IP cores to be developed | 10 |
| Semiconductor design manpower employed | 200 persons |
Why the India Semiconductor Mission Matters?
emiconductors have become critical to the functioning of modern economies. Though rarely visible in everyday life, microprocessors quietly power systems that keep societies running. As highlighted in the Economic Survey 2025–26, they form the backbone of energy networks, financial markets and telecommunications. They enable manufacturing units, hospitals, transport systems and satellites. A reliable supply of semiconductors is therefore essential for economic stability and continuity across sectors.
Recent global disruptions have underscored this dependence. The COVID-19 pandemic exposed serious weaknesses in semiconductor supply chains, with shortages affecting more than 169 industries worldwide. Production delays and rising costs followed, slowing economic activity across countries. These shocks revealed the risks of relying on a narrow set of suppliers. Today, the semiconductor industry is dominated by a few countries, including Taiwan, South Korea, Japan, China and the United States. Taiwan alone produces over 60 per cent of the world’s semiconductors and nearly 90 per cent of the most advanced chips, leaving global supply chains vulnerable to external shocks and geopolitical tensions.
In response, major economies are recalibrating their strategies. The United States, the European Union, Japan and South Korea have launched national initiatives to strengthen domestic chip manufacturing and diversify supply chains. India is positioning itself within this global shift as a trusted and reliable partner. The India Semiconductor Mission responds directly to this moment. By building domestic capacity across design, manufacturing and innovation, ISM represents a critical step towards self-sufficiency and technological sovereignty, while strengthening India’s role in a more resilient global semiconductor ecosystem.
At the core of this strategy lies a strong focus on semiconductor design and talent development, which together form the foundation of technological self-reliance.
Conclusion
India Semiconductor Mission (ISM) 2.0 represents a major step forward in India’s semiconductor journey. Earlier efforts focused on building the basic ecosystem, but now the focus has shifted to strengthening it and connecting India with global supply chains. By increasing support for manufacturing, chip design, and skill development, semiconductors are now seen as a strategic priority for economic stability, digital growth, and technological independence. The higher budget allocation in 2026–27 will help speed up projects, attract private investment, and expand India’s capacity across the entire semiconductor value chain.
Looking ahead, ISM 2.0 is setting the stage for India to become a trusted global hub for semiconductor design, manufacturing, and innovation. With a clear plan for advanced technologies, strong incentives for design, and a growing pool of skilled talent, India aims to reduce its dependence on other countries and play a bigger role in global supply chains. Overall, this mission supports India’s long-term goal of becoming one of the leading semiconductor nations in the world.
