Semicon 2.0 explained: What India wants to achieve with its Rs 1.27 lakh crore chip mission

India's semiconductor ambitions have entered a new phase. Having secured its first wave of chip manufacturing projects, the government is now looking beyond establishing a foothold and towards building an industry that can compete across the global semiconductor value chain.

That ambition is reflected in Semicon 2.0, the second phase of the India Semiconductor Mission (ISM), which received Union Cabinet approval on July 15 alongside the Mobile Phone Manufacturing Scheme (MPMS). Together, the two programmes carry a combined outlay of nearly Rs 1.9 lakh crore and are expected to attract around Rs 4 lakh crore in investments over the next five years while generating Rs 2 lakh crore in production and Rs 1 lakh crore in exports.

According to Electronics and IT Secretary S Krishnan, the next chapter is no longer about proving India can manufacture chips, it is about significantly expanding the country's capabilities across fabrication, packaging, materials and design.

India wants more than just one chip fabrication plant

While the first semiconductor mission succeeded in bringing India's first commercial silicon fabrication project to life, government officials believe the country will require a much broader manufacturing base to emerge as a meaningful global player.

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Speaking to Moneycontrol, Krishnan said India will need at least one additional CMOS (complementary metal-oxide-semiconductor) fabrication plant alongside a dedicated memory fabrication facility and a display fabrication unit. He also indicated that the country should establish several more compound semiconductor fabs, where investment requirements are comparatively lower.

"Clearly, we need more fabs. We need at least one more CMOS. Definitely, we would prefer having a memory fab. We have to have a display fab," Krishnan said, adding that India would likely benefit from "three or four" additional compound semiconductor facilities.

Under the first edition of ISM, India approved one CMOS fabrication plant, one compound semiconductor fab, one microLED display facility and two Assembly, Testing, Marking and Packaging (ATMP) units. Those projects laid the groundwork, but officials now see them as only the beginning of a much larger manufacturing ecosystem.

Advanced packaging becomes the next priority

Semicon 2.0 also marks a strategic shift in how the government wants to allocate future incentives.

The first phase focused heavily on attracting ATMP facilities because India had virtually no presence in semiconductor packaging. With that initial capacity now under development, policymakers believe the emphasis should move towards advanced packaging technologies, an area expected to play an increasingly important role in next-generation chips used for artificial intelligence, high-performance computing and advanced electronics.

"Advanced packaging is a space where we believe we can leapfrog into whatever is the newest technology," Krishnan said.

He explained that while conventional packaging was an essential starting point under ISM 1.0, it is no longer the government's primary focus. Instead, Semicon 2.0 is designed to encourage more sophisticated packaging technologies capable of creating greater value and positioning India higher up the semiconductor supply chain.

Building the missing links in India's semiconductor supply chain

Another major objective of the expanded mission is to reduce India's dependence on imported inputs required for semiconductor manufacturing.

Rather than concentrating solely on fabrication plants, the government wants manufacturers of semiconductor equipment, specialty chemicals, industrial gases, testing systems and advanced materials to establish operations in India.

"Equipment, materials, chemicals, gases, testing equipment — all of these are important elements which need to come into the country," Krishnan said, adding that these segments will receive support under the new programme.

This marks one of the biggest differences between the first and second phases of the semiconductor mission. While ISM 1.0 primarily incentivised chip production itself, Semicon 2.0 seeks to develop the broader industrial ecosystem needed to sustain that production over the long term.

The government's approach also appears aligned with recent investment commitments from global semiconductor suppliers including Lam Research, Applied Materials, AMD, KLA, ASML and Merck, all of which have announced expansion plans or collaborations in India.

A bigger ambition—but bigger challenges remain

The first semiconductor mission delivered tangible progress. Twelve manufacturing projects were approved, collectively representing investments exceeding ₹1.64 lakh crore. Three companies—Micron, Kaynes and CG Semi—have already started commercial production, while another facility is expected to begin operations in 2026.

Beyond manufacturing, the programme supported 24 semiconductor design projects, provided more than 100 start-ups with access to professional electronic design automation (EDA) software and helped train around 68,000 students across 315 universities.

Yet much of India's initial progress has come in packaging rather than fabrication. Of the twelve approved manufacturing units, nine are packaging facilities, highlighting how much work remains before India can compete with established semiconductor powers.

Projects such as Tata Electronics' ₹91,000 crore fabrication plant at Dholera, developed in partnership with Taiwan's PSMC, represent important milestones. However, one fabrication line alone will not be enough to transform India into a semiconductor manufacturing hub.

Semicon 2.0 therefore represents a broader shift in strategy—from attracting individual investments to creating an integrated semiconductor ecosystem spanning design, manufacturing, packaging, research and critical supply chains. Whether that ambition succeeds will depend not only on subsidies but also on India's ability to secure advanced technology, strengthen research capabilities, retain specialised talent and create sustained domestic demand for chips.

If the first semiconductor mission established India's place on the industry's map, Semicon 2.0 will determine whether the country can become a lasting destination for global chip manufacturing.