Government Unveils Next Phase of Chip Strategy to Boost Manufacturing, Design and Electronics Ecosystem
The Union Cabinet has approved the second phase of the India Semiconductor Mission (ISM 2.0) with a massive ₹1.27 lakh crore (₹1.27 trillion) outlay, marking one of India’s biggest investments in semiconductor manufacturing and electronics self reliance. Alongside the semiconductor initiative, the Cabinet also approved the second phase of the Mobile Phone Manufacturing Scheme with an allocation of ₹62,500 crore, reinforcing the government’s ambition to establish India as a global electronics manufacturing hub.
Announcing the decision, Union Minister for Electronics and Information Technology Ashwini Vaishnaw said the semiconductor industry forms the foundation of the modern digital economy, with chips powering virtually every electronic device and technology ecosystem.
The new mission aims to strengthen India’s capabilities across chip design, manufacturing, packaging, materials, and semiconductor supply chains.
What Is India Semiconductor Mission 2.0?
India Semiconductor Mission 2.0 builds upon the success of the government’s original ₹76,000 crore India Semiconductor Mission, which was launched in December 2021 to attract global semiconductor investments and develop a domestic chip manufacturing ecosystem.
Under the second phase, the government will provide a combination of financial grants and equity investments to support the design and development of both strategic and commercial semiconductor chips within India.
In addition, manufacturers of semiconductor equipment, specialty chemicals, industrial gases, and advanced materials will receive a flat 30% capital incentive, encouraging the development of a comprehensive semiconductor supply chain inside the country.
The initiative aims to reduce India’s dependence on imported semiconductor technologies while positioning the country as a competitive global manufacturing destination.
How Big Is the Opportunity?
According to Ashwini Vaishnaw, the total investment expected under the expanded semiconductor programme is projected to reach ₹4 lakh crore over the coming years.
The government estimates the initiative could generate semiconductor production worth ₹2 lakh crore while creating exports valued at approximately ₹1 lakh crore.
Officials believe the mission will play a crucial role in strengthening India’s electronics manufacturing ecosystem by supporting industries such as consumer electronics, automobiles, telecommunications, defence, artificial intelligence, data centres, and industrial automation.
The expansion is also expected to generate thousands of high-skilled jobs while encouraging research, innovation, and technology development within India’s semiconductor sector.
How Has the First Phase Performed?
The original India Semiconductor Mission has already made significant progress since its launch.
As of July 15, 2026, the government has approved 12 semiconductor manufacturing and packaging projects involving cumulative investments exceeding ₹1.60 lakh crore.
Among these projects, three facilities have already commenced commercial production, marking important milestones in India’s efforts to build a domestic semiconductor industry.
The first major project under the mission was approved in June 2023, when the government cleared Micron Technology’s proposal to establish a semiconductor Assembly, Testing, Marking and Packaging (ATMP) facility at Sanand, Gujarat.
The project involved an investment of approximately $2.75 billion and became India’s first large-scale semiconductor packaging facility.
Later in 2023, the government approved India’s first semiconductor fabrication plant through a joint venture between the Tata Group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC).
The fabrication facility involves an investment of nearly $11 billion, or approximately ₹91,000 crore, and represents one of India’s largest technology manufacturing investments.
Mobile Manufacturing Also Gets a Boost
In addition to ISM 2.0, the Cabinet approved the second phase of the Mobile Phone Manufacturing Scheme with an outlay of ₹62,500 crore.
The programme aims to further strengthen India’s position as one of the world’s largest smartphone manufacturing centres by supporting production, exports, component manufacturing, and supply chain localization.
India has emerged as a major global smartphone production hub in recent years, with several leading international manufacturers expanding their operations in the country.
The latest incentives are expected to accelerate investments in advanced electronics manufacturing while creating additional employment opportunities across the sector.
Why Does ISM 2.0 Matter?
Semiconductors are considered the backbone of today’s digital economy, powering everything from smartphones and electric vehicles to medical equipment, defence systems, cloud computing, artificial intelligence, and industrial automation.
The COVID-19 pandemic and global chip shortages highlighted the strategic importance of building resilient semiconductor supply chains.
Through India Semiconductor Mission 2.0, the government aims to create a globally competitive semiconductor ecosystem capable of supporting domestic demand while serving international markets.
With substantial financial incentives, growing private investments, and expanding manufacturing capabilities, India is positioning itself as an important player in the global semiconductor value chain.
The approval of ISM 2.0 marks another major step in the country’s broader strategy to become a global electronics manufacturing powerhouse while strengthening technological self-reliance and long-term economic competitiveness.
