Cabinet approves Semiconductor Mission 2.0 with Rs 1.27 lakh crore outlay

The Union Cabinet on Wednesday approved the second iteration of India’s ambitious Semiconductor Mission, with an outlay of Rs Rs 1.27 lakh crore. The fresh scheme will carry a key focus on subsidising the supply chain around chip manufacturing to attract companies producing commodities like gases, and chemicals used in the production process. The duration of the scheme is six years.

Compared to the first iteration of the India Semiconductor Mission (ISM), government incentives have been slashed in ISM 2.0. For instance, the first scheme carried a uniform capex subsidy of 50% for fabs and assembly plants. However, under ISM 2.0, silicon fabs will receive a subsidy of 40%, and other fabs will get 35%. Similarly, the incentive for advanced packaging has been kept at 35%, and 25% for conventional packaging.

Beyond that, ISM 2.0 will also offer government subsidies for research and development, and talent development in the semiconductor sector.

The country’s foray into semiconductor production and packaging has been outlined as a strategic move by New Delhi to insert itself into the global chip supply chain and establish the sector to deepen domestic value addition in its electronics sector. Semiconductors — used to power devices from toasters to fighter jets — have become a critical resource amid heightened geopolitical tensions over the last few years.

By 2029, India expects to achieve the capability to design and manufacture chips required for nearly 70-75% of domestic applications, and by 2035, the country aims to be among the top semiconductor nations globally.

ISM 1.0 lays the groundwork for chip ecosystem

ISM 1.0, launched in 2021, was conceived as a state-backed push to build a full-stack chip ecosystem, from fabrication and packaging to design and display manufacturing. Under the scheme, cumulative investments of around Rs 1.64 lakh crore have been committed. In this year’s Union Budget, Finance Minister Nirmala Sitharaman announced the India Semiconductor Mission 2.0 to produce equipment and materials, design full-stack Indian IP and fortify supply chains.

Under ISM 1.0, the government has approved a total of 12 chip plants, which includes various assembly and testing (ATMP/OSAT) plants being set up by the likes of Micron Technology, and a chip fabrication facility being developed by Tata Electronics, in partnership with Taiwan’s PSMC. At least three of these plants, including Micron, Kaynes Semicon, and CG Semi, have started commercial production, though the fab is still under construction. These chips are also being exported.

Story continues below this ad

The Indian Express was first to report in 2024 that the IT Ministry had prepared a blueprint for ISM 2.0 with an outlay of $15 billion (which was roughly equivalent to Rs 1.25 lakh crore at that time’s forex rates). This paper had also reported that under the fresh scheme, the government’s focus areas for offering subsidies may change to support the ancillary industry around chip manufacturing, and that incentives offered for assembly and testing plants may be slashed.

In the first iteration of the incentive policy, which was released in December 2021, the Centre had offered a 30% capex subsidy for chip packaging and testing plants. However, in September 2022, it had increased the subsidy for such plants to 50%. It is understood that it was done as a precursor to Micron Technology’s proposal, as the government wanted to facilitate the company establishing an assembly plant in India, which was eventually approved in June 2023.

India’s chip map

The 12 chip plants that have received approvals under the ISM are being constructed in states such as Gujarat, Assam, Andhra Pradesh, Uttar Pradesh, and Odisha. They include one full-fledged commercial semiconductor fabrication facility, and assembly and testing plants.

Tata Electronics semiconductor foundry (Gujarat): The company is setting up India’s first commercial-grade chip fab, in partnership with Taiwan’s PSMC as the technology partner. Coming up in Dholera, Gujarat, the fab will be set up at an estimated cost of Rs 91,000 crore, and is expected to have a total monthly capacity of 50,000 wafers across 28nm to 110nm technologies.

Story continues below this ad

Micron Technology (Gujarat): This was the first project approved under ISM 1.0 in 2023, after the government jacked up incentives for assembly and testing plants from 30% to 50%. The US-based company is a major manufacturer of memory chips, and its approval was seen as a big boost to India’s semiconductor push. The plant started commercial production in February.

Tata Electronics assembly unit (Assam): Tata Electronics is building this semiconductor assembly and testing facility in Jagiroad, Morigaon district, Assam, with an investment of over Rs 27,000 crore. This facility is expected to manufacture 48 million chips per day for sectors including automotive, electronics, and telecommunications.

HCL-Foxconn (Uttar Pradesh): The HCL-Foxconn joint venture is setting up a Rs 3,700 crore semiconductor Outsourced Semiconductor Assembly and Test (OSAT) facility in Jewar, Uttar Pradesh, with operations expected by 2028. Located near Noida International Airport, the plant will produce display driver chips with a capacity of 20,000 wafers per month.

Kaynes Semicon (Gujarat): The Kaynes Semicon plant in Sanand, Gujarat, is a Rs 3,300 crore OSAT facility inaugurated by Prime Minister Narendra Modi on March 31, 2026. With a capacity of up to 60 lakh chips per day, it focuses on producing power modules for electric vehicles and industrial applications. This plant started commercial operations in March.

Story continues below this ad

CG Semi (Gujarat): CG Power, a Murugappa Group company, is setting up an OSAT plant in Sanand, Gujarat. In a joint venture with Renesas Electronics and Stars Microelectronics, the plant is being developed at an investment of over Rs 7,600 crore.

SiCSem (Odisha): The Rs 2,066-crore assembly and testing (ATMP) facility being set up by SiCSem Pvt Ltd, will produce silicon carbide-based diodes and MOSFETs.

3D Glass Solutions (Odisha): This would be India’s first advanced 3D chip packaging unit. The project is being implemented by the US-based 3D Glass Solutions Inc through its wholly owned Indian subsidiary Heterogeneous Integration Packaging Solutions Pvt Ltd. It is funded by Intel, among others.

Advanced System in Package Technologies (Andhra Pradesh): The company will set up a semiconductor manufacturing unit in Andhra Pradesh, under a technology tie-up with APACT Co. Ltd, South Korea, with an annual capacity of 96 million units.

Story continues below this ad

Continental Device (Punjab): The company will expand its discrete semiconductor manufacturing facility at Mohali, Punjab. The proposed facility will manufacture high-power discrete semiconductor devices such as MOSFETs, IGBTs, Schottky Bypass Diodes, and transistors, both in Silicon and Silicon Carbide.

Crystal Matrix (Gujarat): The Cabinet approved a Rs 3,068 crore compound semiconductor fabrication and assembly based on GaN (Gallium Nitride) technology for manufacturing Mini/Micro-LED display modules to be set up by Crystal Matrix Ltd. Once functional, this would be the first display assembly facility in India, an industry that has so far been largely concentrated in countries like Japan and South Korea.

Suchi Semicon (Gujarat): The company will set up an Outsourced Semiconductor Assembly and Test (OSAT) facility in Surat, Gujarat, worth Rs 868 crore for manufacturing discrete semiconductors.