Semicon 2.0 explained: 6 ways India's ₹1.27 lakh crore chip strategy could reshape manufacturing

The Union Cabinet has approved Semicon 2.0, a ₹1.27 lakh crore programme aimed at accelerating India's semiconductor ambitions and strengthening the country's electronics manufacturing ecosystem. The initiative builds on the India Semiconductor Mission (ISM) 1.0 and broadens government support from chip fabrication to the entire semiconductor value chain.

Announced alongside the ₹62,500 crore Mobile Phone Manufacturing Scheme (MPMS), Semicon 2.0 reflects the government's push to increase domestic value addition, reduce import dependence and position India as a competitive global electronics manufacturing hub. Here's how the new policy could reshape the sector.

1. Moving beyond chip fabrication

While ISM 1.0 focused on attracting semiconductor fabrication investments, Semicon 2.0 adopts a wider approach by supporting every major segment of the chip ecosystem. According to BNP Paribas, the programme builds on the ₹1.64 lakh crore of cumulative investments approved under ISM 1.0, with India's first semiconductor fabrication plant expected to commence operations in 2028.

The broader policy recognises that a globally competitive semiconductor industry requires much more than fabrication facilities.

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2. Boosting chip design and intellectual property

A key pillar of Semicon 2.0 is the promotion of chip design and intellectual property (IP) development. India already has a strong base of semiconductor design engineers working for global technology companies, and the government now wants to convert that expertise into indigenous innovation.

Encouraging locally developed chip designs could help Indian firms capture higher value in the semiconductor supply chain while reducing reliance on imported technologies.

3. Building a domestic supply chain

The programme also incentivises the manufacturing of semiconductor equipment, specialty materials, chemicals and industrial gases—all of which are essential for chip production.

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Developing these upstream industries can reduce dependence on imports, strengthen supply-chain resilience and encourage investments across multiple segments of electronics manufacturing instead of concentrating only on chip fabrication.

4. Expanding advanced packaging capabilities

Semicon 2.0 places significant emphasis on scaling OSAT (Outsourced Semiconductor Assembly and Test) and ATMP (Assembly, Testing, Marking and Packaging) infrastructure.

These segments require relatively lower investments than fabrication plants and can be developed more quickly, allowing India to integrate faster into global semiconductor supply chains while creating skilled manufacturing jobs.

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5. Investing in research and talent

The policy also targets advanced semiconductor research and talent development, two areas considered essential for long-term competitiveness.

A robust talent pipeline and continued R&D investments will be critical as semiconductor manufacturing becomes increasingly technology-intensive. Strengthening engineering capabilities could also make India more attractive for global partnerships and high-value investments.

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6. Supporting the broader electronics ecosystem

Semicon 2.0 complements the newly announced Mobile Phone Manufacturing Scheme, which seeks to deepen domestic value addition through incentives for local sourcing, product design and research.

BNP Paribas believes Dixon Technologies and Amber Enterprises are likely to be among the biggest listed beneficiaries of the government's broader electronics manufacturing push, although detailed implementation guidelines are still awaited before the financial impact can be fully assessed. The brokerage noted that India's electronics manufacturing industry has already expanded nearly five-fold, from around $30 billion in FY15 to $150 billion in FY26, while domestic value addition has increased from 15% to 23% over the same period.

The brokerage added that the ultimate success of Semicon 2.0 will depend on execution, industry partnerships and timely approvals. Nevertheless, by supporting every stage of semiconductor manufacturing—from chip design and fabrication to packaging, materials and talent development—the programme represents India's most comprehensive effort yet to build a globally competitive semiconductor ecosystem and strengthen its position in the global electronics value chain.

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