Over the next few months, almost every major semiconductor equipment manufacturer will be setting up a base and supply chains in India.

— Ashwini Vaishnaw, Union Cabinet Minister Of Electronics & Information Technology

The second phase of the India Semiconductor Mission has an outlay of ₹1,27,500 crore.
 

While the main focus of Semicon 1.0 was to introduce chip fabrication and packaging capability to India, Semicon 2.0 aims to establish the manufacturing ecosystem like a chain that includes the design of semiconductors, manufacturing of specialised equipment, materials, advanced packaging, research and talent.

Burgeoning Opportunity

The government expects the semiconductor market in India to reach US$ 115 billion by 2030 and US$ 190 billion by 2035. The global market is expected to reach the trillion-dollar level in the next 10 years.

"The global semiconductor industry is expected to reach US$ 975 billion in annual sales in 2026, a historic peak fueled by an intensifying AI infrastructure boom (Figure 1).1 Growth reached 22% in 2025 and is projected to accelerate to 26% in 2026, and even if growth moderates thereafter, annual sales of US$2 trillion seem likely by 2036," says a Deloitte report on Global Semiconductor Industry Outlook 2026.

Reliance On Imports

Right now, there is a considerable reliance on imports. 

In 2024, India imported US$ 23.8 billion worth of integrated circuits and continues to depend heavily on foreign manufacturers for semiconductors and manufacturing equipment and critical inputs.

Can India Deliver?

India is trying to set up an ecosystem in the semiconductor industry to catch up with the leading manufacturers in the world. 

People should feel dependent on India

— S. Krishnan, Secretary, Minister Of Electronics & Information Technology

Taiwan continues to be the hub of sophisticated foundry technology and services and boasts of a rich network of suppliers and technology firms. South Korea has become a global leader in memory chips and high-tech manufacturing, and China has made substantial investments in local expertise in semiconductors, equipment, materials, and electronics.

These ecosystems did not occur around fabs. They evolved overtime as a result of investing in research, specialised suppliers, talent, and local companies that can perform across various sections of the value chain.

The intensity of the competition is also reflected in the amount of international support. The governments of key semiconductor economies around the globe are investing billions of dollars to secure technology, attract investment, and boost domestic value chains. 

India is trying to construct multiple layers. 

Electronics and IT Minister Ashwini Vaishnaw has argued that India's semiconductor strategy is moving towards creating a wider industrial ecosystem rather than merely attracting individual manufacturing projects.

“Over the next few months, almost every major semiconductor equipment manufacturer will be setting up a base and supply chains in India. Indian firms manufacturing components and precision equipment will become suppliers to the semiconductor equipment manufacturers,” Vaishnaw said.

The drive is big since semiconductor equipment, materials, and specialised components continue to be some of the most technically challenging components within the sector. 

Capital costs in setting up a fab are high, but access to sophisticated machinery, ultra pure chemicals, industrial gases, wafers, testing, and precision engineering are necessary for maintaining a competitive semiconductor ecosystem.

Ensuring Supply Chains

The problem for India is not only to convince overseas companies to establish manufacturing facilities in India. It is to ensure that Indian companies will have access to the supply chains that will be created around these investments.

This is where the second phase is different from the first. Semicon 1.0 was aimed at creating an initial manufacturing base. Semicon 2.0 is trying to build around that foundation to create a more substantial base over the years.

The government has called technology dependence and the lack of a developed semiconductor ecosystem as one of the major hurdles of the semiconductor industry. Whether the fiscal support can be converted to technological capabilities that will survive the end of the initial fiscal incentive will determine the success of the new programme. 

Six Pillars To Deepen The Ecosystem

Semicon 2.0 is organised along six thematic pillars to cater to the various gaps in India's semiconductor value chain.
 

The first is related to the design of the chip. One of the largest changes from the previous programme is the second pillar - machines and materials. The third pillar is for fabrication plants, ongoing silicon, compound semiconductor (CCS) and display fabs. The fourth pillar aims at strengthening ATMP and OSAT facilities, including more advanced packaging technologies. The fifth pillar focuses on research and development. The sixth pillar is talent development. 

The six pillars collectively indicate that fabs are not enough to build a semiconductor industry. But the difficulty will be getting these parts to work together to create a viable commercial ecosystem. 

What Semicon 2.0 Must Prove

Semicon 2.0 is based on the achievements of the first stage. 

An investment of more than ₹1.64 lakh crore has been approved for 12 semiconductor manufacturing units under Semicon 1.0. These include nine packaging units, an integrated gallium nitride Micro LED display facility, a silicon fab and a silicon carbide fab. Commercial production has begun with Micron, Kaynes, and CG Semi, with more projects to be introduced.

During the first phase, progress was also made with chip design. 

Twenty-four semiconductor design projects from startups and MSMEs have been supported financially and 105 startups and MSMEs have been provided access to electronic design automation tools that are available in the industry.

There has also been an increase in talent development. 

The government estimates that approximately 68,000 students have been imparted training in designing complex chips through universities with the help of EDA tools and the programme has set a new target of producing another one lakh semiconductor engineers. 

These achievements suggest that India has moved beyond policy announcements and has begun creating physical manufacturing and design capacity. 

India does not need to replicate the semiconductor ecosystems of Taiwan, South Korea or China, nor is complete self-sufficiency realistic in an industry built around international supply chains. The more practical objective is to build capabilities in areas where Indian companies can become reliable suppliers, technology partners and owners of valuable intellectual property.

“People should feel dependent on India, on our industry, on our production, on our design. That makes us really valuable in the entire supply chain,” MeitY Secretary S. Krishnan said.

Semicon 1.0 laid the groundwork by attracting investment and establishing manufacturing capacity. Semicon 2.0 now seeks to determine whether the rest of the ecosystem can grow around it.

Its success will ultimately depend on more than the ₹1,27,500 crore allocation. 

The real test will be whether India can convert public incentives and private investment into a durable semiconductor ecosystem that captures a larger share of the value generated by the industry's global growth.