Semiconductor Mission

The India Semiconductor Mission (ISM) was launched in December 2021 as a specialized, independent business division within the Digital India Corporation under the Ministry of Electronics and Information Technology (MeitY). Formulated to drive the Semicon India Programme, ISM serves as the nodal institutional agency responsible for building a resilient semiconductor and display ecosystem. Moving beyond the capacity expansion of ISM 1.0, the government introduced ISM 2.0 to expand localized raw material processing, manufacturing equipment, and indigenous intellectual property (IP).

Strategic Imperatives for the Indian Economy

• Mitigating High Import Bills: India’s domestic semiconductor market crossed $45 billion and is projected to reach $100–110 billion by 2030. Cultivating domestic hardware manufacturing curbs the outflow of foreign exchange reserves.
• Ensuring Supply Chain Resilience: The concentration of global foundry capacities in geopolitical hotspots like Taiwan, South Korea, and the Taiwan Strait exposes India’s automotive, telecom, and defense sectors to severe supply disruptions. ISM establishes India as a trusted alternative node in the “China Plus One” global supply strategy.
• Securing Technological Sovereignty: Microprocessors form the hardware foundation for emerging technologies, including artificial intelligence, 5G/6G networks, space systems, cyber-physical networks, and advanced defense equipment.

Institutional Policy and Financial Architecture

Financial Layout and Capital Allocations

• Total Programme Budget: The initial flagship program was backed by a non-lapsable fiscal layout of ₹76,000 crore.
• Fiscal Incentives for Components: The parallel Electronic Components Manufacturing Scheme (ECMS) received a revised financial allocation of ₹40,000 crore to accelerate the domestic manufacturing of downstream substrates, passives, and PCB assemblies.
• Modified Pari-Passu Framework: Under the reconfigured guidelines, the Union Government offers uniform financial support covering 50% of the total project cost on a pari-passu (equal footing) basis across all manufacturing categories, including silicon fabs, compound semiconductors, and packaging infrastructure.

Key Structural Sub-Schemes under ISM

Scheme for Setting Up Semiconductor Fabs

Targets the establishment of large-scale Silicon CMOS-based fabrication plants for producing logic gates, memory chips, analog integrated circuits, and System-on-Chips (SoCs).

Scheme for Setting Up Display Fabs

Aims to attract multi-billion dollar capital investments for setting up TFT-LCD or AMOLED-based display fabrication units required for consumer electronics and industrial dashboards.

Scheme for Compound Semiconductors, Silicon Photonics, and Sensors

Provides financial assistance for specialized manufacturing setups, including discrete semiconductors, micro-electromechanical systems (MEMS), and gallium nitride (GaN) or silicon carbide (SiC) power electronics.

Assembly, Testing, Marking, and Packaging (ATMP) / OSAT Scheme

Supports downstream Outsourced Semiconductor Assembly and Test (OSAT) units, which process raw silicon wafers into finished, commercially viable integrated circuits.

Design Linked Incentive (DLI) Scheme

Provides financial support and infrastructure access to domestic fabless startups. It extends product design linked incentives of up to 50% of eligible expenditure (capped at ₹15 crore per application) alongside deployment linked incentives of 4% to 6% on net sales turnover over five years.

Structural Breakdown of Approved Mega Semiconductor Projects

As of mid-2026, ISM has approved 10 mega semiconductor projects across six states, with a cumulative capital investment pipeline reaching ₹1.60 lakh crore.

Geopolitical and Infrastructure Ecosystem Drivers

Geopolitical Agreements and Global Supply Chains

India has formalised critical bilateral agreements to secure semiconductor technology transfers and supply chain linkages:

• India-US iCET (Initiative on Critical and Emerging Technology): Facilitates joint development in defense electronics, space hardware, and next-generation communication microchips.
• Bilateral MoUs: Strategic partnerships signed with Japan, Singapore, and the European Union establish joint crisis-response mechanisms for component shortages, streamline raw material sourcing, and align international technical workforce standards.

Infrastructure Integration

• The Smart City Advantage: Fabrication units are anchored in major hubs like the Dholera Special Investment Region (SIR) in Gujarat. These sites offer built-in access to continuous power, dedicated water supply networks, and specialized chemical waste disposal pipelines.
• SEZ Regulatory Alignments: Modified Special Economic Zone (SEZ) rules allow semiconductor units to import capital equipment and hazardous chemicals duty-free, while minimizing cross-border freight delays.

The Indian Chip Design Ecosystem

While India is expanding its physical manufacturing capabilities, it already possesses a strong foundation in chip design. Over 20% of the world’s semiconductor design engineers operate out of Indian design centers located in Bengaluru, Hyderabad, and Pune. Under the DLI scheme, ISM has supported 24 semiconductor design startups, drawing over ₹430 crore in private venture capital to build indigenous intellectual property.

Key Structural Challenges Facing the Mission

High Initial Capital and Technology Obsolescence

Modern commercial foundries require massive capital investments, yet chip design cycles typically face obsolescence every 3 to 5 years. Sustaining global competitiveness demands continuous financial support from the state, presenting a long-term fiscal management challenge.

Complex Supply Chain Interdependencies

A functioning factory requires access to thousands of high-purity inputs, including specialized chemicals, ultra-pure gases (such as electronic-grade silane and neon), photolithography equipment, and polished silicon ingots. Currently, India imports nearly all of these base materials, leaving domestic factories vulnerable to external supply chain disruptions.

High Resource Intensiveness

Fabrication plants require continuous, uninterrupted inputs to prevent catastrophic material spoilage:

• Ultra-Pure Water: A single standard fabrication facility requires millions of gallons of treated, ultra-pure water daily.
• Continuous Power Supply: Even a momentary voltage drop can ruin an entire production batch, necessitating dedicated power transmission lines and captive backup systems.

Specialized Advanced Talent Deficit

While India has an abundance of software engineers and front-end chip designers, it face a structural shortage of upstream process engineers, metallurgical experts, and cleanroom operation technicians required to manage physical chemical-vapor deposition and plasma etching processes.

Future Roadmap and Way Forward

Implementation of ISM 2.0

The immediate policy roadmap focuses on implementing ISM 2.0 to transition India from an assembly and testing base into a self-reliant hardware producer. Priority areas include:

• Financially incentivizing local manufacturing equipment, quartz components, and electronic gases.
• Creating a state-backed Technology Development Fund to acquire global intellectual property rights and patents for domestic firms.
• Expanding the design pipeline to support at least 50 domestic fabless companies.

Academic Alignment and Talent Creation

To bridge the workforce gap, MeitY reconfigured engineering curricula across over 100 universities, introducing specialized degrees in VLSI (Very Large Scale Integration) design, microelectronics, and material sciences. This system aims to produce a continuous pipeline of 85,000 industry-ready semiconductor professionals.

Transitioning to Advanced Sub-20nm Nodes

While current approved projects focus primarily on mature legacy nodes (28nm to 90nm) used in automotive systems and consumer appliances, India’s long-term export competitiveness requires a phased transition toward advanced sub-20nm and sub-7nm processing nodes to supply the global smartphone, high-performance computing, and artificial intelligence hardware markets.