India Semiconductor Mission 2.0: Inside the Race to Build a Chip Manufacturing Hub

The India Semiconductor Mission (ISM) is the federal government's flagship programme to build a homegrown semiconductor manufacturing and design ecosystem, launched in 2021 under the broader Semicon India Programme. In February 2026, the government announced an expanded phase — India Semiconductor Mission 2.0 — as part of the Union Budget, widening the programme's focus beyond fabrication plants to equipment, materials, design IP, supply chains and dedicated R&D centres.

The goal is straightforward but ambitious: reduce India's near-total dependence on imported chips and position the country as a credible alternative manufacturing base in a global semiconductor industry that has become a matter of strategic and economic security for governments worldwide.

ISM offers financial support across four categories of projects:

This level of state support — matching private capital rupee for rupee up to half of project cost — is designed to offset the enormous upfront capital expenditure that has historically kept chip fabrication out of India.

Government incentives have started translating into physical infrastructure through 2026:

Gujarat has emerged as the country's leading semiconductor hub, anchored by the Sanand cluster, while the state-run SCL facility in Mohali is undergoing a major modernisation to bring its capabilities closer to current industry standards.

Several factors converged to make 2026 a turning point:

Semiconductors sit at the centre of nearly every modern technology — smartphones, cars, data centres, defence systems and AI infrastructure. A country that cannot manufacture chips domestically is structurally dependent on a small number of foreign suppliers, a vulnerability that became starkly visible during the global chip shortage of the early 2020s.

For India, building even assembly, testing and packaging capacity (which is less capital-intensive than full wafer fabrication) represents a meaningful first step toward supply chain resilience, thousands of skilled manufacturing jobs, and a stronger negotiating position in global electronics trade. Mission 2.0's expanded focus on equipment and materials also signals an attempt to build depth in the supply chain rather than relying solely on assembly operations.

With ISM 2.0 still in its early rollout as of late 2026, the coming phase is expected to focus on:

Is India manufacturing chips from raw silicon, or just assembling them?

As of 2026, most active facilities — including Micron's and Kaynes' plants in Sanand — are Assembly, Testing, Marking and Packaging (ATMP/OSAT) units rather than full wafer fabrication plants. Full fab investments are a longer-term goal under Mission 2.0.

What is India Semiconductor Mission 2.0?

It is the expanded second phase of the original ISM, announced in the February 2026 Union Budget, broadening support beyond fabs to equipment, materials, design IP and R&D infrastructure.

Why is Gujarat the hub for these investments?

The state built dedicated industrial infrastructure and land for semiconductor manufacturing early, and anchor investments like Micron's facility drew other companies to the same cluster.

How much financial support does the government provide?

Fiscal support of up to 50% of project cost is available for fabs, display fabs and ATMP/compound semiconductor facilities, on a matched (pari-passu) basis with private investment.

What jobs does this create?

Semiconductor assembly, testing and packaging facilities require technicians, process engineers and quality-control specialists, alongside broader employment in the supporting supply chain and logistics ecosystem.

India's semiconductor push has moved from announcements to operating factories, with Gujarat emerging as the country's manufacturing anchor. Mission 2.0's broader scope — reaching into equipment, materials and design — suggests the government is now trying to build depth in the ecosystem, not just headline fabs. Whether India can move from assembly and testing to full-scale chip fabrication remains the next major test of the programme.