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

The Indian government has greenlit the ambitious Semicon 2.0 initiative, a massive programme worth ₹1.27 lakh crore designed to propel the nation’s semiconductor industry and bolster its electronics manufacturing infrastructure. This initiative expands upon the initial India Semiconductor Mission (ISM) 1.0 by extending government backing beyond just chip fabrication to encompass the entire semiconductor value chain. Launched alongside the ₹62,500 crore Mobile Phone Manufacturing Scheme (MPMS), Semicon 2.0 reflects a determined governmental effort to enhance domestic value addition, decrease reliance on imports, and establish India as a formidable player in the global electronics manufacturing arena. One of the key shifts with Semicon 2.0 is its focus on a comprehensive approach that goes beyond simply attracting investments in chip fabrication. The programme aims to support every critical segment of the semiconductor ecosystem. According to BNP Paribas, it builds on the ₹1.64 lakh crore in cumulative investments sanctioned under ISM 1.0, with India's inaugural semiconductor fabrication plant projected to begin operations in 2028. A vital aspect of Semicon 2.0 is its emphasis on fostering chip design and intellectual property development. India boasts a robust pool of semiconductor design engineers working with leading tech firms, and the government intends to harness this expertise to drive domestic innovation. By promoting indigenous chip designs, Indian companies could enhance their value within the semiconductor supply chain, thereby reducing dependency on foreign technologies. The initiative also aims to stimulate the development of a domestic supply chain by incentivizing the production of semiconductor equipment, specialty materials, chemicals, and industrial gases—key components for chip manufacturing. Strengthening these upstream industries is essential to minimize import reliance, enhance supply chain resilience, and attract investments across diverse segments of electronics manufacturing, rather than focusing solely on chip fabrication. Moreover, Semicon 2.0 places significant importance on advancing packaging capabilities, particularly in the areas of OSAT (Outsourced Semiconductor Assembly and Test) and ATMP (Assembly, Testing, Marking and Packaging) infrastructures. These sectors require lower capital investment compared to fabrication plants and can be established swiftly, allowing India to integrate into global semiconductor supply chains more effectively while generating skilled jobs in manufacturing. Investment in research and talent development is another cornerstone of this policy, recognizing the need for continuous innovation in an increasingly technology-driven semiconductor landscape. Establishing a solid pipeline of talent and ongoing R&D investments will be critical for maintaining competitiveness. This focus could also make India a more appealing destination for global partnerships and high-value investments. Lastly, Semicon 2.0 is designed to support the broader electronics ecosystem. It works in conjunction with the Mobile Phone Manufacturing Scheme, which aims to enhance domestic value addition through incentives for local sourcing, product design, and research. According to BNP Paribas, companies like Dixon Technologies and Amber Enterprises stand to gain significantly from the government's overarching push in electronics manufacturing. The Indian electronics manufacturing sector has already experienced substantial growth, expanding nearly fivefold from approximately $30 billion in FY15 to a projected $150 billion by FY26, with domestic value addition rising from 15% to 23% in that timeframe. The success of Semicon 2.0 will ultimately hinge on effective execution, industry collaboration, and timely regulatory approvals. Yet, by supporting every facet of semiconductor production—from design to packaging and talent development—this initiative marks India’s most comprehensive effort to cultivate a competitive semiconductor ecosystem and reinforce its standing in the global electronics supply chain.