Semicon 2.0: Accelerating India’s Semiconductor Ecosystem

Context

The Union Cabinet has approved Semicon 2.0, the second phase of the India Semiconductor Mission (ISM), with a financial outlay of ₹1.27 lakh crore. It has also approved the Mobile Phone Manufacturing Scheme (MPMS) with an allocation of ₹62,500 crore.

About Semicon 2.0

1. Semicon 2.0 is the second phase of the India Semiconductor Mission (ISM), launched to establish an end-to-end semiconductor ecosystem in India by strengthening manufacturing, design, research, and innovation.
2. The scheme extends support across the semiconductor value chain, including fabrication, chip design, research & development (R&D), capital equipment, semiconductor-grade materials, and domestically owned intellectual property (IP).
3. It complements the Mobile Phone Manufacturing Scheme (MPMS) to increase domestic value addition in the electronics sector.

Key Features

Five-Year Targets

The scheme aims to achieve the following over the next five years:

• Attract investments worth ₹4 lakh crore.
• Generate semiconductor and electronics production worth ₹2 lakh crore.
• Achieve exports worth ₹1 lakh crore.

 

Expanded Scope

Semicon 2.0 supports the entire semiconductor value chain by promoting:

1. Semiconductor fabrication, assembly, testing, packaging, and design.
2. Capital equipment used in semiconductor manufacturing.
3. High-purity semiconductor-grade chemicals and gases.
4. Research, innovation, and domestically owned intellectual property.

Revised Incentive Structure: Capital subsidy has been rationalised to 30–40%, reflecting growing investor confidence and encouraging greater private participation.

Greater Role of States: State governments are expected to provide land and additional incentives, reducing dependence on Central assistance and encouraging competitive federalism.

Implementation: Detailed operational guidelines will be issued through a Gazette Notification.

Major Achievements under Phase I

The first phase of the India Semiconductor Mission, approved in December 2021 with an outlay of ₹76,000 crore, laid the foundation for India’s semiconductor ecosystem.

Key achievements include:

1. Approval of 12 semiconductor manufacturing and packaging projects with a committed investment of approximately ₹1.64 lakh crore.
2. Projects located across Gujarat, Uttar Pradesh, Punjab, Assam, Odisha, and Andhra Pradesh.
3. Approval of:
   1. One silicon fabrication (Fab) unit.
   2. One Gallium Nitride (GaN) Micro-LED fabrication facility.
4. Support for 24 projects under the Design-Linked Incentive (DLI) Scheme.
5. Provision of licensed Electronic Design Automation (EDA) software to universities and startups to strengthen semiconductor design capabilities.
6. Modernisation of the Semiconductor Laboratory (SCL), Mohali, enabling researchers and startups to tape out (finalise chip designs for manufacturing).
7. Tata Electronics’ semiconductor fabrication plant is expected to begin commercial production in 2028.

Need for Semicon 2.0

India’s emphasis on semiconductor manufacturing has gained momentum due to growing geopolitical uncertainties, supply-chain disruptions, and the strategic importance of semiconductor technologies.

The initiative seeks to:

1. Build resilient semiconductor supply chains.
2. Reduce dependence on imported chips.
3. Strengthen technological sovereignty.
4. Improve India’s integration into global semiconductor and electronics value chains.
5. Support long-term growth of the domestic electronics manufacturing sector.

Focus on Legacy and Frontier Chips

1. India is initially prioritising 28-nanometre (nm) legacy-node chips, which are widely used in:

1. 1. Automobiles.
   2. Consumer electronics.
   3. Industrial equipment.
   4. Telecommunications.
   5. Medical devices.

1. Legacy-node chips provide a commercially viable entry point for developing domestic semiconductor manufacturing.
2. The long-term objective is to develop capabilities for frontier-node chips (7 nm and below) through stronger research, innovation, and domestically owned intellectual property.

Mobile Phone Manufacturing Scheme (MPMS)

The Mobile Phone Manufacturing Scheme (MPMS) complements Semicon 2.0 by increasing domestic value addition across the mobile phone manufacturing ecosystem.

Its objectives are to:

1. Expand domestic handset assembly.
2. Increase local value addition.
3. Strengthen the component manufacturing ecosystem.
4. Promote indigenous product design and R&D.
5. Reduce dependence on imported mobile phone components.

The scheme offers incentives ranging from 2.25% to 5%, depending on the level of domestic design and value addition.

Challenges and Way Forward

Challenges	Way Forward
Dependence on imported semiconductor equipment, materials, and advanced technologies	Promote domestic manufacturing of semiconductor equipment, specialised materials, and critical inputs
Heavy reliance on imported semiconductor manufacturing equipment	Encourage domestic production of capital equipment and facilitate technology transfer
Limited domestically owned intellectual property and advanced chip design capabilities	Strengthen indigenous R&D, innovation, and academia-industry collaboration
Shortage of skilled semiconductor professionals	Expand specialised education, industry-oriented training, and research institutions
High capital requirement and long project gestation period	Ensure stable policies, long-term financing, and sustained investor confidence
Intense competition from established semiconductor-producing countries	Promote strategic international partnerships and technology collaboration
Limited availability of ultra-pure water, reliable power supply, and specialised infrastructure	Develop dedicated semiconductor manufacturing clusters with world-class infrastructure
Dependence on legacy-node manufacturing	Gradually build capabilities for frontier-node semiconductor technologies through sustained research and investment

 

Conclusion:

Semicon 2.0 lays the foundation for India’s emergence as a trusted global semiconductor hub. Its long-term success will depend on sustained policy support, technological innovation, skilled manpower, and strong industry–academia collaboration to build a competitive and resilient semiconductor ecosystem.

 

Q1. What are the key objectives of Semicon 2.0?

Semicon 2.0 aims to build an end-to-end semiconductor ecosystem by promoting manufacturing, design, R&D, and innovation. It targets ₹4 lakh crore in investments, ₹2 lakh crore in production, and ₹1 lakh crore in exports over the next five years.

 

Q2. Why is India prioritising legacy-node (28 nm) chips under Semicon 2.0?

Legacy-node chips meet a large share of global demand and are widely used across industries. They provide a practical and commercially viable starting point for developing India’s semiconductor manufacturing capabilities.

 

Q3. How does Semicon 2.0 differ from the first phase of the India Semiconductor Mission (ISM)?

Unlike the first phase, which focused mainly on establishing manufacturing and design capabilities, Semicon 2.0 supports the entire semiconductor value chain, including R&D, capital equipment, materials, and indigenous intellectual property.

 

Q4. How does the Mobile Phone Manufacturing Scheme (MPMS) complement Semicon 2.0?

MPMS promotes domestic manufacturing of mobile phones and components, increasing local value addition. It complements Semicon 2.0 by strengthening India’s electronics manufacturing ecosystem.

 

Q5. What is the significance of Semicon 2.0 for India?

Semicon 2.0 promotes technological self-reliance, strengthens supply-chain resilience, attracts investments, generates skilled employment, and positions India as a trusted global semiconductor manufacturing hub.

 

Q6. What are the major challenges in implementing Semicon 2.0?

Major challenges include high capital costs, dependence on imported equipment and materials, shortage of skilled manpower, limited indigenous technology, and intense global competition.

 

Q7. How can Semicon 2.0 strengthen India’s technological sovereignty?

By expanding domestic semiconductor manufacturing, encouraging indigenous innovation, and reducing dependence on imported technologies, Semicon 2.0 can enhance India’s technological sovereignty and long-term economic resilience.