In an attempt to increase India’s role in the global semiconductor value chain, the budget 2026-27 has unveiled the India Semiconductor Mission 2.0 (ISM 2.0). With an initial allocation of INR10bn ($110mn) for FY 2026-27, ISM2.0 looks to strengthen manufacturing, design, research, and skill development across the semiconductor value chain, according to a government press note.

ISM 2.0 builds on ISM 1.0, which was greenlit by the government in December 2021 and backed by an incentive of INR760bn. That initial mission helped attract investments in 10 projects in six states, spanning silicon fabrication, advanced packaging, and assembly and testing infrastructure.

While ISM 1.0 focused on building basic capabilities, ISM 2.0 focuses on advanced manufacturing and design.

According to government estimates, India’s semiconductor market has expanded significantly in recent years - from about $38bn in 2023 to between $45bn and $50bn in 2024-25. The market is likely to touch as much as $100-$110bn by 2030.

Under ISM 2.0, authorities have now outlined a clear roadmap to support various segments of the semiconductor value chain. Targets set for 2026-27 include support for one semiconductor fab under the Modified Scheme for Semiconductor Fabs, with an expected investment of INR40bn and direct employment for an estimated 1,500 personnel.

Targets also include nine units under schemes for compound semiconductors, silicon photonics, sensors, discrete fabs, and advanced packaging, bringing in INR110bn in investment and generating around 3,000 jobs in all.

The government has also set a target of 30 design companies to be assisted under the Design Linked Incentive Scheme, driving the development of 10 semiconductor IP cores and employing approximately 200 designers.

These initiatives underscore a dual approach: speed up manufacturing capacity while also developing design innovation, the government stated.

India’s semiconductor push comes amid growing global competition and supply chain reshaping. Advanced chips remain mostly concentrated in a handful of countries, with Taiwan alone supplying more than half of semiconductors and nearly 90% of the most advanced nodes.

The COVID-19 pandemic exposed chinks in the global electronics supply chains, leading to significant shortages and disruptions. In response, major countries like the United States, the European Union, Japan and South Korea have launched their own national initiatives to expand domestic semiconductor production.

In addition to manufacturing, the mission highlights the importance of building local design talent. The Design Linked Incentive Scheme has already supported a number of semiconductor startups and bolstered research efforts. Startups under the scheme have attracted close to INR4.3bn in venture capital funding. About 67,000 students and over 1,000 engineers reportedly now have access to high-end design tools, resulting in innovation and the fabrication of chips at various technology nodes.

A highlight of India’s semiconductor efforts has been the establishment of DHRUV64, a fully indigenous 64-bit microprocessor developed under the Microprocessor Development Programme by the Centre for Development of Advanced Computing (C-DAC). Built on modern architecture, DHRUV64 offers greater efficiency and reliability, enabling its use across 5G infrastructure, automotive electronics, industrial automation and IoT devices.

The mission is also focusing on integrating semiconductor education into mainstream engineering via new academic programmes built to VLSI design, integrated circuit manufacturing and other core skills. Tie ups with industry leaders in training and research are expected to further bolster the talent pipeline.

Despite the positive momentum, India’s semiconductor ambitions do face headwinds. Competing with established manufacturing hubs will need sustained investment, technology adoption and collaboration between government, industry and academia. The sector’s capital-intensive nature and rapid technological evolution mean that continuous policy support and innovation are critical.

Looking forward, ISM 2.0 aims to equip India to design and manufacture chips for nearly 70-75% of domestic applications by 2029, with the aim of being among the world’s top semiconductor producing nations by as early as 2035. Through this mission, India is looking to not only achieve self-reliance but also to contribute to global supply chains.