FM Sitharaman Announces Comprehensive India Semiconductor Mission 2.0 with Holistic Ecosystem Approach
In a significant move to bolster India's semiconductor manufacturing capabilities, Union Finance Minister Nirmala Sitharaman has unveiled the India Semiconductor Mission (ISM) 2.0 during her Union Budget 2026-27 speech. This ambitious second iteration of the flagship scheme marks a strategic evolution from the initial fab-centric approach to a comprehensive, full-value-chain strategy that encompasses the entire semiconductor ecosystem.
Expanding Beyond Fabrication Plants to Build Complete Semiconductor Infrastructure
The newly announced ISM 2.0 represents a substantial broadening of focus beyond the establishment of semiconductor fabrication plants, which dominated the first phase of the initiative. According to the Finance Minister's announcement, the scheme will now concentrate on multiple critical areas essential for building a self-reliant semiconductor industry. These include:
- Production of semiconductor equipment and specialized materials
- Development of chemicals and gases used in chip manufacturing
- Creation of design tools and intellectual property
- Establishment of research and development facilities
- Implementation of comprehensive training programs
- Strengthening of supply chain resilience across the sector
"India Semiconductor Mission (ISM) 1.0 expanded India's semiconductor sector capabilities. Building on this, we will launch ISM 2.0 to produce equipment and materials, design fullstack Indian IP, and fortify supply chains. We will also focus on industry-led research and training centres to develop technology and skilled workforce," stated FM Sitharaman during her budget presentation.
Financial Allocation and Strategic Evolution from ISM 1.0
While the Finance Minister did not disclose the complete financial outlay for ISM 2.0 during the announcement, the Finance Ministry has allocated Rs 1,000 crore for 2026-27 to the IT Ministry specifically for the scheme's second phase. This allocation comes as part of the broader strategic shift from ISM 1.0, which was launched in December 2021 with an initial outlay of approximately $10 billion focused primarily on subsidizing semiconductor fabrication, assembly, and testing plants.
The evolution to ISM 2.0 reflects the government's recognition that sustainable semiconductor manufacturing requires more than just fabrication facilities. Industry experts have welcomed this expanded approach as essential for India's long-term competitiveness in the global semiconductor landscape.
Industry Perspective: From Participant to Structural Player in Global Semiconductor Ecosystem
Ashok Chandak, President of the India Electronics and Semiconductor Association (IESA), emphasized the strategic importance of this development: "The Finance Minister's statement on ISM 2.0 is a very important signal for India's semiconductor ambitions. It marks a clear evolution from a fab-centric approach to a full value-chain strategy, covering equipment, materials, Indian IP, and supply-chain resilience. This is critical if India is to move from being a participant to a structural player in the global semiconductor ecosystem."
Chandak further elaborated that this shift signifies India's ambition to develop capabilities across design, tools, materials, and upstream inputs—areas that define long-term competitiveness and strategic autonomy in the semiconductor industry.
Building on ISM 1.0 Foundations and Current Progress
The announcement of ISM 2.0 builds upon the substantial progress achieved under the first phase of the India Semiconductor Mission. Under ISM 1.0, the government has successfully attracted significant investments, including:
- The Tata-PSMC fabrication plant with an investment of approximately $11 billion
- Assembly and testing facilities by US-based Micron Technology
- Additional plants by the Tata Group, Murugappa Group's CG Power in partnership with Japan's Renesas, Kaynes Semicon, and HCL-Foxconn
Last August, the Union Cabinet approved four new semiconductor assembly and testing plants under ISM 1.0 with a total financial outlay of Rs 4,594 crore, to be established in Odisha, Punjab, and Andhra Pradesh. These developments have brought India closer to its goal of establishing a robust semiconductor manufacturing presence, with the first made-in-India chip already rolled out last year.
Strategic Implications and Future Outlook
The expanded focus of ISM 2.0 addresses several critical gaps in India's semiconductor ecosystem that were identified during the implementation of the first phase. By emphasizing equipment manufacturing, material production, and design tool development alongside traditional fabrication, the government aims to create a more resilient and self-sufficient semiconductor industry.
This comprehensive approach also includes a strong emphasis on developing skilled workforce through industry-led research and training centers, recognizing that human capital development is as crucial as physical infrastructure for sustainable growth in this technology-intensive sector.
The strategic shift embodied in ISM 2.0 positions India to not only manufacture chips but to develop indigenous capabilities across the entire semiconductor value chain, potentially transforming the country from a manufacturing hub to an innovation leader in the global semiconductor industry.
