India Aims to Scale Up Semiconductor Ecosystem with ISM 2.0

India Gears Up for Semiconductor Mission 2.0, Scaling Up Chip Strategy

The Indian government is preparing to launch the second phase of the India Semiconductor Mission (ISM) 2.0, a significant expansion of its chip strategy. The finance ministry has cleared an outlay of Rs 1.20 lakh crore, and the cabinet is expected to give its approval by mid-April.

Building on the execution gains of ISM 1.0, ISM 2.0 will shift its focus towards deepening capabilities by prioritizing research and development (R&D), chip design, and innovation. The mission aims to move beyond a manufacturing-led approach to a more holistic, value chain-driven strategy.

India's Semiconductor Programme: A Growing Ecosystem

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India's semiconductor programme has made significant progress, with 10 approved projects across fabs, OSAT/ATMP units, and specialized semiconductor facilities. The first wave of output is expected this year, with production underway or expected in the 2026 cohort.

India's semiconductor build-out is layered, with fabs manufacturing chips on silicon wafers requiring the highest investment and longest timelines. OSAT/ATMP units handle assembly, testing, and packaging, making them quicker to set up and the first to become operational.

The Road Ahead: ISM 2.0

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The push for ISM 2.0 has been reinforced at the highest levels of government, underlining long-term policy commitment. Prime Minister Narendra Modi highlighted the need to build a full-stack semiconductor ecosystem, including domestic manufacturing of equipment and materials.

The market is expected to grow from about $50 billion to over $100 billion by the end of the decade, with India aiming to meet a larger share of its chip demand domestically. Finance Minister Nirmala Sitharaman announced ISM 2.0 in the Budget for FY27, focusing on equipment, materials, full-stack design capabilities, and supply chain resilience.

Electronics and Information Technology Minister Ashwini Vaishnaw outlined the shift in priorities, with ISM 2.0 prioritizing design-led growth, ecosystem expansion, and talent development. "Going forward, the first focus will be on design companies and startups that can take products to market," he said.

A Pragmatic Approach: Focusing on Mature Nodes

Industry consensus suggests India will not immediately scale manufacturing at leading-edge nodes like 2 nm or 3 nm but will instead focus on mature nodes (28 nm to 65 nm) that cater to high-volume global demand across automotive, industrial, power, analog, RF, and sensor segments.

Ashok Chandak, president of IESA and SEMI India, said, "India's immediate focus should remain on commercially relevant nodes like 28nm and specialty technologies. At the same time, selective investments in advanced nodes will be important to stay aligned with future technology roadmaps."