India Approves ₹1.27 Lakh Crore Semicon Mission 2.0 to Accelerate Domestic Chip Production

NEW DELHI — On July 15, 2026, the Union Cabinet approved a ₹1.27 lakh crore (US$1.5 billion) budget for the second phase of India’s semiconductor mission, dubbed Semicon India 2.0. The package targets the entire chip value chain—from design and fabrication to packaging and testing—to cut the country’s dependence on foreign suppliers and position India as a global manufacturing hub.

Funding allocation and timeline

The ₹1.27 lakh crore allocation will be disbursed over five years, with an initial tranche of ₹30 billion released in the 2026‑27 fiscal year. Roughly 40 % of the funds are earmarked for setting up advanced fab facilities, 25 % for research and development in design and materials, 15 % for skill development, and the remaining 20 % for ecosystem support such as testing labs, logistics and regulatory reforms.

Policy incentives

Semicon India 2.0 bundles a suite of incentives: a 10‑year tax holiday for fab operators, capital subsidy of up to 30 % for equipment purchases, and a dedicated “Chip Fund” that will co‑invest with private players on a 1:1 basis. The government also plans to create a “Semiconductor Development Authority” to streamline clearances and coordinate with state governments on land allocation and power supply.

Industry response

Domestic firms welcomed the move. Tata Group’s electronics arm said the funding would “accelerate our roadmap to a 300‑mm fab by 2030.” Similarly, Wipro‑Ventures’ chief executive noted that the R&D grant could “bridge the design‑to‑fabric gap that has long hampered Indian startups.” International players, including Taiwan’s TSMC and South Korea’s Samsung, have expressed interest in joint ventures, citing the policy certainty as a key factor.

Strategic backdrop

India’s first semiconductor mission, launched in 2022, allocated ₹45 billion and focused on pilot lines and talent pipelines. While it succeeded in establishing three design centres and a modest fab in Gujarat, the sector still imported over 90 % of its chips, according to the Ministry of Electronics and Information Technology (MeitY). Global supply‑chain disruptions and the U.S.–China tech rivalry have heightened the urgency for an indigenous supply base, prompting the expanded budget.

Challenges ahead

Experts caution that the success of Semicon India 2.0 hinges on execution. “Capital intensity, water usage and skilled labor shortages remain critical bottlenecks,” said Dr. Ananya Rao, a semiconductor analyst at the Indian Institute of Technology Delhi. The government’s pledge to develop 10 million skilled workers by 2032 will require coordinated effort between industry, academia and vocational institutes.

International cooperation

To complement domestic spending, the Ministry of External Affairs announced parallel MoUs with the United States, Japan and the European Union for technology transfer and joint research. A joint task force with the U.S. Department of Commerce will focus on advanced lithography equipment, while Japan’s Ministry of Economy, Trade and Industry will assist in developing silicon‑carbide substrates.

Looking forward

If the funding is deployed as planned, India could achieve a 30 % domestic share of its chip demand by 2035, up from less than 5 % today. The cabinet’s approval marks the largest single‑year investment in the country’s electronics sector and signals a decisive shift toward self‑reliance in critical technology.