The Union Cabinet has approved ₹1.27 lakh crore for the second phase of the India Semiconductor Mission to boost domestic chip production. This new phase shifts toward targeted incentives and explores equity participation for larger corporations, signaling a move to reduce reliance on heavy subsidies as the ecosystem matures.
The Ministry of Electronics and Information Technology is launching the second phase of the India Semiconductor Mission, known as ISM 2.0, with a significant budgetary allocation of ₹1.27 lakh crore. This follows the initial ₹76,000 crore program launched in December 2021. The latest government strategy marks a shift in how financial support will be distributed, prioritizing strategically important projects over across-the-board subsidies.
Strategic Shift and Equity Participation
Unlike the first phase, which focused heavily on attracting foundational investments, ISM 2.0 is designed to integrate more mature industry players. Secretary S Krishnan indicated that the government is moving toward a more nuanced support model. This includes exploring equity investments, co-investment structures, and royalty-based frameworks. By involving larger Indian corporations alongside startups and smaller enterprises, the government aims to create a more self-sustaining ecosystem. The increasing participation of state governments in providing infrastructure and additional financial incentives is expected to lower the total burden on central funds over the long term.
Focus on Production and Export Targets
The government expects this ten-to-twelve-year program to catalyze roughly ₹4 lakh crore in total capital investment. The stated goal is to generate ₹2 lakh crore in domestic semiconductor production and ₹1 lakh crore in exports. A key focus will be the Assembly, Testing, Marking, and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) segments. As these facilities reach operational maturity, the government expects the requirement for direct subsidies to decline, allowing for a more efficient allocation of resources toward complex, higher-value technologies.
Impact on Mobile Manufacturing
Alongside the semiconductor push, the Cabinet has approved a separate ₹62,500 crore scheme dedicated to mobile manufacturing over the next five years. This initiative is projected to drive ₹39 lakh crore in mobile production and create approximately 60,000 direct jobs. Both programs are scheduled to be formally notified within the next 20 days. For investors, these policies represent a continued government effort to reduce dependency on chip imports and build a resilient electronics supply chain within India. The transition to equity-linked support suggests that the government wants a more direct stake in the success of these companies, which may influence future capital allocation decisions for participants in the sector.