Cabinet Approves ₹1.27 Lakh Crore Semicon 2.0 to Strengthen India's Chip Ecosystem; Here's Who Could Benefit

Union Cabinet has approved Semicon 2.0, the second phase of the India Semiconductor Mission (ISM), with a total outlay of ₹1.27 lakh crore. The new programme marks a major expansion of India's semiconductor strategy, shifting the focus from attracting chip fabrication plants to building a complete domestic semiconductor ecosystem.

The approved allocation is higher than the ₹76,000 crore committed under the first phase of the India Semiconductor Mission and reflects the government's long-term push to make India a global semiconductor hub.

Semicon 2.0 to build a complete semiconductor ecosystem

Unlike the first phase, which primarily focused on attracting semiconductor fabrication (fab) and assembly units, Semicon 2.0 aims to strengthen every part of the semiconductor value chain. According to the government, the programme will focus on six key pillars:

• Expanding India's chip design ecosystem

• Promoting semiconductor manufacturing equipment

• Supporting materials, speciality chemicals and industrial gases

• Setting up more semiconductor fabrication plants

• Strengthening the ATMP/OSAT (Assembly, Testing, Marking and Packaging) ecosystem

• Investing in research, development and talent creation

Greater focus on design, materials and advanced technologies

Semicon 2.0 will build upon the progress made under the Design Linked Incentive (DLI) scheme. According to the government, 105 startups have already started developing semiconductor chips in India. The next phase will focus on developing intellectual property (IP), chip designs and complete semiconductor systems to position India as a global chip design destination.

Another major focus area is semiconductor manufacturing equipment and raw materials. Companies involved in manufacturing semiconductor machinery, speciality chemicals, gases and other critical materials will be eligible for incentives. It is expected to strengthen India's precision manufacturing capabilities and improve supply chain resilience.

The government will also encourage additional semiconductor fabrication units, including silicon fabs, compound semiconductor fabs, discrete semiconductor fabs and display fabs. With India's first semiconductor fab expected to be commissioned in 2028, officials believe global interest in the country's semiconductor programme is increasing.

R&D and talent development remain priorities

Research and development is another major pillar of Semicon 2.0.

India's semiconductor journey has so far focused on mature technology nodes ranging from 28 nanometres (nm) to 110 nm. Under the second phase, the government plans to support research into advanced semiconductor technologies and gradually move towards 2 nm chip technologies in collaboration with global research institutions.

Talent development will also receive significant attention. According to the government, 315 universities are currently offering semiconductor chip design training using advanced Electronic Design Automation (EDA) tools, and nearly 68,000 students have already been trained. 

PM outlines long-term vision

Prime Minister Narendra Modi has repeatedly stressed the need to build a complete semiconductor ecosystem rather than relying solely on chip manufacturing.

He recently said India aims to create stronger domestic and global supply chain partnerships as the country's semiconductor market is expected to grow from around $50 billion today to more than $100 billion by the end of this decade.

Finance Minister Nirmala Sitharaman had announced Semicon 2.0 in the Union Budget for FY27, stating that the next phase would focus on equipment, materials, full-stack chip design capabilities and supply chain resilience.

Electronics and IT Minister Ashwini Vaishnaw has also said the government's priorities include supporting design startups, strengthening the complete semiconductor ecosystem and expanding India's skilled workforce.

READ MORE: HDB Financial Services Q1 FY27 Results

Listed companies that could benefit from Semicon 2.0

• CG Power and Industrial Solutions Ltd: Part of the consortium setting up an OSAT (Outsourced Semiconductor Assembly and Test) facility in Gujarat. It is among the biggest listed beneficiaries of India's semiconductor push.

• Kaynes Technology India Ltd: Expanding its semiconductor packaging, chip design and electronics manufacturing capabilities. The company is investing in OSAT and has been actively building its semiconductor business.

• Dixon Technologies (India) Ltd: India's largest EMS player. While not a semiconductor manufacturer, it is expected to benefit from deeper domestic electronics manufacturing and component localisation.

• ASM Technologies Ltd: Provides engineering and semiconductor design services, making it a potential beneficiary of increased investments in chip design and R&D.