India Semiconductor Mission 2.0
The Union Budget 2026–27 marked a decisive moment for India’s technology ambitions with the announcement of India Semiconductor Mission (ISM) 2.0. This new phase signals a clear policy push to deepen domestic semiconductor capabilities at a time when chips underpin every critical digital and industrial system.
ISM 2.0 will focus on:
- Producing semiconductor equipment and materials in India
- Designing full-stack Indian semiconductor intellectual property (IP)
- Strengthening domestic and global supply chains
A provision of ₹1,000 crore has been allocated for FY 2026–27, with strong emphasis on industry-led research and training centres to drive technology development and create a future-ready workforce.
Semiconductors power computers, mobile devices, telecom networks, automobiles, defence systems, and artificial intelligence. Under ISM 1.0, India consolidated earlier investments into a full-stack semiconductor value chain—expanding design capabilities and advancing fabrication, assembly, and testing infrastructure. ISM 2.0 builds on this momentum, positioning India as a reliable and competitive global participant.
Sectoral Outlook: India’s Semiconductor Ecosystem
India is steadily emerging as a global semiconductor hub, driven by large-scale investments and expanding manufacturing capacity. Platforms such as SEMICON India 2025 reflect rising global confidence.
Market Growth
- 2023: ~$38 billion
- 2024–25: $45–50 billion
- 2030 (Projected): $100–110 billion
This expansion aligns with the national vision of Make in India and Make for the World, positioning India as both a manufacturing base and global supplier.
ISM 1.0 Achievements
Approved in December 2021 with an incentive framework of ₹76,000 crore, ISM 1.0 offers fiscal support up to 50% for:
- Silicon fabs
- Compound semiconductor facilities
- Assembly, Testing, Marking, and Packaging (ATMP)
- Chip design
As of December 2025:
- 10 projects approved
- ₹1.60 lakh crore total investment
- Spread across 6 states
These include silicon fabs, silicon carbide facilities, advanced and memory packaging units, and specialised testing infrastructure.
Technology Roadmap
- By 2029: Capability to design and manufacture chips for 70–75% of domestic demand
- Under ISM 2.0: Roadmap toward 3nm and 2nm nodes
- By 2035: Target to rank among the top global semiconductor nations
Anticipated Impact in 2026–27
The modified semiconductor programme for 2026–27 carries a financial outlay of ₹8,000 crore.
Projected Targets
1. Semiconductor Fabs (1 unit supported)
- ₹4,000 crore investment
- 1,500 jobs
2. Compound Semiconductors, ATMP/OSAT (9 units supported)
- ₹11,000 crore investment
- 3,000 jobs
3. Design Linked Incentive (30 companies supported)
- 10 semiconductor IP cores developed
- 200 design professionals employed
Together, these measures aim to scale manufacturing, deepen design capabilities, and expand skilled employment.
Why the Mission Matters
Semiconductors are the backbone of modern economies—powering energy grids, financial systems, telecom networks, hospitals, and satellites.
The COVID-19 pandemic exposed severe vulnerabilities in global supply chains, affecting 169+ industries. Taiwan alone produces:
- Over 60% of global semiconductors
- Nearly 90% of advanced chips
This concentration highlights geopolitical risks and supply fragility.
In response, major economies including the United States, EU, Japan, and South Korea have launched national semiconductor strategies. India’s mission aligns with this global shift—building self-reliance while strengthening global supply resilience.
Strengthening India’s Design Ecosystem
The Design Linked Incentive (DLI) Scheme has been central to India’s fabless ecosystem development.
Achievements (as of January 2026)
- 24 semiconductor design startups supported
- ₹430 crore in venture capital attracted
- 2.25 crore EDA tool hours logged
- 67,000 students and 1,000+ startup engineers using design tools
- 122 academic tape-outs
- 56 chips fabricated at 180nm (Semiconductor Laboratory, Mohali)
- 16 startup tape-outs; 6 chips fabricated at advanced nodes (up to 12nm)
- 75 academic patents and 10 startup patents filed
The next phase targets 50 fabless companies, reinforcing India’s ambition as a global design hub.
Advancing Indigenous Microprocessors
Microprocessors form the foundational layer of digital infrastructure. India has prioritised sovereign processor design.
A major milestone is DHRUV64, a fully indigenous 64-bit microprocessor developed by C-DAC under the Microprocessor Development Programme.
DHRUV64:
- Built on modern architecture principles
- Supports 5G, automotive, industrial automation, IoT
- Reduces reliance on imported processors
It builds on processors such as:
- SHAKTI
- AJIT
- VIKRAM
- THEJAS
Developed under the Digital India RISC-V (DIR-V) Programme, these leverage open-source RISC-V architecture, eliminating licence costs and fostering collaborative innovation.
Building the Talent Pipeline
India recognises that semiconductor leadership depends on people as much as infrastructure.
Key Initiatives
Chips to Start-up Programme
- 397 universities and startups onboarded
- 56 chips fabricated via 46 universities
AICTE Academic Integration
- B.Tech in Electronics (VLSI focus)
- Diploma in IC manufacturing
- Minor in VLSI design
SMART Lab at NIELIT Calicut
- Target: 1 lakh engineers
- 62,000 already trained
Industry Partnership (Lam Research)
- Nanofabrication & ATMP training
- 60,000 professionals targeted over 10 years
FutureSkills PRIME (MeitY & NASSCOM)
- Online skilling in semiconductors and emerging technologies
- Industry-aligned certifications
Together, these initiatives are creating a large, industry-ready semiconductor workforce.
Conclusion
India Semiconductor Mission 2.0 marks a strategic shift from ecosystem creation to consolidation and global integration.
By strengthening manufacturing, advancing indigenous processor design, and building deep talent capacity, ISM 2.0 positions semiconductors as a core pillar of:
- Economic resilience
- Digital infrastructure
- Technological sovereignty
With a clear roadmap toward advanced nodes, expanded design incentives, and growing private participation, India is laying the foundation to become a trusted semiconductor hub and a leading global player by 2035.
Formal Definition of “Deep Tech” Start-ups
Formal Definition of “Deep Tech” Start-ups
- The Union government has officially defined “deep tech” start-ups through a gazette notification issued by the Department for Promotion of Industry and Internal Trade (DPIIT).
- A deep tech start-up must:
- Develop solutions based on new scientific or engineering knowledge
- Be heavily engaged in research and development (R&D)
- Own or be developing novel intellectual property (IP)
- Be taking steps toward commercialisation of such IP
- Operate under long development timelines, extended gestation periods, high capital and infrastructure requirements, and significant technical or scientific uncertainty
Insight: This moves “deep tech” from a buzzword to a legally defined category, providing clarity for policy and funding.
Difference Between Regular and Deep Tech Start-ups
- Regular Start-up: Less than 10 years old or turnover under ₹200 crore
- Deep Tech Start-up: Can retain start-up status for up to 20 years and have turnover up to ₹300 crore
Insight: The extended time and higher turnover reflect the longer incubation cycles and capital-intensive nature of deep science ventures.
Certification and Regulatory Oversight
- Companies must apply to DPIIT for deep tech certification.
- DPIIT is the final authority, guided by an Inter-Ministerial Board including:
- Joint Secretary, DPIIT (Convener)
- Representative from the Department of Science and Technology (DST)
- Representative from the Department of Biotechnology
Insight: Ensures technical vetting and prevents misuse of the “deep tech” label, though may introduce bureaucratic delays.
Investment Restrictions
- Recognised start-ups cannot invest in:
- Real estate
- Speculative assets
- Shares and securities
- Exception applies if investments are directly tied to core knowledge production
Insight: Ensures public incentives and concessions are directed strictly toward innovation, not speculation.
Link to Government’s Technology Push
- Aligns with India’s broader strategy on technology-driven growth.
- The Anusandhan National Research Foundation manages a ₹1 lakh crore Research and Development Innovation (RDI) Fund, investing in emerging technologies over seven years.
- Deep tech start-ups are expected to be key beneficiaries.
Insight: The formal definition serves as a screening mechanism for fund allocation.
Financial Incentives
- RDI-supported firms may access concessional financing:
- Interest rates of ~2%–4%
- Loan tenures up to 15 years
Insight: Long-tenure, low-cost financing is crucial for deep tech ventures due to delayed revenue realization.
Policy Context
- Draft deep tech policy prepared in July 2023 by the Principal Scientific Adviser’s office
- Policy is still awaiting Union Cabinet approval
Insight: The definition is a precursor to broader structural reforms in deep tech governance.
Broader Economic and Strategic Implications
- Institutional recognition of deep tech as a distinct economic category
- Signals India’s ambition to:
- Build indigenous scientific capacity
- Reduce technological dependence
- Compete in frontier sectors like AI, biotech, semiconductors, and advanced manufacturing
- Provides longer runway and regulatory clarity for science-led ventures
India-Germany Partnership
Strengthening India-Germany Partnership
- German Chancellor Friedrich Merz visited India, his first trip to Asia since taking office, meeting Prime Minister Narendra Modi.
- 19 MoUs and 8 key announcements were signed, including a Joint Declaration of Intent on Cooperation in Critical Minerals.
- Focus areas include defence, economic co-operation, critical minerals, renewable energy, and technology.
Strategic Importance of Critical Minerals
- India identifies 30 critical minerals, many containing rare-earth elements for permanent magnets.
- These magnets are essential for electric mobility, semiconductors, renewable energy (wind turbines), aerospace, and defence.
- India imported over 90% of permanent rare-earth magnets from China in 2025, showing high dependency.
- China has historically used its monopoly to influence global trade, as seen when India’s automobile industry faced supply restrictions due to China-U.S. trade tensions.
Shared Indo-German Interests
- Germany is also heavily reliant on China for rare-earth magnets, especially for offshore wind energy.
- Offshore wind energy uses turbines installed in seas to generate renewable power.
- The Joint Declaration promotes:
- Collaborative exploration, R&D, processing, recycling
- Joint ventures in India, Germany, and third countries
- Integration with defence co-production, green hydrogen initiatives, and semiconductor innovation
India’s National Initiatives
- National Critical Mineral Mission (2025–2031): $4 billion budget to secure critical mineral supply chains.
- Cabinet approved ₹7,280 crore (~$800 million) for sintered Rare Earth Permanent Magnets (REPM) manufacturing.
- Union Budget 2026-27 announced a dedicated rare earth corridor for mining, processing, research, and manufacturing.
- India has the third-largest rare earth deposits globally, but currently produces less than 1% of global output. Most deposits are monazite sands and hard rock in coastal areas, based on inferred reserves.
Europe’s Supply Chain Context
- Over 90% of permanent magnets for wind turbines in Germany and Europe are sourced from China.
- Germany aims to source 30% of permanent magnets from outside China by 2030 (Resilience Roadmap for Permanent Magnets, 2025).
- Europe seeks proven, reliable, and cost-competitive supplies, which India is positioning itself to provide.
Collaboration in Wind Energy
- Wind turbines need 200+ kg of permanent magnets per MW.
- India targets 107 GW and Germany 145 GW of wind energy by 2030.
- India has ~70 GW offshore wind potential (Tamil Nadu and Gujarat); Germany has 9.2 GW installed.
- Technology transfer is critical as India currently has no offshore wind installations.
- Indo-German collaboration includes component production, engineering consulting, and renewable energy technology sharing.
European and Global Context
- Hamburg Declaration (Jan 26, 2026): Germany and 9 European nations commit to 100 GW of joint offshore wind projects.
- Europe wants resilient supply chains, increasing interest in India’s rare earth corridor and permanent magnet manufacturing program.
- India could become a reliable partner for Europe in permanent magnet supply and renewable energy.
Key Takeaways
- The partnership addresses strategic vulnerabilities due to China’s dominance in rare-earth magnets.
- India aims to develop domestic rare earth supply chains and position itself as a global supplier.
- Collaboration strengthens defence, renewable energy, and semiconductor sectors in both countries.
- Offshore wind energy emerges as a key area of mutual interest.