India's chip ambitions are entering a new phase. With a ₹1.27 trillion outlay for Semicon 2.0, the government is shifting its focus from attracting chip factories to building a complete semiconductor ecosystem—from design and research to equipment, materials and gases central to the chip industry. Can this help India move up the semiconductor value chain? Mint explores
What is Semicon 2.0, and how is it different from the first mission?
The Union cabinet on Wednesday approved a ₹1.27 trillion support package for the Semicon 2.0 project, expanding the push beyond chip manufacturing and assembly to the wider supply chain, including equipment, chemicals, gases and materials. This follows the first ₹76,000 crore India Semiconductor Mission, launched in 2021, which supported 12 projects with proposed investments of around ₹1.64 trillion. The focus is now on chip design, intellectual property (IP), and research and development to move to advanced chip technologies.
Why India needs to invest in semiconductors?
Semiconductors, or chips, are the soul of every electronic product—from switches to smartphones and telecom equipment to electric vehicles, artificial intelligence systems and defence technology. For India, spending on creating chip projects and their allied sectors is important not only to reduce dependence on chip imports but also to build domestic capabilities, strengthen supply chain security and capture a larger share of the global technology industry.
Securing a domestic semiconductor supply is crucial, too, for strategic independence and national security needs. After setting the base with semiconductor assembly and fabrication in the first chip mission, a key focus now for India is to create its own chips in six critical segments – compute, memory, power management, sensors, and network - that will directly power India's defense, aerospace, and precision equipment industries.
Will Semicon 2.0 help India move up the value chain?
While India is way behind major countries like Taiwan, South Korea, the US and China in semiconductors, the plan to localize the value chain focusing on all the key pillars – from design, machines and materials to research and talent development – is the right strategy, industry experts said.
According to a Niti Aayog report in May, by 2035, India should target building a $120-150 billion semiconductor value chain by choosing leadership and purpose over participation. The policy think tank wants India to define its own pathway, shaped by strategic self-sufficiency, ecosystem strength and global indispensability.
The report said that in chip design, India can play up to its greatest strengths, including its design talent, high-quality workforce and materials and chemistry ecosystem potential.
What are the challenges ahead?
Moving up the semiconductor value chain will depend on the quality of projects India attracts across design, manufacturing, materials and equipment, and whether domestic companies can develop globally competitive technologies.
The semiconductor industry operates on a complex global value chain. Therefore, integrating into this market requires competing effectively on cost and quality. As Niti Aayog has noted, chips made in India will also need to meet global performance and reliability standards before they gain wider acceptance, which will take time.
Other challenges include the need for sustained government support, patient venture capital for chip design startups with long development cycles, bridging the talent gap, and ensuring reliable access to critical resources such as power and ultra-pure water.
Where does India stand compared to other countries in the semicon race?
The government, in a release on Wednesday, said India now targets the domestic semiconductor market worth $200 billion by 2035 through Semicon 2.0. However, nearly 90–95% of semiconductor demand is currently met through imports, leading to large foreign exchange outflows and increasing the vulnerability of critical sectors to supply-chain disruptions.
India has an advantage in human capital, accounting for 20% of the global semiconductor design workforce. In terms of incentives, India has nearly $21 billion outlay so far. It lags the US' $52.7 billion in funding, the European Union’s $50 billion programme, Japan’s $28 billion from FY21 to FY23, and China's indicative investment of $324 billion over the last 10 years, according to Niti Aayog report.