India's Semicon 2.0: ₹1.27 lakh crore for full chip supply chain

Key Takeaways

• Union Cabinet approved Semicon 2.0 with ₹1,27,500 crore outlay, nearly doubling the previous ₹75,000 crore allocation
• First Indian semiconductor initiative to cover all six pillars: chip design, fabrication, assembly, testing, R&D, and indigenous materials
• Mobile Phone Manufacturing Scheme gets ₹62,500 crore over five years with special incentives for domestic sourcing

India's Union Cabinet approved Semicon 2.0 on Wednesday with a ₹1,27,500 crore outlay, marking what HCL co-founder Ajai Chowdhry calls the country's first attempt at building a complete semiconductor value chain. The initiative covers chip design through packaging, a shift from earlier programs that focused primarily on attracting fabrication plants.

The approval comes alongside the Mobile Phone Manufacturing Scheme (MPMS), which received ₹62,500 crore over five years. Together, these form part of a broader ₹2,19,353 crore package of seven major decisions.

What makes Semicon 2.0 different from the first program?

The original Semicon India program, launched in December 2021 with ₹76,000 crore, focused heavily on attracting fab investments. Results were mixed. The Tata-PSMC fab in Gujarat and Micron's assembly facility moved forward, but the broader ecosystem remained underdeveloped.

Semicon 2.0 takes a different approach. According to Chowdhry, who heads the EPIC Foundation focused on electronics manufacturing, the new program addresses six pillars of the semiconductor value chain: chip design, fabrication, assembly, testing and packaging, R&D, talent development, and indigenous technologies and materials.

“This is exactly what we at EPIC Foundation have envisioned for India's semiconductor journey. This is the first time a complete ecosystem approach has been adopted, covering all six pillars of the value chain.”

— Ajai Chowdhry, HCL co-founder

The emphasis on chip design stands out. India already holds roughly 6% of global semiconductor design activity, concentrated in Bengaluru, Hyderabad, and Pune. But most of this work happens inside captive R&D centers of foreign companies. Indian brands designing their own chips remain rare.

Why the focus on design and R&D?

Chowdhry pointed to a specific gap: Indian electronics brands have fallen behind Chinese competitors partly because they do not control their chip designs. When a company buys commodity chips from external suppliers, it competes on margins. When it designs its own silicon, it can differentiate on features and performance.

"There is a very clear direction from the government to incentivise design and R&D for Indian brands, which have been left behind for years and overtaken by Chinese competitors," Chowdhry said. "This is a decisive step towards correcting that imbalance."

The government has not published detailed incentive structures for Semicon 2.0. But Chowdhry's statement suggests specific provisions for domestic brands undertaking chip design, not just foreign companies setting up design centers.

Mobile phone scheme adds domestic sourcing push

The MPMS continues India's push to become a mobile phone manufacturing hub. Apple suppliers Foxconn, Wistron, and Pegatron have already invested billions in Indian facilities. Samsung operates one of the world's largest mobile phone factories in Noida.

The new scheme's ₹62,500 crore allocation over five years provides continuity for existing investors. But Chowdhry highlighted a new element: special incentives for domestic sourcing.

"What is the most interesting part is that there will be special incentives for domestic sourcing which will lead to much higher value addition," he said.

Currently, most components in Indian-assembled phones are imported. Display panels, memory chips, and processors come from China, South Korea, Taiwan, and Japan. Higher domestic value addition would mean more components manufactured in India, capturing more of the supply chain's economic value.

Can India catch up in semiconductor manufacturing?

The scale of investment required for competitive semiconductor manufacturing remains daunting. A single advanced fab costs $10-20 billion and takes 3-5 years to build. India does not yet have operational leading-edge fabs.

But India's approach under Semicon 2.0 appears pragmatic. Rather than chasing the most advanced nodes controlled by TSMC and Samsung, the program emphasizes compound semiconductors, assembly and testing (ATMP/OSAT), and mature-node manufacturing. These segments require less capital, shorter timelines, and face less geopolitical complexity.

India's $500 billion target for electronics manufacturing by 2030 depends partly on this semiconductor push. The current electronics manufacturing sector stands at roughly $110 billion annually.

Frequently Asked Questions

What is Semicon 2.0 in India?

Semicon 2.0 is India's updated semiconductor policy approved in 2025 with ₹1,27,500 crore outlay. It covers six areas: chip design, fabrication, assembly, testing, R&D, talent, and indigenous materials.

How much has India allocated for semiconductor manufacturing?

The Union Cabinet approved ₹1,27,500 crore for Semicon 2.0, nearly doubling the original ₹75,000 crore allocation from the 2021 program.

What is the Mobile Phone Manufacturing Scheme MPMS?

MPMS is a ₹62,500 crore scheme over five years to support mobile phone manufacturing in India, with special incentives for companies that source components domestically.

Does India have semiconductor fabs?

India has announced fabs under construction, including the Tata-PSMC fab in Gujarat. Micron is building an assembly and test facility. No leading-edge fabs are operational yet.

What is India's electronics manufacturing target?

India aims for $500 billion in electronics manufacturing by 2030, up from approximately $110 billion currently.

Source: Tech-Economic Times / ET