Government to Fast-Track Next Round of India Semiconductor Mission to Boost Chip Manufacturing

At the recently finished Semicon 2025, Prime Minister Narendra Modi presided over a roundtable conversation with executives from the global semiconductor sector, during which the industry shared their thoughts on the current projects and suggestions for the next iteration.

During the last roundtable, one executive involved in the discussions told the media that the government had promised to expedite the approval of the ISM 2.0 programme. The sector has requested far more funding—nearly twice as much as it did under the prior plan.

Although the amount has not yet been determined, government sources stated that because the rupee has now further devalued against the dollar, the expenditure is probably going to surpass the prior outlay in order to reach the $10 billion threshold under ISM 1.0.

Increased Funding and Subsidy Model

The scheme’s incentives will differ for each category due to its wider scope; the highest subsidies will go to those establishing silicon wafer fabrication units, while compound semiconductor units, which require less capital, will receive smaller subsidies, according to officials.

According to officials, a portion of the investment will also go towards MSMEs and fabless semiconductor designs. Government officials claim that the plan is nearing completion and that by the end of October, a cabinet note will be sent to the union cabinet for approval. Applications are anticipated before the end of the year. In an effort to compete in international markets, industry officials stated that projects that were approved under ISM 1.0 will now aim to establish a local supply chain to acquire minerals, chemicals, and gases locally.

The government is attempting to bring its foreign suppliers of essential materials, like chemicals and gases, to India, according to an executive in charge of supply chain and procurement for a semiconductor company who spoke to ET. In order to respond to consumer demand and shorten turnaround times, it is essential to have local suppliers who can offer prompt assistance.

ATMP and OSAT – Industry’s Growing Focus

The sector is bringing together different assembly, testing, marking, and packaging (ATMP) businesses to establish a basis, generate economies of scale, and develop a cohesive business case to submit to the government, officials noted.

“We are examining the future structure and features of ISM 2.0. The government has made some indications. They have discussed fabless, design, and helping MSMEs. Additionally, they have discussed assisting suppliers of materials, chemicals, gas, tools, and equipment”, according to Dixon Technologies managing director Atul Lall.

In order to transition to more sophisticated OLED displays, the contract manufacturer intends to establish a display fabrication unit for LED panels. Dixon has not yet found a technological partner, indicating that the idea is still in its early stages. If approved, the $3 billion investment needed to put up the fab might be subsidised under ISM 2.0. Ten significant projects under ISM 1.0 have been authorised by the government, almost using up its INR 65,000 crore investment.

Companies setting up semiconductor wafer fabrication units, display fabrication units, compound semiconductor manufacturing units, and outsourced semiconductor assembly and test (OSAT) and ATMP packaging units were given financial support equal to a flat 50% of the project cost.

Commenting on the development, Manu Iyer, Bluehill VC stated, “In scaling terms 180 nm is about four to five generations older than the 40 nm class used by many commercial microcontrollers, with the typical progression being 180 to 130 to 90 to 65 to 40 nm. For broad commercial use-cases in IoT or automotive sectors this chip is not competitive. On 180 nm the same compute typically needs about twenty times more die area than a 40 nm class microcontroller unit.”

“This means a larger die, fewer chips per wafer, higher power use, and higher unit cost. The right near term positioning is clearly aerospace and related low volume defense or scientific platforms, not general purpose consumer or automotive markets. The generational gap also explains ecosystem gaps, since newer nodes bring denser memory and peripherals, lower operating voltages, and mature certification paths that are common in commercial microcontrollers used in most common applications,” he added further .