Semicon 2.0 decoded: The six pillars powering India’s semiconductor future

India’s semiconductor ambitions have entered a new phase with the rollout of Semicon 2.0, a Rs 1.27 lakh crore programme that expands the country’s chip strategy well beyond manufacturing incentives. While the Union Cabinet approved the programme last week, its significance lies in creating a complete semiconductor ecosystem that spans design, fabrication, advanced packaging, materials, research and skilled talent.

The first phase of the India Semiconductor Mission focused largely on attracting manufacturing investments. Semicon 2.0 builds on that foundation by targeting every critical link in the semiconductor value chain, reducing India’s dependence on imports while positioning the country as a global technology manufacturing hub.

For an economy rapidly embracing artificial intelligence, electric vehicles, data centres, telecommunications, defence electronics and industrial automation, the programme is as much about technological sovereignty as it is about economic growth.

Why Semicon 2.0 matters

Semiconductors have become the backbone of every digital industry. From AI accelerators and smartphones to electric vehicles and medical equipment, nearly every connected device depends on advanced chips.

Although India has emerged as one of the world’s largest semiconductor design centres, accounting for a significant share of global chip design talent, it still imports most of the chips used across industries. The pandemic exposed the vulnerabilities of global semiconductor supply chains, prompting countries worldwide to strengthen domestic manufacturing capabilities.

Semicon 2.0 reflects India’s attempt to move beyond being only a design destination to becoming a comprehensive semiconductor ecosystem.

Pillar One: Building India’s intellectual property through chip design

The biggest success story of India’s semiconductor journey has been chip design.

Under Semicon 1.0, 105 startups and MSMEs received access to industry standard Electronic Design Automation tools, while 24 design projects secured financial assistance.

Semicon 2.0 seeks to move beyond designing chips for clients. The objective is to develop Indian intellectual property, processor architectures, system on chips and reusable semiconductor IP blocks that can power commercial as well as strategic applications.

A stronger domestic design ecosystem could reduce dependence on imported technologies while enabling Indian companies to participate in global semiconductor innovation.

Likely beneficiaries include semiconductor design firms, fabless startups and companies developing AI processors, automotive chips, defence electronics and communication systems.

Pillar Two: Localising machines, materials and chemicals

One of the least discussed but most important aspects of semiconductor manufacturing is the supply chain that supports fabrication plants.

Chip manufacturing requires highly specialised chemicals, industrial gases, silicon wafers, photoresists, precision equipment and clean room technologies.

Semicon 2.0 extends incentives to companies manufacturing these critical components.

If successfully implemented, India could gradually develop domestic capabilities in semiconductor chemicals, specialty gases, ultrapure materials and precision manufacturing equipment, reducing dependence on overseas suppliers.

This pillar could also create opportunities for Indian industrial manufacturing companies looking to diversify into high value engineering.

Pillar Three: Bringing more semiconductor fabs to India

The establishment of semiconductor fabrication plants remains India’s most ambitious objective.

With the country’s first commercial silicon fabrication facility expected to become operational in 2028, the government is looking to attract additional investments across silicon fabs, compound semiconductor fabs, silicon carbide facilities, gallium nitride manufacturing and display fabrication plants.

Rather than focusing on a single technology, the policy aims to develop multiple manufacturing capabilities catering to consumer electronics, automotive, defence, renewable energy and power electronics.

A larger fabrication ecosystem would also encourage multinational semiconductor companies to establish long term manufacturing operations in India.

Pillar Four: Strengthening packaging through ATMP and OSAT

Packaging has become one of the fastest growing opportunities in the global semiconductor industry.

Advanced packaging technologies are increasingly critical as AI processors, high performance computing chips and automotive semiconductors become more complex.

India has already attracted several Assembly, Testing, Marking and Packaging facilities under the first phase of the semiconductor mission.

Semicon 2.0 seeks to accelerate this momentum by encouraging more advanced Outsourced Semiconductor Assembly and Test technologies.

This segment is expected to generate employment faster than fabrication while helping India integrate into global semiconductor supply chains.

Pillar Five: Investing in advanced semiconductor research

Semiconductor technology evolves rapidly.

While India’s current manufacturing initiatives are focused on mature technology nodes between 28 nanometres and 110 nanometres, future competitiveness will depend on continuous innovation.

Semicon 2.0 therefore proposes stronger collaboration with research institutions, academia and international technology partners to develop next generation semiconductor technologies.

Research priorities are expected to include advanced process technologies, compound semiconductors, photonics, chiplets, heterogeneous integration and emerging materials that support AI, quantum computing and next generation communication networks.

Pillar Six: Developing the talent pipeline

Talent remains India’s biggest competitive advantage.

More than 315 universities are already participating in semiconductor education initiatives, with around 68,000 students trained using advanced Electronic Design Automation software.

The next phase aims to deepen industry participation by introducing specialised training in clean room operations, semiconductor fabrication, equipment maintenance, packaging technologies and manufacturing processes.

A larger skilled workforce will become increasingly important as semiconductor manufacturing expands across multiple states.

Progress under Semicon 1.0

The first phase of India’s semiconductor programme has already attracted cumulative investments exceeding Rs 1.64 lakh crore across 12 approved projects.

These include one silicon fabrication facility, one silicon carbide fab, an integrated gallium nitride Micro LED display facility and nine semiconductor packaging units.

Commercial production has already begun at facilities operated by Micron, Kaynes and CG Semi, while additional projects are expected to commence operations during 2026.

On the design front, 24 semiconductor design projects have secured financial support, and more than 100 startups have gained access to world class chip design software.

Which sectors could benefit the most?

The impact of Semicon 2.0 is likely to extend far beyond electronics manufacturing.

Artificial intelligence companies require specialised AI accelerators and high performance processors.

Electric vehicles depend heavily on power semiconductors and silicon carbide devices.

Data centres require networking chips, processors, memory and power management components.

Telecommunications infrastructure increasingly depends on advanced radio frequency semiconductors.

Defence manufacturing, industrial automation, aerospace, healthcare equipment and consumer electronics could also benefit from improved domestic semiconductor capabilities.

Challenges

While the policy lays out an ambitious roadmap, execution will determine its success.

Building semiconductor fabs requires billions of dollars in investment, uninterrupted power supply, access to ultra pure water, specialised logistics and highly skilled engineers.

India will also compete with countries such as the United States, Taiwan, South Korea, Japan and China, all of which continue to invest heavily in semiconductor manufacturing.

Ensuring timely project execution, attracting global technology leaders and strengthening domestic supply chains will be essential for achieving the programme’s long term objectives.

The road ahead

Semicon 2.0 represents more than another incentive scheme. It marks India’s transition from promoting isolated semiconductor projects to building a fully integrated ecosystem spanning design, manufacturing, materials, packaging, research and talent.

If implemented successfully, the programme could strengthen India’s position in global semiconductor supply chains while supporting emerging industries such as artificial intelligence, electric mobility, advanced electronics and digital infrastructure. For a country aspiring to become a global technology powerhouse, Semicon 2.0 could become one of the defining industrial policies of the coming decade.