India is building its own semiconductor ecosystem, and Budget 2026 just doubled down on it. The Centre launched India Semiconductor Mission 2.0 with a Rs 1,000 crore allocation for FY 2026-27 — alongside a separate Rs 40,000 crore Electronics Components Manufacturing Scheme (ECMS). The focus shifts from attracting fabs to making equipment, materials, and Indian-designed chip IP.
What ISM 2.0 actually is
ISM 1.0 (launched 2021) was about getting fabs built in India — offering up to 50% fiscal support to lure chipmakers. It worked: 10 projects worth Rs 1.60 lakh crore got approved across 6 states, backed by a Rs 76,000 crore incentive framework.
ISM 2.0 is the next phase. Instead of just assembling chips, India now wants to:
- Produce semiconductor equipment and materials domestically
- Design full-stack Indian IP — owning the chip designs, not just manufacturing them
- Fortify supply chains so India isn’t dependent on a single country for critical components
In short: ISM 1.0 built the factories. ISM 2.0 wants to own what goes into them.
Where things stand
The big projects approved under ISM 1.0 are hitting milestones:
- Tata-PSMC fab (Dholera, Gujarat): Rs 91,000 crore investment. Trial runs of 300mm wafers began in early 2026, with commercial production expected this year. India’s first silicon fab.
- Micron ATMP facility (Sanand, Gujarat): Rs 22,500 crore+. Past pilot phase, scaling up its 500,000 sq ft cleanroom for commercial DRAM and NAND packaging.
- Kaynes Semicon: Full-scale OSAT operations launched, producing multi-chip modules for edge AI.
Other approved players include CG Power, HCL-Foxconn, and additional Tata Electronics facilities.
Why it matters
Semiconductors underpin everything — phones, cars, defence systems, AI infrastructure. India currently imports nearly all its chips. The global supply chain crisis of 2020-22 proved that dependence is a strategic vulnerability.
ISM 2.0 positions semiconductors as a national capability, not just an industrial policy. ISM 2.0’s Rs 1,000 crore for FY 2026-27 targets research and training centres — building the skilled workforce that most chip programs worldwide struggle with.
What’s next
The Tata-PSMC fab going commercial in 2026 will be the real proof point. If India can manufacture chips at scale — even at mature nodes — it changes the country’s position in the global semiconductor map. The bigger ambition: by 2032, India wants to be a credible alternative in the global chip supply chain, not just a consumer of it.