India is making a major push to build a stronger semiconductor industry at home. The Union Cabinet approved Semicon 2.0 with an outlay of ₹1,27,500 crore. The programme builds on Semicon 1.0 and expands India’s focus from setting up chip manufacturing facilities to developing a wider semiconductor ecosystem.
The new phase covers chip design, research, semiconductor equipment and materials, new fabs, advanced packaging and talent development. But what exactly are semiconductors? Why does India want to manufacture more chips? And what has the country achieved so far?
Here is a simple look at India’s semiconductor journey and what Semicon 2.0 aims to change.
Why are semiconductors so important?
Semiconductors are at the centre of modern technology. They are used in smartphones, computers, cars, medical equipment, satellites, defence systems and data centres. Technologies such as artificial intelligence (AI), telecommunications, electric mobility, the Internet of Things (IoT), 5G, 6G and autonomous vehicles are also increasing demand for chips.
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As more industries become digital, access to semiconductors is becoming increasingly important for technology, manufacturing and economic growth. The global semiconductor market grew at a compound annual growth rate (CAGR) of 6.5% between 2014 and 2024. It is projected to grow at 8.5% over the next five to 10 years.
At the same time, recent disruptions have shown how vulnerable the global semiconductor supply chain can be. Geopolitical tensions have also raised concerns about dependence on a limited number of manufacturing locations. As a result, major economies are working to strengthen their own semiconductor capabilities.
India’s semiconductor demand is rising
India is also expected to become a much larger semiconductor market. According to the government, India’s semiconductor demand is projected to reach $110 billion by FY2030 and exceed $200 billion by FY2035.
However, domestic manufacturing is still at an early stage. Between FY2017 and FY2025, India spent almost $150 billion on semiconductor product imports. Imports grew at a CAGR of 23% during this period.
If this trend continues, annual semiconductor imports could reach $240 billion by 2035. This growing gap between domestic demand and local manufacturing is one of the reasons India is trying to develop capabilities across the semiconductor value chain.
What is Semicon 2.0?
Semicon 2.0 is the second phase of India’s semiconductor programme. Approved by the Union Cabinet in July 2026, it has a total outlay of ₹1,27,500 crore. It builds on the foundation laid by Semicon 1.0, which was approved in December 2021 with an outlay of ₹76,000 crore.
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The first phase focused largely on establishing semiconductor fabs, display fabs and ATMP/OSAT facilities, along with strengthening chip design. Semicon 2.0 takes a wider approach. It brings together chip design, machines and materials, new fabs, advanced packaging, research and talent development. The aim is to develop more of the semiconductor chain within India, rather than concentrating only on the final stages of chip production.
What is a semiconductor?
A semiconductor is a material whose electrical conductivity can be controlled. This gives it a useful position between conductors and insulators. Copper, for example, allows electricity to flow easily, while an insulator strongly resists the flow of electricity.
Semiconductor materials can be engineered to switch, amplify, sense and control electrical signals. One of the most important components made using semiconductors is the transistor. A transistor is essentially a microscopic electronic switch.
Modern integrated circuits can contain millions or even billions of transistors on a small chip. These tiny components work together to enable computing, communication, sensing, memory and power management. In simple terms, semiconductors are the building blocks of modern electronics.
How is a semiconductor chip made?
The chip-making process starts with silicon, the most widely used semiconductor material. Silicon is obtained from silica, which occurs abundantly in sand. However, chip manufacturing requires highly purified silicon.
The material is first formed into cylindrical ingots. These ingots are then sliced into thin wafers and polished. The wafers are sent through hundreds of carefully controlled processes inside semiconductor fabrication plants. These include deposition, photolithography, etching and ion implantation.
Photolithography uses light to transfer extremely small patterns onto the wafer. These patterns eventually form transistors, interconnects and other parts of the chip.
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The process is repeated across multiple layers until the complex structures needed for an integrated circuit are created. Once the semiconductor device is manufactured, it still needs to be assembled, tested and packaged.
This is where Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Test (OSAT) come in. Packaging protects the chip and allows it to connect with other electronic components, while testing checks whether it meets the required performance and quality standards.
What does a semiconductor node mean?
Terms such as 90nm, 45nm and 28nm often appear in discussions about semiconductor technology. These numbers refer to semiconductor manufacturing nodes, which broadly indicate different generations of manufacturing technology.
Historically, node names were linked more directly to specific physical dimensions. Today, they are mainly used as shorthand for a particular process generation. A smaller node can allow more transistors to fit into a smaller area. It can also support higher performance and lower energy use.
However, node size is not the only factor that determines a chip’s capabilities. Circuit design, materials, packaging and the intended application also play a role. Advanced nodes are important for high-performance computing and leading-edge processors. Mature nodes remain important for applications such as automobiles, industrial electronics, telecommunications, power systems and consumer products.
Why does India want to manufacture semiconductors?
Semiconductors have become strategically important because they sit at the heart of many critical technologies. Global chip manufacturing is concentrated in a relatively small number of countries and regions. Taiwan, South Korea, Japan, China and the US are among the major semiconductor manufacturing centres.
The government says Taiwan alone accounts for more than 60% of global chip production and nearly 90% of advanced chips. Such concentration can create risks for global supply chains, particularly when disruptions or geopolitical tensions affect production and trade.
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There is also no single country that controls the entire semiconductor value chain. Different economies specialise in chip design, fabrication, equipment, materials, memory and packaging. For India, building domestic capabilities is therefore linked to reducing import dependence, strengthening supply-chain resilience and creating high-value employment.
India already has semiconductor capabilities in space.
Semiconductors are not new to India’s strategic programmes. The Semiconductor Laboratory (SCL), Mohali develops flight-grade chips for satellites and launch vehicles. These chips are designed to operate under extreme conditions in space.
India’s space missions have also used domestically developed semiconductor technologies. The Chandrayaan-3 lander carried an Indian-made camera chip for its imaging systems. SCL’s Vikram processor is used in satellite launch vehicles and rockets. The Aditya-L1 mission uses radiation-hardened ADC chips developed by SCL.
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These applications highlight the role semiconductors can play in areas where reliability and specialised technology are critical.
Semicon 1.0: Where did India start?
The government approved Semicon 1.0 in December 2021, with an outlay of ₹76,000 crore. The programme was designed to establish a domestic semiconductor and display manufacturing ecosystem.
It included schemes for semiconductor and display fabs, compound semiconductors, silicon photonics, sensors and ATMP/OSAT facilities. The Design Linked Incentive (DLI) Scheme was also introduced to strengthen semiconductor design capabilities. The idea was to establish a foundation across chip design, fabrication, packaging and related technologies.
What has Semicon 1.0 achieved?
The government says Semicon 1.0 has resulted in approvals, investments and chip-design activity across several parts of the ecosystem.
| Areas | Progress |
| Semiconductor manufacturing units | 12 units approved |
| Cumulative investment | More than ₹1.64 lakh crore |
| Manufacturing mix | One silicon fab, one silicon carbide fab, one Gallium Nitride Micro LED Display Fab and nine ATMP/OSAT units |
| Locations | Gujarat, Assam, Uttar Pradesh, Odisha, Punjab and Andhra Pradesh |
| Commercial production | Five units have started commercial production |
| Chip design projects | 24 projects approved |
| Value of chip design projects | Around ₹900 crore |
| Engineers given access to advanced chip-design tools | More than 1 lakh |
| Organisations involved | 500 organisations, including 400 academic institutions and 100 start-ups |
| Chip designs developed | More than 300 |
| Global semiconductor cooperation | US, Japan, European Union, Singapore and the Netherlands |
| Semiconductor-domain GCCs | India hosts about 7% of the world’s semiconductor-domain GCCs |
| Global chip-design workforce | India employs nearly 20% of the global semiconductor chip-design workforce |
India has also expanded international cooperation in the sector. This includes an India-Germany Semiconductor Ecosystem Partnership and India’s participation in Pax Silica.
How is Semicon 2.0 different?
Semicon 2.0 expands the scope of the first programme. Semicon 1.0 concentrated mainly on fabs and ATMP/OSAT facilities. The second phase adds capabilities that support the wider semiconductor ecosystem. This includes machines and materials, chip design, research and development, talent, new fabs and advanced packaging.
The objective is to build a more complete chain, from raw materials and equipment to design, manufacturing, packaging and finished chips. That broader approach is important because semiconductor manufacturing does not depend on fabs alone. A functioning industry also needs specialised equipment, materials, engineers, designers, researchers and packaging capabilities. Semicon 2.0 is intended to bring more of these elements together within India.
What other policies support India’s semiconductor ecosystem?
Semicon 2.0 is part of a wider policy framework supporting electronics and semiconductor manufacturing. The National Policy on Electronics 2019 provides an overall framework for Electronics System Design and Manufacturing, including core components such as chipsets.
The Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) supports domestic manufacturing of components, sub-assemblies and semiconductors through capital expenditure-linked incentives.
The Modified Electronics Manufacturing Clusters Scheme (EMC 2.0) supports infrastructure, common facilities and plug-and-play facilities for electronics manufacturing.
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The government has also used production-linked incentive schemes to encourage domestic manufacturing. The PLI Scheme for Large Scale Electronics Manufacturing focuses on mobile phones and components, while the PLI Scheme 2.0 for IT Hardware supports products such as laptops, tablets, all-in-one PCs and servers.
The Electronics Components Manufacturing Scheme, introduced in 2025, has an enhanced outlay of ₹40,000 crore under the 2026–27 Budget. It aims to attract investment across the electronics components value chain and increase domestic value addition.
The Mobile Phone Manufacturing Scheme 2026 focuses on increasing the scale and competitiveness of mobile manufacturing, with greater domestic value addition and support for Indian mobile brands. Other measures include the Research, Development and Innovation Scheme under Semicon 2.0 and the policy allowing 100% foreign direct investment in electronics manufacturing.
What does Semicon 2.0 mean for India?
India’s semiconductor push is moving beyond building individual chip plants. The larger ambition is to create an ecosystem that can support chip design, manufacturing, packaging, research, equipment, materials and talent.
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Since the launch of Semicon 1.0 in 2021, the country has moved from having no commercial chip plant to having 12 approved semiconductor manufacturing units, five of which have started commercial production, according to the government.
The next challenge is to expand this ecosystem and develop capabilities across more stages of the value chain. Semiconductor manufacturing is highly complex and requires long-term investment, specialised skills and consistent policy support. Semicon 2.0 is designed to provide that longer-term push.
For India, the semiconductor opportunity is not limited to producing chips for electronic devices. It also involves building skills, supporting strategic technologies and reducing dependence on distant supply chains. The chip itself may be tiny, but the industrial ecosystem behind it is enormous. India is now trying to build more of that ecosystem at home.
Indrani Priyadarshini is a journalist and editorial professional specialising in technology, artificial intelligence, smart cities, green energy, and digital transformation. With over four years of experience in tech journalism and digital media, she is known for turning complex industry developments into clear, engaging, and insightful stories. Her expertise spans reporting, editorial strategy, digital publishing workflows, and in-depth coverage of emerging technologies shaping the future.
