Union Budget 2026: FM unveils India Semiconductor Mission 2.0; focus shifts to equipment, IP and supply chains

Finance Minister Nirmala Sitharaman announced the the launch of the second phase of the India Semiconductor Mission (ISM) with a Rs 1,000 crore Budget for FY27, while presenting the Union Budget 2026 on Sunday.

"ISM 1.0 expanded India’s semiconductor sector capabilities. Building on this, we will launch ISM 2.0 to produce equipment and materials, design full-stack Indian IP, and fortify supply chains. We will also focus on industry-led research and training centres to develop technology and skill workforce," she said.

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Commenting on the announcement, Sujay Shetty, Managing Director (ESDM & Semiconductor), PwC India, said, "The launch of ISM 2.0 represents a transformative step forward, prioritising domestic production of equipment and materials, full-stack design capabilities, development of Indian IP, resilient supply chain fortification, intensified industry-led R&D, and a robust skilled workforce through dedicated training initiatives. This comprehensive framework could significantly elevate India’s role in the global semiconductor value chain.

"Complementing these efforts, the additional Rs 40,000 crore outlay for the Electronics Components Manufacturing Scheme (ECMS) could catalyse substantial investments, enhance domestic value addition, generate high-quality employment, and solidify India’s emergence as a global leader in electronics manufacturing and innovation.”

Sudheer Narayan, Partner, Bain & Company, also lauded the announcement, saying, "The Budget sends a clear signal that electronics and semiconductors remain a top national priority. Building on the success in electronics manufacturing, especially mobile phones, the focus now shifts to scale, higher domestic value addition, and deeper integration with global value chains. Continued support through ISM 2.0 and higher ECMS outlays reflects a move beyond capacity creation toward building scale, Indian IP, stronger supply chains, and priority areas such as power electronics. This approach should help attract sustained global investment."

The first phase of ISM was announced in late 2021 and had an outlay of Rs 76,000 crore. It currently has 10 projects under construction, with four expected to begin chip production this year. The scheme was positioned as a cornerstone of India’s push to reduce import dependence and build strategic manufacturing capabilities.

India’s internal semiconductor demand over the next five years is expected to account for nearly 10% of global consumption, according to industry estimates, strengthening the business case for domestic manufacturing. However, semiconductor projects typically have construction timelines of 36–60 months, making long-term policy visibility critical.

Union IT minister Ashwini Vaishnaw said at an event in January that India aims to be among the world’s top four semiconductor manufacturing nations by 2032.