Govt to fast-track next round of India Semiconductor Mission

The government is planning to fast track approval of the next iteration of India Semiconductor Mission (ISM 2.0) with a cabinet note expected to be tabled by the end of October, government officials and industry executives said.

ISM 2.0 is likely to broaden the scheme’s support to include compound semiconductor fabs, advanced packaging, display fabs, capital equipment manufacturing, specialised chemicals & gas suppliers and fabless design companies, covering the entire semiconductor value chain, they said.

The industry has requested the government to double the financial outlay for the next iteration to $20 billion (about Rs 1.76 lakh crore) to attract more projects. The outlay has not been finalised yet, with the government expected to undertake more stakeholder consultation to gauge interest from the industry.

Also Read: India will command major share of $1 trillion global semiconductor market: PM Narendra Modi

Prime Minister Narendra Modi chaired a roundtable discussion with global semiconductor industry executives at the recently-concluded Semicon 2025 where the industry gave feedback on the ongoing projects and provided their inputs for the next iteration.

“The government has committed to fast track the approval for the ISM 2.0 scheme during the recent roundtable. The industry has sought substantially higher financial support, almost double the outlay compared to the previous scheme,” an executive present in the discussions told ET.

Government officials said that while the outlay has not been finalised, it is likely to exceed the previous outlay just to match the $10 billion figure under ISM 1.0, because the rupee has now further depreciated against the dollar.

Due to the broader scope, the incentives under the scheme will vary for each category, with the highest subsidies reserved for those setting up fabrication units for silicon wafers, while compound semiconductor units, which are relatively less capital intensive, will receive lesser subsidies, officials said. A portion of the outlay will also be earmarked for fabless semiconductor designs and MSMEs, officials said.

“The scheme is in its final stages of being drafted and a cabinet note is expected to go to the union cabinet for approval by the end of October, with applications expected by the end of the year,” a government official told ET, asking not to be named.

Industry executives said projects which have been approved under ISM 1.0 will now look to set up a local supply chain to procure materials, chemicals and gases locally, in a bid to compete in the global markets.

“We are trying to bring our overseas suppliers for necessary materials like chemicals and gases to India. The goal is to have local suppliers who can provide quick support, which is crucial for reacting to customer demand and reducing long turnaround times,” an executive in charge of procurement and supply chain for a semiconductor manufacturer told ET on condition of anonymity.

The executive added that the industry is rallying various assembly, testing, marking and packaging (ATMP) companies to set up base and create economies of scale and a unified business case to present to the government.

“We are looking at what the ISM 2.0 structure and contours are going to be. The government has indicated certain things. They have talked about design, fabless and supporting MSMEs. They have also talked about supporting the equipment manufacturers, tool makers, materials, chemicals and gas suppliers,” said Atul Lall, managing director, Dixon Technologies.

The contract manufacturer has plans to set up a display fabrication unit for LED panels, which will eventually move to more advanced OLED displays. The project is currently in a premature stage, with Dixon yet to identify a technology partner, indicating that the fab will require investment upwards of $3 billion to set up, which can be subsidised under ISM 2.0 if approved.

The government has approved 10 major projects under ISM 1.0, nearly exhausting its Rs 65,000 crore outlay. It extended fiscal support of flat 50% of the project cost to companies establishing semiconductor wafer fabrication units, display fabrication units, compound semiconductor manufacturing units and outsourced semiconductor assembly and test (OSAT) and ATMP packaging units.