The Union Budget 2026 has announced India Semiconductor Mission (ISM) 2.0 with an allocation of ₹1,000 crore for FY27. The new phase builds on the earlier India Semiconductor Mission, launched in December 2021 with a total outlay of ₹76,000 crore.
The first phase of the programme focused primarily on attracting semiconductor fabrication and outsourced assembly and testing (OSAT) facilities to India. Under this framework, the government targeted the establishment of domestic manufacturing capacity through partnerships with global and domestic investors.
As of Budget 2026, ten fabrication and OSAT projects are under construction, and four facilities are expected to begin commercial production in FY26. These projects include investments by companies such as Tata Electronics and Micron Technology.
Focus on Domestic Semiconductor Equipment Manufacturing
While the first phase concentrated on attracting fabrication plants, India Semiconductor Mission 2.0 expands the scope of intervention to upstream and downstream segments of the semiconductor value chain.
A central focus of the new phase is the development of domestic capabilities for wafer fabrication equipment. Under the earlier approach, Indian fabrication facilities continued to rely on imported equipment sourced primarily from suppliers based in the United States, the Netherlands and Japan.
The revised mission framework provides for the design, testing and domestic manufacturing of high-precision semiconductor manufacturing machinery used in chip fabrication and related processes. These equipment systems represent a major component of capital expenditure for fabrication plants and are currently procured almost entirely from overseas suppliers.
Localisation of Critical Materials and Inputs
India Semiconductor Mission 2.0 also introduces support for the domestic production of critical semiconductor-grade materials and consumables.
Semiconductor fabrication requires ultra-pure chemicals, specialty gases and ultra-high-purity water. These inputs are presently sourced largely through imports. The Budget 2026 framework provides for domestic manufacturing of such materials in order to support fabrication and OSAT facilities operating in the country.
The localisation of materials is intended to address supply-chain risks associated with dependence on external suppliers and to support operational continuity for semiconductor manufacturing units in India.
Indigenous Semiconductor Design Capabilities
In addition to equipment and materials, the revised mission places explicit emphasis on the development of indigenous semiconductor intellectual property and chip design capabilities.
Under the new framework, the mission includes provisions to support domestic semiconductor design and related research activities. The objective is to enable Indian entities to develop and commercialise semiconductor architectures and associated technologies, alongside manufacturing activity.
This expands the scope of the national semiconductor programme beyond fabrication and packaging into design-led capability creation.
Programme Scope Under Budget 2026
India Semiconductor Mission 2.0 introduces a broader value-chain approach covering equipment manufacturing, materials localisation and semiconductor design, in addition to fabrication and OSAT facilities supported under the original programme.
The ₹1,000 crore allocation for FY27 marks the first budgetary provision under the second phase of the mission. The expanded mandate is aimed at strengthening domestic capacity across multiple stages of semiconductor production and associated infrastructure under the national semiconductor policy framework.
