The Cabinet Clears Semicon 2.0: ₹1.27 Lakh Crore to Build the Rest of India's Chip Supply Chain

The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the second phase of the India Semiconductor Mission on 15 July 2026, sanctioning an outlay of ₹1.27 lakh crore for a scheme the government hopes will pull the country beyond its first cluster of chip factories and into the wider ecosystem of materials, equipment and design that a real semiconductor industry runs on. IT and electronics minister Ashwini Vaishnaw announced the decision, framing it around a familiar goal: self-reliance in the one supply chain no modern economy can do without.

From building fabs to building an ecosystem

India's first Semiconductor Mission, launched in 2021 with a ₹76,000 crore budget, was designed to do the hardest and most conspicuous thing first — get physical chip plants onto Indian soil. On that narrow measure it has worked. The government has cleared roughly a dozen projects, together representing well over ₹1.5 lakh crore of committed investment, spanning Micron's assembly-and-test plant in Sanand, the Tata–PSMC wafer fab at Dholera, Tata's packaging unit in Assam, and a run of OSAT (outsourced semiconductor assembly and test) lines from CG Semi, Kaynes and others. Several are now in commercial production.

But a fab is only the visible tip of a semiconductor industry. Behind it sits a vast and unglamorous supply chain: ultra-pure gases and chemicals, silicon wafers, photomasks, specialty materials, and the lithography, deposition and metrology tools that cost more than the buildings they sit in. Almost none of that exists in India today, which means even domestically "made" chips depend on imported inputs at nearly every step. Semicon 2.0 is explicitly aimed at that gap.

What is new in the second mission

The headline number — ₹1.27 lakh crore — is well above the first mission's outlay, but the more important shift is in what the money can be spent on. According to the government, the new scheme is written to cover the entire value chain, and for the first time extends incentives to suppliers of raw materials, including the minerals and industrial gases that feed chip manufacturing. That is a deliberate answer to the criticism that ISM 1.0 subsidised the assembly line while leaving India dependent on foreign vendors for everything that goes into it.

Vaishnaw said the government expects the scheme to catalyse investments of around ₹4 lakh crore over its lifetime and to enable semiconductor production worth roughly ₹2 lakh crore during the scheme period — figures that, like all such projections, will be judged by how many projects actually break ground.

The step that makes it official

Wednesday's Cabinet decision is the one that legally greenlights the mission, and it follows an earlier procedural milestone: the Expenditure Finance Committee, the finance ministry panel that vets big spending proposals, had cleared a draft outlay for Semicon 2.0 at the start of July. The EFC's nod is a recommendation; the Cabinet's is the authorisation that unlocks the money and lets the electronics ministry begin inviting and approving applications. In practical terms, the scheme now exists.

Why materials and equipment are the harder problem

There is a reason India tackled fabs first and materials second, and it is not sequencing for its own sake. Assembly and packaging are labour- and capital-intensive but technologically approachable; a country can buy the know-how and the tools and be productive relatively quickly. The materials-and-equipment layer is different. It is dominated by a handful of specialised global firms — many Japanese, American, Dutch and German — that have spent decades perfecting processes measured in atoms and parts-per-billion purities. Building even a modest domestic base in that layer means either persuading those firms to localise or nurturing Indian companies patient enough to compete on quality rather than price.

By writing incentives that reach all the way down to gases and minerals, Semicon 2.0 is betting that subsidy plus a guaranteed domestic customer base — the fabs and OSAT lines already coming online — can bootstrap that ecosystem. It is the same flywheel logic that has driven the whole mission: put the anchor factories in place, then use their demand to justify the suppliers around them.

The risks that don't go away

None of this is guaranteed. Semiconductor manufacturing is brutally cyclical, capital-hungry and unforgiving of delay, and India is entering it late against entrenched incumbents in Taiwan, South Korea, the United States, China and Japan. The first mission has shown that projects can be announced faster than they can be built, and that the gap between an approved proposal and a shipping chip is measured in years. A larger budget does not shorten that timeline; it widens the number of bets.

What Semicon 2.0 does do is signal that New Delhi understands the difference between owning a few factories and owning an industry — and is willing to spend to close it. Whether the materials, equipment and design ecosystem it is trying to conjure actually materialises will be the real test of India's chip ambitions over the rest of the decade.

Sources

• Cabinet approves Rs 1.27 lakh crore for Semiconductor Mission 2.0 — The Federal
• Cabinet approves Rs 1.27 lakh crore for Semicon Mission 2.0 — ThePrint
• Union Cabinet approves Semicon 2.0 with Rs 1.27 lakh crore outlay — Deccan Herald
• Cabinet Greenlights INR 1.27 Lakh Crore Semicon Mission 2.0 — StartupTalky