the-road-to-ism-2-0-building-a-self-reliant-chip-ecosystem-in-india

India stands at a pivotal moment in global technology transformation, striving for self-reliance and leadership in semiconductors. Semiconductor chips are the fundamental components that power modern technologies, from smartphones and cloud infrastructure to artificial intelligence (AI).

The India Semiconductor Mission (ISM), launched in 2021, lays the foundation for developing domestic capabilities in semiconductor design, manufacturing, packaging, and supply chain logistics.

In this article, we discuss the evolution of ISM, its schemes, ongoing projects, and how it’s transforming the ecosystem, leading to the ambitious next phase: ISM 2.0. We also explore how ISM initiatives are set to kick-start a new era of electronics, particularly embedded electronics, in India.

What is the ISM?

The India Semiconductor Mission (ISM) is a government-led initiative designed to build a sustainable semiconductor and display manufacturing ecosystem. With an outlay of ₹76,000 crore (approximately, US $10 billion) under the Ministry of Electronics and Information Technology (MeitY), the mission focuses on developing semiconductor fabrication plants, assembly units, and display manufacturing to reduce India’s dependence on imports.

ISM also supports domestic innovation in chip design through financial and infrastructure incentives for indigenous startups. As the nodal agency, it oversees the implementation of semiconductor manufacturing, packaging, testing, and design schemes while fostering collaboration among academia, industry, and government for R&D and talent development.

The mission’s long-term goal is to establish India as a globally competitive semiconductor hub by nurturing the entire value chain, including chip design, fabrication, packaging, and integration within global supply networks.

The four pillar schemes under the ISM

The ISM operates through four key schemes, each addressing a specific stage of the semiconductor value chain.

1. Semiconductor Fabs scheme: Under the Production Linked Incentive (PLI) program, the Government of India provides up to 50% fiscal support of the project cost on a pari-passu basis for setting up semiconductor wafer fabrication (fab) units. The scheme is designed to attract large-scale investments in semiconductor manufacturing and reduce import dependence by developing domestic capabilities.

2. Display Fabs scheme: Also part of the PLI program, this scheme offers financial assistance of up to 50% of the project cost for establishing display manufacturing units based on TFT LCD and AMOLED technologies. It focuses on building India’s display manufacturing capacity.

3. Compound Semiconductor and ATMP/OSAT scheme: Under the same PLI framework, the government provides 30 to 50% fiscal support for setting up facilities in compound semiconductors, silicon photonics, sensors, and semiconductor assembly, testing, marking, and packaging (ATMP/OSAT). The scheme targets advanced technology segments and supports downstream activities in the semiconductor ecosystem.

4. Design Linked Incentive (DLI) scheme: The DLI scheme offers financial incentives such as reimbursement of up to 50% of eligible product design expenditures and deployment-linked incentives of four to six percent of net sales over five years. It aims to strengthen semiconductor design startups and micro, small, and medium enterprises (MSMEs) by supporting product development, infrastructure access, and intellectual property creation to expand India’s semiconductor design capabilities.

The PLI scheme

The Production Linked Incentive (PLI) scheme is the cornerstone of the India Semiconductor Mission (ISM). India has long been a global hub for chip design, with Bengaluru and Noida together accounting for more than 20% of the world’s chip design workforce.

However, the country has historically lacked domestic semiconductor manufacturing capabilities, relying on imports for nearly 90% of its chip requirements.

The PLI scheme provides fiscal incentives linked to output or sales, offering up to 50% financial support toward the cost of establishing semiconductor wafer fabs, display panel units, and ATMP/OSAT facilities. By tying support directly to incremental production, the program aims to expand domestic manufacturing capacity and enhance global competitiveness.

India’s demand for semiconductor chips is growing rapidly, with estimates suggesting a compound annual growth rate (CAGR) between 7.3 and 13.8% in the coming years. To meet this accelerating demand, developing a reliable domestic manufacturing base has become essential.

Large-scale semiconductor projects

Currently, ten semiconductor manufacturing projects have been approved under the ISM, distributed across six states: Gujarat, Punjab, Uttar Pradesh, Odisha, Andhra Pradesh, and Assam.

The approved projects are as follows:

1. Tata Electronics & Powerchip Semiconductor Manufacturing Corp (PSMC), Dholera, Gujarat
Tata Electronics, in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), is setting up a large semiconductor fabrication facility in Dholera, Gujarat, with an investment of around ₹91,000 crore. This is India’s first major commercial fab project.

The plant is designed as a state-of-the-art, AI-enabled 300mm facility with a manufacturing capacity of up to 50,000 wafers per month, targeting mature to mid-level semiconductor nodes such as 28, 40, and 90 for power chips, automotive MCUs, and industrial applications. The project is part of the Dholera Special Investment Region within the Delhi–Mumbai Industrial Corridor and is expected to create over 20,000 skilled jobs directly and indirectly.

The first batch of semiconductor production is anticipated by December 2025, with full operations targeted for 2026–27. Tata Electronics has partnered with PSMC for technology transfer and design support and is collaborating with companies, such as Merck for specialty chemicals and Tokyo Electron for fab equipment.

The company also plans to expand by building two additional fabs in Gujarat within the next five to seven years, aiming to establish a vertically integrated semiconductor ecosystem in India.

2. Micron Technology, Sanand, Gujarat
Micron Technology is investing approximately ₹22,516 crore in Sanand, Gujarat, to build an advanced semiconductor assembly, testing, marking, and packaging (ATMP) facility.

The project includes a phased ramp-up and focuses on DRAM and NAND packaging. Construction, managed by Tata Projects, is roughly 60% complete as of early 2025. The facility spans about 500,000 square feet of cleanroom space and will be one of the largest backend semiconductor fabrication units globally.

Construction is on track for completion and handover by December 2025, after which Micron will determine the official start of production. The facility is expected to generate around 5,000 direct and 15,000 indirect jobs.

3. CG Power & Industrial Pvt Ltd, Sanand, Gujarat
CG Power & Industrial Pvt Ltd, through its subsidiary CG Semi Pvt Ltd, is developing two advanced packaging units for chip assembly, testing, and post-test services. It represents India’s first end-to-end Outsourced Semiconductor Assembly and Test (OSAT) pilot line facility, located in Sanand, Gujarat.

The G1 facility, opened in August 2025, has a peak capacity of approximately 0.5 million units per day and is scheduled for commercial production in 2026. A larger G2 facility is under construction nearby and expected to be completed by the end of 2026, scaling capacity to 14.5 million units per day. The combined project is expected to create over 5,000 direct and indirect jobs.

Developed in collaboration with Japan’s Renesas Electronics and Thailand’s Stars Microelectronics, the two-phase project represents a total investment of ₹7,600 crore (around $870 million). The facilities will support both traditional and advanced packaging technologies, including QFN, QFP, SOIC, and advanced formats such as FC BGA and FC CSP. The chips will serve critical sectors, such as automotive, the Internet of Things (IoT), industrial, infrastructure, and 5G technologies.

4. Kaynes Semicon Pvt Ltd, Sanand, Gujarat
Kaynes Semicon Pvt Ltd, in partnership with California-based UST, is establishing an OSAT facility in Sanand, Gujarat. Pilot operations began in April 2025, with multi-month product validation trials currently underway. Commercial-scale deliveries are scheduled to start in October 2025 to key customers such as Alpha Omega Semiconductor, with full-scale production expected by January 2026.

The total investment for the project is approximately ₹3,330 crore, supported by the central and state governments alongside company funding. The facility will have an annual capacity of 2.3 billion units (about 6.3 million chips per day) and will focus on power MOSFETs, IGBTs, and IPMs serving industrial, automotive, electric vehicles (EVs), and consumer electronics sectors. It’s expected to generate around 1,000 direct jobs.

5. Continental Device India Ltd (CDIL), Mohali, Punjab
Continental Device India Ltd (CDIL), headquartered in Mohali, Punjab, has been a leading semiconductor manufacturer in India since 1964. The company specializes in silicon-based semiconductor chips and high-power discrete devices such as MOSFETs, IGBTs, Schottky diodes, and transistors made from both silicon and silicon carbide.

CDIL’s products are widely used domestically and exported to major markets, including the United States, Europe, China, and Australia. The company maintains strong collaborations with Indian strategic organizations such as ISRO, HAL, and BEL, as well as international partners including Infineon Technologies.

Under ISM, CDIL’s facility has been approved for a major brownfield expansion valued at ₹4,594 crore. The project aims to increase annual production capacity from 600 million to over 760 million semiconductor units, targeting sectors such as EVs and charging infrastructure, renewable energy, power conversion, industrial systems, and communication infrastructure.

In September 2023, CDIL inaugurated a new Surface Mount Semiconductor Packaging Line at the Mohali plant, becoming India’s first silicon carbide components manufacturer under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS). In February 2025, the company launched India’s first indigenous solar bypass diodes.

6. HCL–Foxconn Joint Venture, Uttar Pradesh
The HCL–Foxconn joint venture for a semiconductor manufacturing facility was officially approved in May 2025 as the sixth project under the India Semiconductor Mission. The plant will be located near the upcoming Jewar International Airport in Uttar Pradesh, within the Yamuna Expressway Industrial Development Authority (YEIDA) region.

The facility will manufacture display driver chips used in mobile phones, laptops, automobiles, PCs, and other display-based devices. It’s designed for a capacity of 20,000 wafers per month, producing approximately 36 million chips monthly. The project represents an investment of about ₹3,700 crore (roughly $435 million), with commercial production expected to begin in 2027.

The joint venture has secured 30 acres of land in the YEIDA area and is currently in the planning and approval phase for establishing an OSAT facility. HCL contributes decades of expertise in hardware development, while Foxconn brings global experience in electronics manufacturing and semiconductor assembly.

7. Tata Semiconductor Assembly and Test Pvt Ltd (TSAT), Jagiroad, Assam
Tata Semiconductor Assembly and Test Pvt Ltd (TSAT) is an indigenous greenfield semiconductor assembly and test facility located in Jagiroad, Morigaon district, Assam.

The project involves an investment of ₹27,000 crore (about US $3.2 billion). It’s designed to produce up to 48 million semiconductor chips per day using advanced packaging technologies such as wire bond, flip chip, and Integrated System in Package (ISIP) for applications across automotive, mobile devices, AI, and consumer electronics. The first phase is expected to be completed by mid-2025, with commercial production beginning in 2026. It’s projected to create over 27,000 direct and indirect jobs, significantly boosting industrialization and economic growth in Northeast India.

8. SicSem Private Limited, Bhubaneswar, Odisha
SicSem Private Limited, founded in December 2023 and based in Chennai, specializes in silicon carbide (SiC)–based compound semiconductors used in power electronics for EVs, fast chargers, renewable energy, data centers, industrial equipment, aerospace, and 5G/6G communications.

The company is establishing India’s first commercial compound semiconductor fab and an advanced ATMP (assembly, test, mark, and package) facility in the Info Valley industrial area of Bhubaneswar, Odisha. It’s a ₹4,600 crore (around US $523 million) project developed in collaboration with Clas-SiC Wafer Fab Ltd. from the UK and supported by ISM.

The facility will have an annual wafer start capacity of 60,000 wafers and a packaging capacity of 96 million chips per year. It’s expected to be operational by 2026, producing energy-efficient SiC MOSFETs, diodes, and power modules for sectors, such as EVs, renewable energy, telecom, industrial automation, aerospace, and power electronics. SicSem is also working with IIT Bhubaneswar to establish a Silicon Carbide Research and Innovation Center (SiCRIC) at the university.

9. 3D Glass Solutions Inc (3DGS), Bhubaneswar, Odisha
3D Glass Solutions Inc (3DGS) is setting up a vertically integrated advanced packaging and embedded glass substrate unit in Info Valley, Bhubaneswar.

The ₹1,943 crore (around US $220 million) project is backed by Heterogeneous Integration Packaging Solutions Pvt Ltd, supported by US technology majors including Intel, Lockheed Martin, and Applied Materials. It’s focused on cutting-edge packaging technologies, such as glass interposers with passives, silicon bridges, and 3D Heterogeneous Integration (3DHI) modules.

The plant will have an annual capacity of roughly 69,600 glass panel substrates, 50 million assembled units, and 13,200 3DHI modules. The packaged devices will serve high-end markets such as telecom, automotive, data centers, consumer electronics, and industrial electronics. The facility is expected to begin production within two to three years of the August 2025 cabinet approval.

10. ASIP (Advanced System in Package Technologies), Tirupati, Andhra Pradesh
ASIP is building a semiconductor manufacturing unit at the Electronic Manufacturing Cluster (EMC) near Tirupati International Airport with an investment of ₹468 crore (around $53 million). It’s an OSAT/ATMP facility focused on producing advanced packaging solutions for telecom, automotive, industrial, and consumer electronics.

The project, developed in collaboration with South Korea’s APACT Co. Ltd, will have an annual production capacity of 96 million semiconductor units. It’s expected to begin production within two to three years following the August 2025 cabinet approval.

Chip imports versus domestic capacity

India currently imports around 18 billion semiconductor chips annually, valued at ₹1.71 lakh crore (approximately US $22 billion), resulting in an 80 to 90% import dependency. Once all ISM-backed projects reach full-scale operations, domestic production capacity is expected to reach 10–15 billion chips per year. This would allow India to meet roughly 55 to 80% of its annual chip demand within the next five to seven years.

The country’s initial focus is on mature technology nodes (22 to 65nm), which are well-suited for automotive, IoT, telecom, and industrial applications. Most packaging and OSAT facilities are running pilot or commissioning batches by 2025, while large wafer fabs are expected to begin production between 2026 and 2028 as construction and technology partnerships advance.

As the ecosystem matures, it’s expected to enable future progression toward more advanced nodes.

The DLI scheme

The Design Linked Incentive (DLI) scheme under ISM is driving a domestic chip design movement by supporting 23 advanced design projects and enabling 72 startups and MSMEs to access world-class EDA tools and infrastructure.

Notable startups supported under the DLI scheme include:

Vervesemi Microelectronics – IP-rich fabless firm specializing in aerospace, defense, and industrial ICs
Netrasemi – Chip design for smart vision and IoT
Mindgrove Technologies – Focused on surveillance and edge devices
Fermionic Design – Developer of satellite communication chips
Saankhya Labs – Wireless and telecom chip specialist
Other participants – Signalchip Innovations, Chipmonk Microsystems, Sensesemi, Morphing Machines, InCore Semiconductors, BigEndian, and Vayavya Labs

Collectively, these startups focus on applications such as smart cameras, metering, communications, automotive systems, and defense technologies, contributing to India’s strategic self-reliance in semiconductor design.

Building a national semiconductor supply chain

ISM projects are geographically distributed to establish a national supply and logistics network for semiconductor manufacturing. Fabs, packaging facilities, and design centers are spread across six major states, interconnected through industrial corridors and special economic zones (SEZs).

Initiatives are underway to localize silicon wafers, high-purity gases, specialty chemicals, and semiconductor-grade machinery. India is also developing supporting logistics infrastructure, including warehousing, transportation, and controlled-environment systems for safe wafer and chip movement, along with digital supply-chain platforms for quality, inventory, and process monitoring.

The country is forming strategic partnerships to integrate into global supply networks, strengthening competitiveness in exports and technology collaboration.

Transitioning to ISM 2.0

The rollout of ISM 2.0 is imminent. The Ministry of Electronics and Information Technology (MeitY) is in the final stages of preparing the updated scheme and is expected to submit a Cabinet note for approval by the end of October 2025. ISM 2.0 represents a major leap forward, doubling investment, broadening the program’s scope, and addressing critical ecosystem gaps.

While ISM was launched with a financial outlay of ₹76,000 crore (around $10 billion), ISM 2.0 involves an investment of approximately ₹1.76 lakh crore (about US $20 billion). The new phase expands coverage to include compound semiconductor fabs, capital equipment manufacturing, raw materials, chemicals, and a broader range of ancillary industries. It introduces a larger budget and enhanced DLI support for indigenous design, IP development, and fabless ecosystem growth.

Unlike ISM’s limited focus on workforce development, ISM 2.0 emphasizes creating a talent pipeline of 275,000 semiconductor professionals by 2030 through Centers of Excellence and updated academic curricula. It also highlights advanced and compound semiconductor technologies such as silicon carbide (SiC), aligning them with strategic sectors including EVs, defense, and telecom.

ISM 2.0 will promote full-stack innovation, implement stronger measures to retain IP, and integrate Indian players more deeply into global supply chains. While ISM centered primarily on manufacturing and design, the next phase will build a comprehensive ecosystem that includes equipment, materials, and service suppliers. Its goal is to accelerate scale, innovation, and competitiveness, positioning India to capture a significant share of the global semiconductor market by 2030.

Conclusion

India’s transition from a major chip importer to a semiconductor manufacturer and innovator is gaining momentum. Backed by strong government vision, startup energy, private-sector investment, and global partnerships, the India Semiconductor Mission is laying the foundation for long-term technological self-reliance.

The leap to ISM 2.0 reflects India’s ambition to integrate more fully into the global semiconductor ecosystem, drive innovation, and secure strategic national interests. Over the next decade, India is set to expand manufacturing capacity, deepen design-led innovation, and advance into AI and cloud-enabled semiconductor technologies.