Government notifies ₹1.27 lakh crore Semicon 2.0 scheme for chip ecosystem

Summary

• Scale of outlay: The Ministry of Electronics and Information Technology (MeitY) has officially notified the ₹1,27,500 crore Semicon 2.0 scheme, more than doubling the ₹76,000 crore allocation approved for the first phase.
• Full-value-chain support: The framework expands fiscal support across six strategic verticals, including silicon fabrication, display and compound semiconductors, advanced packaging, chip design, semiconductor equipment and materials, and R&D and talent development.
• Strategic chip focus: A high-level committee co-chaired by the Principal Scientific Adviser and the National Security Adviser will oversee the identification of more than 100 strategic chips spanning areas such as compute, memory, RF, power electronics, networking and sensors.

NEW DELHI, August 31, 2026 — The Union Government has officially notified the operational guidelines for Semicon 2.0, approving a fiscal outlay of ₹1.27 lakh crore ($15.2 billion) to strengthen domestic capabilities across semiconductor fabrication, advanced packaging, raw materials, manufacturing equipment and indigenous chip design.

The programme builds on the ₹76,000 crore Semicon India Programme approved in 2021 and significantly expands its scope from supporting semiconductor manufacturing and packaging to developing a broader domestic ecosystem covering critical inputs, equipment, design and research.

Under the framework notified by the Ministry of Electronics and Information Technology (MeitY), Semicon 2.0 is aimed at generating ₹4 lakh crore in fresh investments, ₹2 lakh crore in domestic electronics production and ₹1 lakh crore in exports over the programme lifecycle.

The scheme is organised around six strategic verticals: silicon-based semiconductor fabrication; display and compound semiconductor fabrication; advanced packaging, including ATMP and OSAT facilities; domestic fabless chip design; semiconductor capital equipment and specialised materials; and research, development and talent creation.

Fiscal support across the semiconductor value chain

Semicon 2.0 provides different levels of fiscal support depending on the type of semiconductor activity and the investment involved.

For CMOS-based silicon fabrication plants, the government will provide support equivalent to 40% of eligible capital expenditure on a pari-passu basis. Other semiconductor and display fabrication projects will be eligible for 35% of eligible capex, also on a pari-passu basis.

The framework provides 35% of eligible capital expenditure for advanced packaging projects, including ATMP and OSAT facilities. Conventional packaging projects will receive support equivalent to 25% of eligible capex.

The incentives extend beyond manufacturing. The chip-design component provides support for design infrastructure, risk capital and deployment-linked activities, helping domestic companies address some of the high costs associated with developing and commercialising new chip designs.

The programme also introduces dedicated support for semiconductor machinery, equipment and specialised materials, including eligible manufacturing and R&D activities involving electronic-grade gases and specialised chemicals.

For eligible R&D and talent-development projects, the framework provides support of up to 75% of project cost, including applicable state incentives.

The government has also specified eligibility and investment conditions for individual categories. The India Semiconductor Mission will serve as the nodal agency for implementing the programme. Projects will generally run for up to six years, while the initial application window will remain open for three years.

Strategic chip development and national security

A major element of Semicon 2.0 is the focus on developing semiconductor technologies considered important for critical infrastructure and national security.

The framework seeks to encourage the development of standardised intellectual property cores, system-on-chips (SoCs) and discrete semiconductor modules for applications spanning telecommunications, defence, power infrastructure and aviation.

A high-level expert committee co-chaired by the Principal Scientific Adviser (PSA) and the National Security Adviser (NSA) will identify and prioritise a portfolio of more than 100 strategic chips.

The priority areas are expected to cover six broad functional categories: compute, memory, radio frequency (RF), power electronics, networking and sensor technologies.

Startups, MSMEs and other eligible domestic entities, including qualifying firms owned by Overseas Citizens of India (OCIs), will be able to access risk capital and deployment-linked support for strategic chip development. Such assistance is intended to help address the substantial costs associated with chip design, fabrication preparation and commercial tape-outs.

Expanding support for equipment, materials and gases

The inclusion of semiconductor capital equipment and materials marks an important expansion of the policy framework.

India’s semiconductor ambitions depend not only on fabrication plants and packaging facilities but also on access to the specialised equipment and materials required to operate them. These include precision manufacturing equipment, cleanroom systems, electronic-grade gases and specialised chemicals used in semiconductor production.

Under the Semiconductor Capital Equipment and Materials (SCEM) vertical, eligible domestic and global manufacturers can receive fiscal support for qualifying manufacturing and R&D activities.

The policy is designed to strengthen upstream capabilities and reduce dependence on external supply chains for critical semiconductor inputs. This is particularly relevant as semiconductor manufacturing becomes increasingly sensitive to disruptions involving specialised materials, gases and production equipment.

With commercial production at early-stage fabrication facilities in Gujarat expected to come online in 2028, the broader policy framework is intended to develop the supporting industrial ecosystem required for semiconductor manufacturing in India.

Why this matters

• Strengthening the upstream supply chain: By extending support to semiconductor equipment, materials, gases and specialised chemicals, Semicon 2.0 seeks to reduce vulnerabilities that could disrupt domestic fabrication and packaging operations.
• Lowering barriers for chip-design companies: Developing proprietary silicon involves significant costs, particularly for mask preparation and tape-outs. Risk capital and deployment-linked incentives could help domestic fabless companies take more designs from development to commercialisation.
• Building strategic semiconductor capacity: The focus on more than 100 strategic chips places semiconductor development within a broader national-security and critical-infrastructure framework, with potential applications across defence, telecommunications, energy, transportation and other strategic sectors.
• Creating a broader semiconductor ecosystem: By combining fabrication, packaging, design, equipment, materials and R&D support, the programme moves beyond individual semiconductor projects towards a more integrated domestic value chain.

FAQs

Q1: How does Semicon 2.0 differ from the original Semicon India scheme?

Semicon 2.0 expands the total outlay to ₹1.27 lakh crore, compared with the ₹76,000 crore allocation for the first phase. It also broadens support to include upstream semiconductor equipment and materials, advanced packaging, strategic chip design, R&D and talent development.

Q2: What financial support is available for semiconductor manufacturing plants?

CMOS-based silicon fabs are eligible for 40% of eligible capital expenditure on a pari-passu basis. Other semiconductor and display fabrication projects are eligible for 35% of eligible capex.

Advanced packaging projects can receive 35% of eligible capex, while conventional packaging projects are eligible for 25% of eligible capex.

Q3: What support is available for semiconductor equipment and materials?

The SCEM vertical provides fiscal support for eligible manufacturing and R&D activities involving semiconductor equipment, materials, electronic-grade gases and specialised chemicals.

Q4: Who will identify the strategic chips to be prioritised?

A high-level committee co-chaired by the Principal Scientific Adviser and the National Security Adviser will oversee the identification and prioritisation of more than 100 strategic chips across areas including compute, memory, RF, power electronics, networking and sensors.

Q5: How long will Semicon 2.0 projects run?

Projects will generally have a duration of up to six years. The initial application window will remain open for three years.