The Indian government intends to collaborate with private investors under the Semicon 2.0 program, which has a budget of 1.27 trillion rupees, to assist Indian companies in creating advanced semiconductor developments, including chips for artificial intelligence applications.
According to a senior official, the provisions of the Semicon 2.0 program, which provide incentives to Indian chip manufacturers in the form of equity capital, should stimulate the large investments required to create complex chips for technologies such as artificial intelligence.
Electronics and Information Technology Minister S. Krishnanu stated in an interview with PTI on Saturday that developing advanced chips may require investments amounting to thousands of crore rupees. He noted that the existing incentive scheme, tied to design, offers only about 15 crore rupees, whereas designing high-end chips requires 1000 crore rupees or more.
Since the government cannot cover all expenses, a combined model has been developed. Under this model, a venture capitalist investor or an individual who believes in the project's success invests funds, while the government participates in joint investments.
Earlier, the government approved the Semicon 2.0 program worth 1.27 trillion rupees (approximately 14 billion dollars) on July 15 to accelerate semiconductor manufacturing and design capabilities. This initiative will be effective for six years, starting from the financial year '27.
The government has not set an upper limit for investments in advanced chip design by Indian firms. Support will be provided in the form of grants and equity capital or linked to royalty payments. Krishnanu explained that the idea of joint investment has a dual purpose: firstly, increasing the total available funding, and secondly, delegating the selection process, as the government lacks such competence. The government will participate in investing when approved venture funds are involved.
Under the Indian Semiconductor Mission, the government has identified 105 startups already engaged in chip development. The main focus of Semicon is on deepening the design ecosystem. Krishnanu emphasized that through Semicon 2.0, the country should be capable of developing its own advanced chips, although he added that he is not yet confident about their domestic production capability.
Although the manufacturing of advanced chips may take time, their design will occur in the coming years. Currently, advanced chips are defined as semiconductors with nodes of 7 nanometers or less. India's first manufacturing unit will start operations using outdated 28-nanometer node technology, typically used for power electronics. The goal of approving Semicon 2.0 is to develop intellectual property (IP) and system designs for chips, which should elevate India to the status of a key country in semiconductor intellectual property design.
Last week, the Union Cabinet approved the second phase of the Indian Semiconductor Mission (ISM) with an allocation of 1.27 trillion rupees. Additionally, the second phase of the Mobile Phone Manufacturing Scheme was approved with investments of 62,500 crore rupees.
The Minister of Electronics and Information Technology of the Union, Ashwini Vaishnaw, stated that out of twelve projects for the manufacturing and packaging of semiconductor chips approved by the government under ISM, three have already commenced commercial production. Vaishnaw emphasized that the semiconductor industry is a foundational sector because all devices use semiconductor chips, and now the entire electronics product creation chain is covered.
Under the second phase of ISM, the government will provide a combination of grants and equity investments for the development of strategic and commercial chips in India. A fixed incentive of 30 percent will be set for the production of equipment, chemicals, gases, and materials.
According to Vaishnaw, the total investment under ISM is expected to reach 4 trillion rupees, with production amounting to 2 trillion rupees and exports reaching 1 trillion rupees. As of July 15, 2026, India had approved 12 projects with cumulative investments exceeding 1.60 trillion rupees under the flagship Indian Semiconductor Mission valued at 76,000 crore rupees.
The initial Indian Semiconductor Mission, approved by the Union Cabinet in December 2021, received approval for its first project in June 2023. This project concerned Micron's proposal to establish an Assembly, Testing, Marking, and Packaging (ATMP) unit for semiconductor chips in Sanand, Gujarat, with investments of $2.75 billion. Later that year, the government approved the first chip manufacturing project in India—a joint venture between Tata Group India and Taiwan's Powerchip Semiconductor Manufacturing Corporation with investments of approximately $11 billion, equivalent to about 91,000 crore rupees.
