Presenting the Union Budget 2026 in the Parliament today, Union Finance Minister Nirmala Sitharaman has announced the launch of India Semiconductor Mission 2.0 with a focus on equipment manufacturing, research and development (R&D), Intellectual Property (IP) creation, and developing a resilient supply chain.

India today consumes close to $50 billion worth of semiconductors annually, yet domestic manufacturing contributes less than $2 to $3 billion. With semiconductor consumption expected to cross $100 billion by 2030, capacity creation must now move faster than demand growth to avoid widening this gap.

India Semiconductor Mission (ISM) 1.0 expanded India’s semiconductor sector capabilities. “Building on this, we will launch ISM 2.0 to produce equipment and materials, design fullstack Indian IP, and fortify supply chains. We will also focus on industryled research and training centres to develop technology and skilled workforce. The Electronics Components Manufacturing Scheme, launched in April 2025 with an outlay of INR 22,919 crore, already has investment commitments at double the target. We propose to increase the outlay to INR 40,000 crore to capitalise on the momentum,” said the Union Finance Minister.

With an allocation of INR 40,000 crore for manufacturing electronics components, furthering the India semiconductor mission – India is moving beyond chip assembly to build a complete, self-reliant semiconductor ecosystem.

“The announcement of India Semiconductor Mission 2.0 and the proposal to raise the Electronics Components Manufacturing Scheme outlay to INR 40,000 crore marks a decisive shift from ecosystem creation to ecosystem deepening. ISM 2.0’s focus on equipment, materials, full stack design and Indian IP directly addresses the weakest layers of India’s semiconductor value chain, which have historically remained import dependent,” Ashok Mehta, founder of Suchi Semicon.

The emphasis on industry led research and training centres is equally critical. Semiconductor manufacturing is capital intensive, but it is fundamentally driven by process discipline, yield optimisation and skilled manpower. Backend manufacturing such as assembly, testing and advanced packaging can be operational within two to three years, compared to five to seven years for advanced fabrication plants, making it the fastest and most practical route to absorb domestic demand and generate high quality manufacturing employment at scale.

“The INR 40,000 crore semiconductor push reflects a clear reading of what the industry actually needs. The shift from fab-centric incentives to ecosystem enablement — design, packaging, testing, equipment, and talent — is the right structural move. For industry, the next unlock will come from speed, predictability, and consistency of execution, which will determine how quickly this intent converts into irreversible capability and global trust,” said Raghu Panicker, CEO Kaynes Semicon.

This Budget marks a clear inflection. ISM 2.0 moves India from chip assembly to full-stack semiconductor sovereignty — equipment, materials, IP, and skills. “Combined with ECMS expansion, PLI depth, rare-earth corridors, duty rationalisation, and logistics reform, this is now a coordinated industrial system play. The structure is right; realizing it at globally meaningful scale — measured in billions, not pilots — will depend on speed, predictability, and sustained execution,” Panicker added.

For fabless semiconductor companies, the emphasis on industry-led research and training centres is particularly important. Chip design is a deep-tech discipline that relies on specialised skills in architecture, verification, RF engineering and system integration. Strengthening this talent base is critical if India is to move beyond assembly and packaging towards owning core semiconductor IP.

Through ISM 2.0, India will develop modern chip design, manufacturing, and the entire semiconductor ecosystem, affirmed Union Minister Ashwini Vaishnaw.

The Budget adopts a calibrated, sector-specific approach to Make in India, including a near doubling of the outlay for electronics component manufacturing alongside targeted support across areas such as semiconductors, critical minerals, container manufacturing, R&D, design capabilities. In a challenging global environment, this approach signals policy resolve and could meaningfully influence long-term investment decisions and India’s positioning within global manufacturing value chains, said Abhishek Jain, partner and head, Indirect Tax, KPMG in India.

India Semiconductor Mission 2.0 is not merely a manufacturing initiative; it represents a strategic reset of India’s technology ambition. In the short term, the INR 40,000-crore outlay will catalyse private investment, strengthen chip design and advanced engineering capabilities, and generate immediate spillovers for IT services, electronics manufacturing, and deep-tech startups. “Crucially, by extending support beyond fabs to equipment, materials, and full-stack IP, the mission addresses a key bottleneck in India’s tech ecosystem -control over critical technologies. Over the long term, it positions India not just as a downstream adopter but as a creator of foundational digital infrastructure, driving resilient exports, higher-value innovation, and sustained competitiveness in the global technology economy,” said Raja Lahiri, partner and IT & ITes leader, Grant Thornton Bharat.

India Semiconductor Mission 2.0 marks a necessary shift from building assets to building real capability, with its focus on industry-led R&D, training, and full-stack Indian IP. The government’s move to exempt customs duties on critical minerals and to strengthen rare earth mining and processing through dedicated corridors is equally important, as secure access to materials underpins semiconductors, defence, and advanced electronics.

“ISM 2.0 presents a once-in-a-generation opportunity to reduce India’s dependence on imported chips to a more balanced 30–40 per cent through strong domestic companies. This would give Indian players meaningful leverage in global supply chains and highlight India’s strengths in deep engineering talent and scalable execution. What matters now is channeling funding to build Indian product companies that earn a seat at the global decision-making table. Indian companies are naturally frugal and globally oriented, and this is the moment to back passionate builders and take control of our semiconductor future,” said semiconductor industry veteran, Raja Manickam, founder & CEO, iVP Semi, and former CEO of TATA Electronics OSAT.