Semicon India 2.0: What’s new in the government's ₹1.27 lakh crore chip plan

A bigger bet on chips

The government has rolled out a revised version of its flagship semiconductor incentive scheme, Semicon India 2.0, with a significantly larger outlay of ₹1.27 lakh crore. The new plan, approved by the Union Cabinet on Tuesday, replaces the earlier Semicon India 1.0, which had a budget of ₹76,000 crore.

The move comes as India seeks to carve out a place in the global semiconductor supply chain, a sector currently dominated by Taiwan, South Korea, and the United States. Officials said the enhanced outlay reflects lessons learned from the first phase and aims to address industry feedback.

Key changes from version 1.0

The most visible change is the increased financial support. Under Semicon India 1.0, the government offered up to 50% of the project cost for setting up fabrication units. The new scheme retains this but adds a 30% incentive for building assembly, testing, marking, and packaging (ATMP) facilities.

Another major tweak is the inclusion of compound semiconductors and silicon photonics. The earlier version was largely focused on traditional silicon CMOS nodes. Now, the government is also targeting gallium nitride (GaN) and silicon carbide (SiC) chips, which are critical for electric vehicles and 5G infrastructure.

The application window, which was previously capped at 45 days, has been extended to 120 days. Industry bodies had flagged the short timeline as a deterrent for global firms. The new plan also allows multiple applications across different technology segments.

What remains unchanged

The core structure of the scheme remains intact. The government will continue to provide fiscal support through a combination of capital subsidy and interest subvention. The minimum investment threshold for a fab unit stays at ₹10,000 crore.

The requirement for a technology partner with proven commercial experience also remains. This clause had stymied several proposals in the first phase, as few global players were willing to share proprietary processes.

The timeline for achieving commercial production has been set at five years from the date of approval. Companies that fail to meet this deadline risk losing the incentives.

Industry response and job creation

The announcement has drawn cautious optimism from industry bodies. The India Electronics and Semiconductor Association (IESA) called it a “step in the right direction” but stressed the need for faster infrastructure clearances. State governments have been asked to identify land parcels and ensure uninterrupted power and water supply for chip fabs.

The government estimates the plan will create 1 lakh direct jobs and another 2.5 lakh indirect jobs over the next decade. Most of these are expected to come from ATMP units, which are less capital-intensive than fabrication plants.

India currently imports over 95% of its semiconductor requirements. The new scheme aims to bring that down to 70% by 2030, though officials admit this target is ambitious.

What happens next

The application window opens on August 1. The government expects to receive at least three major proposals in the first six months. A committee headed by the IT secretary will evaluate all applications. The first approvals could come by early 2027.