New Delhi (ABC Live):India Semiconductor Mission 2.0:  Semiconductors are no longer ordinary industrial components. Instead, they have become strategic infrastructure, shaping national capabilities in artificial intelligence, defence platforms, clean energy systems, telecommunications, automobiles, data centres, and cloud computing. Consequently, in the contemporary geopolitical economy, control over semiconductor supply chains increasingly determines economic resilience, strategic autonomy, and geopolitical leverage. Export controls on advanced chips, aggressive subsidy races among major economies, and the re-shoring of critical technologies have therefore placed semiconductors at the very centre of global competition.

For India, however, this global shift has exposed a persistent structural vulnerability. Despite being one of the world’s fastest-growing digital economies and a major consumer of electronics and IT services, India remains heavily dependent on imported semiconductors. In other words, market size alone has not translated into manufacturing depth or strategic resilience.

India’s Semiconductor Demand–Supply Gap

To understand why a policy reset became unavoidable, it is essential to look at the underlying demand–supply imbalance.

Taken together, this data clearly shows that India’s semiconductor challenge is not cyclical but structural. Therefore, the policy response required redesign rather than mere expansion.

ISM 1.0: Entry Into the Semiconductor Map, Not Ecosystem Mastery

It was against this backdrop that the Government launched India Semiconductor Mission (ISM) 1.0 in 2021. The first phase was shaped by urgency—pandemic-era chip shortages, supply-chain disruptions, and the immediate need to signal India’s seriousness as a manufacturing destination.

ISM 1.0 headline outcomes

On the one hand, ISM 1.0 succeeded in attracting attention and capital. On the other hand, it simultaneously revealed the limits of a fab-centric strategy in a sector driven by process learning, materials science, equipment ecosystems, and intellectual property. As a result, domestic value addition remained limited and ecosystem spillovers were slower than expected.

Rising Imports and the Silent Review Before Budget 2026–27

Despite approvals under ISM 1.0, India’s import dependence continued to grow. By FY 2023–24, semiconductor imports had reached ₹1.71 lakh crore. Consequently, it became clear that manufacturing presence alone does not ensure strategic resilience.

Importantly, no consolidated public evaluation report of ISM 1.0 was released before announcing ISM 2.0. Instead, policy learning occurred through:

• project-level PIB approvals,

• parliamentary questions and answers,

• budget speeches and fiscal notes, and

• industry consultations.

Taken together, these inputs produced a silent but substantive policy redesign, rather than a formally documented review.

ISM 2.0: From Fab Announcements to Capability Creation

Against this background, the launch of India Semiconductor Mission (ISM) 2.0 in the Union Budget for FY 2026–27 marks a decisive shift. Announced by Nirmala Sitharaman, ISM 2.0 is not positioned as a fab subsidy scheme. Rather, it is framed as a capability-building mission focused on ecosystem depth.

ISM 2.0 core design (Budget 2026–27)

Although the allocation appears modest, this is deliberate. In effect, ISM 2.0 prioritises knowledge accumulation over asset creation, recognising that competence compounds while capacity depreciates without ecosystem support.

ISM 1.0 vs ISM 2.0: A Structural Pivot

In essence, ISM 2.0 implicitly acknowledges that India cannot shortcut decades of semiconductor learning through subsidies alone. Instead, it shifts the emphasis to long-term capability building.

ECMS Expansion: Breadth to Complement Depth

At the same time, Budget 2026–27 expanded the Electronics Components Manufacturing Scheme (ECMS), recognising that import substitution is often faster at the components and materials layer.

Therefore, while ISM 2.0 builds depth, ECMS builds breadth. Together, they form a layered industrial strategy rather than isolated interventions.

Approved Projects: Scale Exists, Ecosystem Risk Remains

Consequently, the principal risk lies in creating stand-alone facilities that operate below capacity and deliver limited domestic spillovers.

Semiconductors Within a Broader “Chips-to-Cloud” Strategy

Meanwhile, Budget 2026–27 linked ISM 2.0 with reforms in IT services taxation and data-centre incentives.

As a result, ISM 2.0 operates within a stacked logic:
chips → systems → software → cloud → data economy.

Comparative Global Semiconductor Strategies: India vs US, EU, and Japan

In contrast to peers, India is the only major economy prioritising capability before capacity. Therefore, its success depends far more on execution quality than subsidy size.

Governance and Transparency Gaps

Nevertheless, despite clearer intent, official disclosures do not yet define:

• annual Indian IP creation targets,
• domestic value-addition benchmarks,
• supplier localisation ratios, or
• public reporting of R&D outputs.

Without these, ISM 2.0 risks becoming well-designed but outcome-opaque.

How We Verified

This report is based on Press Information Bureau releases, Union Budget 2026–27 documents, parliamentary questions and answers, and government-cited trade and investment data. Where outcome data was unavailable, limitations have been explicitly flagged on offcial website of India Semiconductor Mission.

Final Assessment on India Semiconductor Mission 2.0

ISM 1.0 brought India into the semiconductor conversation.
ISM 2.0 will determine whether India stays in it.

Ultimately, ISM 2.0 reflects policy maturity. However, its success will hinge on execution discipline, transparent metrics, and sustained ecosystem learning, rather than headline investment numbers.

Also, Read ABC Live Report;

Explained: SEMICON India 2025 and India’s Chip Ambitions