Aug 27, 2025
20
mins read
The India Semiconductor Mission (ISM) is a pivotal government initiative aimed at positioning India as a global hub for semiconductor and display manufacturing. Launched in 2021 with a ₹76,000 crore outlay under the Ministry of Electronics and IT(MeitY), ISM spearheads the development of a vibrant chip-making ecosystem. It functions as an independent division within the Digital India Corporation, empowered to catalyze India’s semiconductor design, manufacturing, and packaging capabilities. By attracting investments and fostering advanced fabrication and R&D, ISM seeks to reduce India’s heavy reliance on imported chips and propel the country towards technological self-reliance. In essence, this mission is central to India’s ambition of becoming a major player in the global electronics supply chain, driving economic growth, innovation, and job creation in the tech sector.
Image Credit: The Economic Times
The Union Cabinet recently approved four new semiconductor manufacturing projects in the states of Odisha, Punjab, and Andhra Pradesh under the India Semiconductor Mission (ISM).
With these four additions, the total approved projects under ISM has reached 10 projects across 6 states, entailing cumulative investment commitments of around ₹1.60 lakh crore. This reflects a significant push by the government to build a robust domestic semiconductor ecosystem.
Table of content
What is ISM?
It is a specialized and independent business division under MeitY (Ministry of Electronics and IT), functioning within the Digital India Corporation. ISM serves as the nodal agency for coordinating and executing India’s semiconductor and display industry development programs.
Objectives: The mission’s core aim is to build a vibrant semiconductor and display ecosystem in India and enable the country’s emergence as a global hub for electronics manufacturing and design. It is tasked with catalyzing growth across semiconductor fabrication, packaging, and chip design domains.
Authority: ISM has been granted full administrative and financial authority to drive the semiconductor program, and it is guided by an advisory board of global semiconductor experts. This empowers the mission to make swift decisions to foster the semiconductor ecosystem.
Semicon India Programme
ISM is the implementing agency for the Semicon India Programme, a comprehensive initiative launched in 2021 with ₹76,000 crore financial outlay. Under this program, ISM oversees multiple schemes offering fiscal support to encourage:
Scheme for setting up of Semiconductor Fabs in India.
Scheme for setting up of Display Fabs in India.
Scheme for setting up of Compound Semiconductors/Silicon Photonics/ Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP)/OSAT facilities in India.
Design Linked Incentive (DLI) Scheme
Scheme for setting up of Semiconductor Fabs in India: Setting up cutting-edge silicon wafer fabrication plants in India (with up to 50% government fiscal support).
Scheme for setting up of Display Fabs in India: Establishing display panel fabrication units (TFT LCD, AMOLED) with financial incentives to develop a display manufacturing base.
Scheme for setting up of Compound Semiconductors/Silicon Photonics/ Sensors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP)/OSAT facilities in India: Building units for compound semiconductors (e.g., silicon carbide, gallium nitride), photonic sensors, and ATMP/OSAT (Assembly, Testing, Marking, Packaging) facilities (with ~30–50% CapEx support). This encourages downstream packaging and specialty chip production in India.
Design Linked Incentive (DLI) Scheme: Nurturing semiconductor chip design firms through financial incentives and infrastructure support across various stages of IC/SoC development. For example, the DLI scheme offers reimbursement of up to 50% of design costs and incentives on net sales of designed chips.
Related Incentives: Alongside ISM, the government has rolled out Production-Linked Incentive (PLI) schemes to boost electronics manufacturing (e.g., for smartphones, IT hardware) which indirectly support semiconductor demand. Moreover, a “Chips to Startups” program aims to train 85,000 engineers in semiconductor design and support 50% of expenses for startups under DLI.
Massive Government Backing:
The Indian government has demonstrated strong commitment to semiconductors by approving numerous projects with attractive incentives.
As noted, 10 semiconductor projects have been approved under ISM, with total investments of about ₹1.60 lakh crore committed across six states. This includes semiconductor fabs, ATMP units, and display fabs supported by central and state subsidies.
Recent Big Investments:
Three flagship projects approved in 2024 involve an investment of ₹1.26 lakh crore (including ₹76,000 crore government support):
A 28nm Semiconductor Fab in Dholera, Gujarat by Tata Electronics in partnership with Powerchip (Taiwan), costing ₹91,000 cr and planned to output 50,000 wafers/month.
An ATMP facility in Assam by Tata’s TSAT, ₹27,000 cr investment, to assemble/test up to 48 million chips per day for automotive and EV sectors.
A specialized chip ATMP unit in Sanand, Gujarat by a consortium (CG Power with Renesas Japan and a Thai firm) at ₹7,600 cr, for manufacturing chips for consumer and automotive uses. (Construction of these plants was slated to begin within 100 days of approval)
Holistic Ecosystem Development
Importantly, government support isn’t limited to fabs. Incentives span the entire value chain – from chip design (via DLI grants) to display manufacturing and advanced packaging. This holistic approach is evident in the Semicon India Programme’s four schemes (for fabs, display fabs, compound/ATMP units, and design). By mid-2025, four new proposals were also approved focusing on compound semiconductors and advanced packaging (e.g., India’s first silicon carbide fab in Odisha, an advanced glass substrate packaging unit, etc.). These niche projects highlight India’s push into emerging semiconductor technologies.
State Initiatives: Several Indian states have complemented ISM by releasing their own semiconductor policies (e.g. Gujarat, Maharashtra, Karnataka, Uttar Pradesh) offering land, infrastructure, and additional subsidies to attract chipmakers. The synergy of central and state efforts is creating a more investor-friendly environment for semiconductor firms.
Growing Market:
expanding rapidly,
fueled by rising demand in sectors like telecommunications, IT, consumer electronics, automotive, and industrial electronics.
In 2023, the Indian semiconductor market was valued around $23.2 billion, and it is projected to reach $80+ billion by 2028 (at an impressive ~17% CAGR).
Current Dependence on Imports:
Despite growth in demand, domestic production of semiconductors is currently limited – India still imports the vast majority of its semiconductor components and chips.
Around 65–70% of India’s electronic components (including semiconductors) are imported, mainly from China, Taiwan, South Korea, etc.
Until the new fabs come online, almost all high-end semiconductor chips needed for electronics (100% in certain categories) must be sourced from abroad.
Limited Existing Fab Capacity:
Historically, India has had only a handful of semiconductor fabs, primarily for strategic purposes.
The country’s existing fabrication facilities – like SCL in Mohali (Punjab) and a GaAs fab in Bengaluru – are older and serve defense or space needs, not mass commercial production.
Many global semiconductor companies have design/R&D centers in India (over 90% have a presence), but none had established large-scale fabs here until now.
This gap in manufacturing means India’s talented chip designers had to send designs overseas for fabrication.
Momentum for Change:
Government initiatives under ISM and related schemes are attempting to change this scenario.
The approvals of new fabs and assembly units are the first steps toward creating an end-to-end semiconductor ecosystem domestically.
If these projects execute as planned, India will significantly augment its capacity in coming years – moving from zero advanced node fabs to at least a few, and from importing chips to making a chunk of them locally.
This will strengthen India’s electronics supply chain and potentially make it an exporter of certain chips in the long run.
With sustained policy support and private investment, India is poised to evolve into a vibrant semiconductor hub that can not only meet domestic needs but also integrate into global supply networks.
Theme | Explanation |
Concentrated Global Supply | - Taiwan: Produces 90% of the world's advanced 5nm semiconductor chips (TSMC). - Taiwan + South Korea: 80% of global semiconductor fabs / foundry capacity. - US & Europe: Lead in chip design and manufacturing equipment. - Japan: Dominates materials supply. |
Supply Chain Vulnerabilities | - COVID-19: Disrupted East Asia → global semiconductor shortage (autos, electronics, gaming). - Geopolitics: US–China trade disputes, Taiwan tension. - Russia–Ukraine War: Shortages of neon gas, palladium critical for semiconductor wafer fabrication facilities. |
Impact on India | - Heavy import dependence (India imports most chips for electronics manufacturing). - 2021–22: Indian automakers cut production due to chip shortage. - Urgency for India Semiconductor Mission (ISM) & Semicon India programme to create local fabs. - Semiconductors are now seen as the “new oil” → crucial for electronics and information technology. |
Chip Wars & Tech Nationalism | - Global race in semiconductor manufacturing. - US CHIPS Act ($52B), EU Chips Act (€43B). - Export controls: US restrictions on China (<7nm tech). - India’s Strategy: Through India Semiconductor Mission ISM, build semiconductor fabs, promote outsourced semiconductor assembly (OSAT), and collaborate with US, Japan, Taiwan. |
India’s Aspirations | - Aim: Become a global hub in the global semiconductor industry. - Support via Semicon India: incentives for fabs, ATMP, display fabs, and design. - Long-term goal: Reduce imports, integrate into global supply chain, and strengthen electronics manufacturing. |
Integral to the Ecosystem:
Display manufacturing (for OLED, LCD panels, etc.) is a critical segment of the electronics value chain that India is also targeting.
Displays are used in everything from smartphones and TVs to automotive screens, and currently India imports most display panels.
Under the ISM’s mandate to build a complete “semiconductor and display” ecosystem, dedicated schemes encourage setting up display fabs domestically.
Government Initiatives for Displays:
The Scheme for setting up of Display Fabs in India offers financial support (up to 50% of project cost) to attract manufacturers of Gen 6/Gen 8 LCD or AMOLED display panels.
The goal is to establish at least a couple of state-of-the-art display fabrication units in India.
Challenge | Details (Concise for UPSC) |
High Capital Investment | Setting up a fab costs $3–7 billion (₹25k–58k cr) per unit – very capital-intensive. |
Funding Constraints | Govt. has earmarked ₹76,000 cr, but experts say more support is needed for display fabs, packaging/testing units, and design centers. |
Infrastructure Needs | Requires 24×7 uninterrupted power and ultra-pure water; even seconds of disruption can ruin wafer batches. |
Location Constraints | Only select states (Gujarat, Karnataka, Telangana, Tamil Nadu) have suitable power, water, and cleanroom-ready infrastructure. |
Regulatory Clearances | Multiple approvals needed – environmental, foreign tech licensing (e.g., sub-5nm process needs export approval). |
Tech Access Limits | Advanced equipment like EUV lithography monopolized by ASML (Netherlands), very costly and restricted. |
Talent Gap | India faces a shortage of 2.5–3 lakh skilled semiconductor professionals by 2027. |
Workforce Development | Govt. has launched training via universities and “Chips to Startups,” but results will take time; firms rely on expat experts initially. |
Technology Lag | Current projects focus on 28nm+ nodes, while global leaders (TSMC, Samsung) are at 3nm–2nm. |
Weak R&D/Innovation | Limited indigenous IP in chip design; Bharat Semiconductor Research Centre (Mohali) being set up to improve R&D. |
Global Competition | US, EU offer larger subsidies (CHIPS Act, EU Chips Act). India must compete with giants like TSMC, Intel, Samsung on cost & scale. |
Soaring Chip Demand from Emerging Tech
Key drivers: AI, IoT, 5G/6G, autonomous vehicles, renewable energy.
Chips power: AI accelerators, IoT sensors, 5G base stations, EV systems, solar power management.
India’s strengths: Large IT workforce, startup ecosystem → rising demand for advanced chips.
Relevance to India: Supports Industry 4.0, robotics, drones, quantum computing.
Niche Focus – Compound Semiconductors & Specialty Chips
India targeting compound semiconductors (Silicon Carbide, Gallium Nitride).
Applications: EV inverters, defense radars, 5G radios, solar inverters.
Example: First SiC fab approved in Odisha for EVs and defense needs.
Other focus areas: MEMS sensors, photonic chips, advanced packaging.
Strategic gain: Position India as a global supplier in niche chip markets.
Advanced Packaging & Design Innovation
India’s advantage: Strong chip design workforce (working with global majors).
Next steps: Promote fabless design startups (AI processors, affordable 5G chips).
Support: Design Linked Incentive (DLI) scheme.
Packaging frontier: 3D heterogeneous integration, chiplet design.
Example: Odisha project by 3DGS → glass-based 3D packaging.
Government R&D Support
SCL MOhali upgrade with ₹10,000 cr → Bharat Semiconductor Research Centre.
Focus: Chips for space, defense, mass electronics.
Talent push: 60,000+ students trained, 300+ institutes equipped with design tools.
Outcome: Seeding next-gen Indian semiconductor innovators.
Long-Term Vision (2030 & Beyond)
Global semiconductor market: projected $1 trillion by 2030.
India’s target: 10% market share.
Future roadmap:
Multiple fabs (28nm, later 14nm & 10nm).
Thriving fabless design sector.
Integrated supply chain of materials & equipment.
Impact: From importer to global semiconductor hub within 10–20 years.
Q. What is the India Semiconductor Mission (ISM)?
A. ISM is a government initiative to strengthen India’s semiconductor manufacturing and design ecosystem.
Q. Why is semiconductor manufacturing important for India?
A. It reduces import dependence, boosts domestic capability, and supports future technologies like AI, EVs, and 5G.
Q. What is the current status of India’s semiconductor industry?
A. The industry is growing rapidly but still relies heavily on imports for semiconductor chips.
Q. What are semiconductor fabs and their significance?
A. Semiconductor fabs are wafer fabrication facilities producing chips, critical for electronics manufacturing and supply chains.
Q. How does India Semiconductor Mission (ISM) support electronics manufacturing?
A. ISM provides fiscal incentives for fabs, design, and outsourced semiconductor assembly and testing units.
The India Semiconductor Mission represents a transformative step in the country’s journey towards tech self-reliance. By backing chip manufacturing and design through generous incentives and policy support, India has signaled its intent to become a significant player in the global semiconductor arena. The recent approvals of multiple fabrication and packaging units across different states show tangible progress.
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