The Cabinet’s approval of India Semiconductor Mission 2.0 changes the question facing the semiconductor programme. India no longer needs to prove that it can attract chip investments. It must show that public subsidies can create capabilities that survive after the incentives run out. The ₹1.275 lakh crore programme covers design, equipment and materials, fabrication, advanced packaging, research and talent. That breadth is welcome. It also makes execution harder.
The demand case is not in doubt. The Electronics and Information Technology Ministry now expects India’s domestic semiconductor market to reach $200 billion by 2035. NITI Aayog has set a separate ambition of building a $120–150 billion domestic semiconductor value chain by then. The difference between the two numbers is the policy problem: India may become a huge consumer of chips without capturing a commensurate share of their value.
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Electronics policy has already enlarged that gap. The government says electronics production has risen seven-fold in 11 years, exports eleven-fold and mobile phone exports 165-fold. These are substantial gains. They also increase the import bill for processors, memory, sensors and other components when domestic capability remains thin. A country can become an efficient exporter of finished devices while importing much of what gives those devices their value.
India semiconductor demand exposes the assembly gap
Rising semiconductor imports do not by themselves prove policy failure. No large electronics producer makes every component at home. The question is whether India’s imports are accompanied by a steady move into design, fabrication, equipment, materials and advanced packaging. At present, India remains heavily dependent on imported semiconductors and other high-value electronic components.
The first phase of the mission has produced more than announcements. Twelve manufacturing projects have been approved, with investments exceeding ₹1.64 lakh crore. Micron, Kaynes and CG Semi have begun commercial production. The first large silicon fabrication plant is scheduled for commissioning in 2028. These projects give India an industrial base from which to attempt the harder stages of the value chain.
Packaging and testing should not be dismissed as glorified assembly. Malaysia accounts for about 13% of global chip assembly, testing and packaging and has built a durable export industry around it. Advanced packaging is becoming more important as chipmakers combine specialised components in a single system. But packaging success does not automatically produce indigenous process technology, equipment, materials or valuable chip designs. India’s policy must use the early plants to pull those capabilities into the country.
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India Semiconductor Mission 2.0 needs policy endurance
Supply-chain diversification away from excessive concentration in East Asia gives India an opening. It does not confer an entitlement. Semiconductor firms compare electricity quality, water supply, logistics, tax rules, customs procedures, engineering talent and the depth of local suppliers. A large subsidy can secure a plant. It cannot compensate indefinitely for an unreliable industrial environment.
This is where India Semiconductor Mission 2.0 will be judged. The relevant measures are not the number of memoranda signed or foundation stones laid. They are the number of Indian suppliers qualified by global chipmakers, the share of local value added, the quality of design intellectual property, the movement of engineers from routine services into product development, and the ability of plants to win orders without permanent fiscal protection.
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The programme should also resist the temptation to define success as import substitution. Attempting to reproduce China’s semiconductor supply chain in its entirety would waste capital and delay entry into segments where Indian firms can compete. India has credible advantages in chip design, engineering talent, a large electronics market and a growing base in packaging. It can add strength in compound semiconductors, power electronics, equipment components and specialised materials.
No major economy seeks self-sufficiency in every class of chip. India needs a position in global supply chains that others find costly to replace. Lower imports may follow. The more important result would be an industry that designs, makes and exports products whose value is not exhausted by the subsidy that brought the factory to India.