India wants a larger share of the manufacturing now concentrated in China. On July 15, the Union Cabinet backed that ambition with ₹1.9 lakh crore for two electronics schemes: ₹1.275 lakh crore for Semicon 2.0 and ₹62,500 crore for the Mobile Phone Manufacturing Scheme.
This is among India’s largest industrial policy commitments since the production-linked incentive schemes began. The first semiconductor programme brought fabrication and packaging projects to India. The two new schemes attempt something harder: raising domestic value addition and developing Indian technology.
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Semicon 2.0 moves beyond chip factories
The first semiconductor mission offered large capital subsidies for fabrication and packaging plants. Twelve manufacturing projects involving investment of more than ₹1.64 lakh crore have since been approved. Micron, Kaynes and CG Semi have begun commercial production, according to the Cabinet statement on Semicon 2.0.
Semicon 2.0 will continue to support fabs, including silicon, compound semiconductor and display plants. But much of its ₹1.275 lakh crore outlay is intended for the parts of the supply chain that India does not have.
Manufacturers of semiconductor equipment, materials, chemicals and gases will qualify for incentives. The scheme will also support chip design, packaging, research and training. Its design programme covers intellectual property, individual chips and complete systems. The first Indian semiconductor fab is scheduled to begin production in 2028.
These are sensible additions. A fabrication plant cannot operate as an isolated industrial project. It depends on chemicals, ultra-pure gases, precision equipment, testing facilities and trained engineers. Importing most of these inputs would leave Indian fabs exposed to high costs and disruptions abroad.
The research provision also deserves attention. India has begun its manufacturing programme with chips in the 28-nanometre to 110-nanometre range. Moving to smaller nodes will require sustained research rather than another round of capital subsidies. The government says 68,000 students have received chip-design training at 315 universities. The quality of that training will count for more than the enrolment number.
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Mobile phone manufacturing seeks more Indian content
The new Mobile Phone Manufacturing Scheme follows the production-linked incentive programme that ended on March 31. That programme helped India become the world’s second-largest mobile phone producer by volume. Mobile phone production reached ₹6.27 lakh crore in 2025-26, while exports rose to ₹2.60 lakh crore.
Much of the increase, however, came from assembling imported components. India has yet to secure a comparable share of the value generated by displays, memory chips, camera modules, processors and product design.
The five-year scheme tries to change this incentive structure. Manufacturers will receive 2.25% to 5% of eligible sales. Domestic sourcing of specified components can bring an additional incentive of up to 1.5%. Indian brands can claim another 3% for product design and research.
The government expects cumulative mobile phone production of about ₹39 lakh crore between 2026-27 and 2030-31, along with 60,000 direct jobs. These numbers assume that existing contract manufacturers expand and that component suppliers follow them into India.
Apple’s expansion through contract manufacturers has shown that India can build large assembly operations. It has not yet established that local companies can design globally competitive phones or own the technology inside them. The additional incentive for Indian brands addresses that weakness, though an incentive cannot create a successful brand by itself.
Component manufacturing should raise domestic value addition and reduce the import content of each phone. It may also produce better-paid technical jobs than assembly. But the process will take time. Component suppliers tend to locate near large customers only when orders are predictable and factories operate at scale.
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Semiconductor subsidies face a global contest
Semiconductor manufacturing is among the most capital-intensive businesses in the world. An advanced fabrication plant can cost more than $20 billion. It must run at high utilisation, update its equipment and secure customers before production begins. A subsidy can reduce the initial cost; it cannot ensure that the plant remains commercially viable.
India is also entering a contest financed by national treasuries. The United States has the CHIPS and Science Act. The European Union and Japan subsidise production, while South Korea backs Samsung and SK Hynix. Taiwan retains its lead through TSMC. China continues to spend heavily despite American restrictions on advanced equipment.
The supply chain is divided among a small group of countries and companies. American firms dominate much of chip design. Taiwan and South Korea lead fabrication. The Netherlands, Japan and the United States supply critical equipment. Japan and a few other producers control several chemicals and materials. India will have to persuade these suppliers that its market can support permanent operations.
That requires more than an approved outlay. Semiconductor investors work to time horizons longer than an Indian government’s term. Tax disputes, customs delays, trade restrictions or a change in subsidy rules can upset projects planned over 15 or 20 years.
The semiconductor mission has had political support since 2021. Semicon 2.0 extends that commitment and corrects the earlier emphasis on factories by providing for equipment, materials and design. Its success will be measured by operating fabs, locally made inputs and Indian intellectual property, rather than the value of projects approved.
The mobile scheme faces a similar test. India has proved that incentives can attract assembly. The next five years must show whether they can bring component makers, product design and Indian brands with them.