India Widens Semicon 2.0 Incentives — Bigger Subsidies for Domestic Chipmakers

July 10, 2026 4 min read

India's government has announced a significant expansion of its Semicon 2.0 semiconductor incentive programme, widening the scope of subsidies and support available to domestic chip manufacturers. The move signals a renewed push to establish India as a global semiconductor hub after the first edition of the programme drew mixed results. Officials confirmed the updated framework will offer increased financial backing across more segments of the supply chain, from design to fabrication.

Expanded incentive framework

The revised Semicon 2.0 programme broadens eligibility criteria for companies seeking government support. Under the updated structure, firms can access higher subsidy caps compared to the original scheme, which launched with a budget of around $10 billion. The changes aim to address earlier challenges where several approved projects faced delays or were abandoned due to funding gaps and technical hurdles. Government sources indicated the new framework provides more flexible disbursement terms to reduce bottlenecks that slowed progress under Semicon 1.0.

Why the programme matters

Semiconductors have become a strategic priority for nations seeking to reduce reliance on imports, particularly from Taiwan, South Korea, and the United States. India's push into chip manufacturing aligns with global efforts to diversify supply chains, driven by geopolitical tensions and pandemic-era shortages that exposed vulnerabilities in electronics manufacturing. The government has framed semiconductors as essential infrastructure for everything from smartphones to electric vehicles and defence systems.

India currently imports nearly all its semiconductor requirements, spending billions of dollars annually on chips used in consumer electronics, automotive components, and telecommunications equipment. Building domestic capacity would reduce this trade deficit while creating skilled jobs in high-technology sectors. The Semicon programme also fits into India's broader manufacturing push under its Make in India initiative.

First edition shortcomings

The original Semicon India programme approved several high-profile projects, including a chip fabrication plant proposed by the Vedanta-Foxconn joint venture in Gujarat. That project ultimately fell apart in 2023 after the two partners failed to resolve disagreements over technology sharing and investment terms. The collapse highlighted the difficulty of attracting leading-edge semiconductor technology to India, where the ecosystem for advanced chipmaking remains underdeveloped compared to established hubs like Taiwan or South Korea.

Other approved applications under the first programme also struggled to meet milestones. Some companies cited challenges including rising costs for specialised equipment, difficulty sourcing components, and shortages of trained engineers. The government responded by extending deadlines and relaxing certain conditions before ultimately deciding to redesign the programme entirely.

New strategic direction

Semicon 2.0 places greater emphasis on the entire semiconductor value chain rather than focusing primarily on large fabrication plants. The updated approach supports chip design, research and development, packaging facilities, and testing operations alongside manufacturing. This wider focus reflects advice from industry consultants who argued India could more quickly build competitive advantage in specialised segments rather than attempting to compete directly in cutting-edge logic chip production.

The programme will also offer enhanced support for talent development, a critical gap identified during the first round. Universities and training institutes are expected to receive funding to develop specialised semiconductor engineering programmes. Several Indian technology companies have already announced partnerships with international firms to train engineers in chip design and verification.

Industry response

Semiconductor industry executives have welcomed the revised approach, though some remain cautious about India's timeline for becoming a significant player in global chip supply. Industry groups have pointed to the need for consistent policy support across government changes, reliable power infrastructure, and streamlined regulatory approvals as essential conditions for success. The government has pledged to fast-track environmental and land-use clearances for approved semiconductor projects.

International chip companies continue to evaluate opportunities in India, with several firms conducting feasibility studies for potential investments. The presence of a large and growing domestic market for electronics provides a natural customer base for any production facilities established in the country.

What happens next

The government is expected to open the revised Semicon 2.0 application window within the coming months. Companies and consortiums interested in participating will submit proposals for evaluation by a panel comprising officials from the Ministry of Electronics and IT and independent experts. Approved projects will receive letters of intent followed by formal agreements specifying milestones and disbursement schedules. Officials have suggested the first round of new approvals could be announced before the end of the fiscal year, giving successful applicants time to begin site preparation and equipment procurement.