India Semiconductor Mission
Why in News?
• The Union Government has decided to retain the pari passu funding model under India Semiconductor Mission (ISM) 2.0, signalling continued emphasis on fiscal discipline and accountable subsidy disbursal.
• The move comes as India accelerates efforts to build a self-reliant semiconductor ecosystem and reduce dependence on imported chips.
India Semiconductor Mission
• The India Semiconductor Mission is a flagship initiative launched in 2021 to develop India as a global hub for semiconductor and display manufacturing.
• The mission aims to strengthen domestic capabilities in chip fabrication, assembly, packaging, testing, and semiconductor design.
• Semiconductors are essential for sectors such as telecommunications, defence, automobiles, healthcare, satellites, AI, and consumer electronics.
• The mission aligns with the broader vision of Make in India and Make for the World.
India Semiconductor Mission 1.0
• ISM 1.0 was approved by the Union Cabinet in December 2021 with an outlay of ₹76,000 crore.
• The mission provides up to 50% fiscal support for semiconductor fabs, display fabs, packaging facilities, and chip design initiatives.
• By May 2026, approved investments crossed ₹1.64 lakh crore, exceeding the original target of ₹1.6 lakh crore.
• Around 10 projects across 6 states have been approved, including silicon fabs, semiconductor packaging units, and specialised testing infrastructure.
India Semiconductor Mission 2.0
• ISM 2.0 focuses on moving beyond manufacturing capacity toward building a complete semiconductor ecosystem.
• The Union Budget 2026–27 allocated ₹1,000 crore for ISM 2.0.
• The new phase emphasises:
o Semiconductor equipment manufacturing.
o Specialty chemicals and materials.
o Advanced display technologies.
o Design-led innovation and intellectual property creation.
o Research, training centres, and talent development.
• ISM 2.0 aims to generate high-quality employment and accelerate capital investment in strategic technology sectors.
Major Schemes under ISM
1. Semiconductor Fabs Scheme
• Provides up to 50% fiscal support for semiconductor wafer fabrication plants.
2. Display Fabs Scheme
• Supports AMOLED and LCD display fabrication units with up to 50% financial assistance.
3. Compound Semiconductor & ATMP/OSAT Scheme
• Supports semiconductor assembly, testing, packaging, and compound semiconductor units.
4. Design Linked Incentive (DLI) Scheme
• Has an outlay of ₹1,000 crore.
• Supports startups and MSMEs involved in semiconductor design and innovation.
• Provides incentives of up to ₹15 crore per company.
Strategic Importance of ISM
• India currently depends heavily on imported semiconductors and electronic components.
• Semiconductor self-reliance is crucial for economic security, digital sovereignty, and national security.
• The COVID-19 pandemic exposed vulnerabilities in global chip supply chains, affecting over 169 industries worldwide.
• Global semiconductor production remains concentrated in a few countries such as Taiwan, South Korea, Japan, China, and United States.
• Taiwan alone produces over 60% of global semiconductors and nearly 90% of advanced chips.
Market Growth & Economic Potential
• India’s semiconductor market was valued at about $38 billion in 2023.
• It reached nearly $45–50 billion during 2024–25.
• The market is projected to grow to $100–110 billion by 2030.
• ISM aims to position India as both a manufacturing base and global supplier in semiconductor value chains. Pari Passu Funding Model
• Pari passu is a Latin term meaning “on equal footing.”
• Under this model, government incentives are released in proportion to the company’s actual investment expenditure rather than being given upfront.
• This ensures that public funds move alongside private investment, reducing risks of cost overruns, delays, and misuse of subsidies.
• The model improves financial accountability, fiscal prudence, and investor confidence.
• The Centre has retained this mechanism in ISM 2.0 due to its success in attracting serious long-term investment.
Important Concepts
Semiconductor
• A semiconductor is a material with conductivity between a conductor and insulator, forming the foundation of electronic devices.
Microprocessor
• A microprocessor is a semiconductor chip that acts as the Central Processing Unit (CPU) of a computer.
Chip Fabrication (Fab)
• Fabrication refers to the manufacturing of semiconductor wafers and integrated circuits.
Key Challenges
• Semiconductor manufacturing is highly capital intensive and technology intensive.
• India still faces dependence on imported equipment, raw materials, and advanced technology.
• The sector requires massive investments in power supply, water availability, precision infrastructure, and skilled workforce.
• Global geopolitical tensions and supply chain concentration continue to create vulnerabilities.