India’s Semiconductor Push Gets Bigger With Semicon 2.0

India has formally notified the Rs 1,27,500 crore Semicon 2.0 programme, taking the country’s Semiconductor strategy beyond attracting fabrication and packaging plants. The new framework covers chip design, equipment and materials, fabrication, advanced packaging, research and development and talent development, with the government aiming to build capabilities across the entire semiconductor value chain.

The programme comes after India achieved its earlier target of developing 85,000 semiconductor engineers in four years against the original 10 year timeline. Semicon 2.0 now targets another 100,000 engineers. The government also expects India to account for close to 10 per cent of the global semiconductor market in the coming years, while students from Tier II and Tier III cities have already designed more than 250 chips.

What does Semicon 2.0 offer?

For large silicon fabs requiring a minimum investment of Rs 20,000 crore, the government will provide support of 40 per cent of eligible capital expenditure. Smaller fabs involving compound semiconductors, silicon photonics and sensors can receive 35 per cent support with a minimum investment of Rs 500 crore.

Advanced packaging technologies such as 2.5D and 3D packaging, wafer level chip scale packaging and heterogeneous integration will receive support of up to 35 per cent, while conventional ATMP and OSAT facilities will receive 25 per cent.

A major addition is support for semiconductor equipment and materials. Eligible projects covering equipment research and development, semiconductor grade raw materials, testing and characterisation and equipment manufacturing can receive 30 per cent capital expenditure support. Equipment and component manufacturers can also receive production linked incentives of 2 per cent to 10 per cent based on domestically sourced components for five years from FY29.

Chip design and talent get a bigger role

Semicon 2.0 places considerable emphasis on developing Indian chip intellectual property. Startups and MSMEs working on commercially oriented chip designs can receive milestone linked seed funding of up to Rs 15 crore or 50 per cent of project cost, whichever is lower.

Strategic sector chip development will be undertaken through C-DAC, while larger companies can access royalty based financing or equity co-investment. Newly launched chips can also qualify for a deployment linked incentive equal to 9 per cent of net sales for five years, subject to prescribed limits.

The government has expanded its semiconductor design programme to 355 universities, while around 100 chips across compute, memory, radio frequency, power, networking and sensors have been prioritised.

India’s semiconductor ecosystem is already taking shape

Under the earlier programme, 12 manufacturing projects across six states were approved with cumulative investment exceeding Rs 1.64 lakh crore. These include projects involving Micron, Tata Electronics, CG Power and Kaynes Technology. Three companies, Micron, Kaynes and CG Semi, have already started commercial production.

The government expects Semicon 2.0 to catalyse around Rs 4 lakh crore of investment, Rs 2 lakh crore of production and Rs 1 lakh crore of exports. India’s semiconductor market, currently estimated at around USD 52 billion, is expected to reach USD 110 billion to USD 120 billion by 2030.

Which listed companies could benefit?

The policy creates opportunities beyond direct semiconductor manufacturers. CG Power and Kaynes Technology have direct exposure through their semiconductor manufacturing and packaging projects. Cyient DLM, Dixon Technologies, Syrma SGS Technology, MosChip Technologies and Tata Elxsi could gain from the broader expansion in electronics manufacturing, chip design and semiconductor related engineering.

The opportunity could also extend to suppliers of equipment, materials, precision components, PCBs, specialty chemicals and other inputs required by new fabs and packaging facilities.

Outlook

Semicon 2.0 marks a shift from simply building semiconductor factories to developing a complete domestic ecosystem. If the proposed incentives translate into actual investments, India could gradually build capabilities spanning chip design, manufacturing, packaging, equipment and materials, while creating a much larger pool of specialised engineering talent.

Disclaimer: The article is for informational purposes only and not investment advice.