The Union Cabinet on Wednesday approved two major manufacturing initiatives with a combined outlay of nearly ₹1.9 trillion to deepen India’s semiconductor ecosystem, expand mobile phone manufacturing, and strengthen the country’s position as a global electronics manufacturing hub.
While ₹1.27 trillion has been allocated for the second phase of the India Semiconductor Mission (ISM 2.0), ₹62,500 crore has been earmarked for a revamped Mobile Phone Manufacturing Scheme (MPMS).
The ISM’s second phase will focus on attracting semiconductor design firms, as well as manufacturers of materials, equipment and specialty chemicals, said Union Electronics and Information Technology Minister Ashwini Vaishnaw, while announcing the Cabinet decisions.
“The semiconductor industry is a foundational industry. All devices we use need semiconductor chips. The entire electronics value chain has now been covered,” said Vaishnaw, who is also information and broadcasting minister.
As in the first phase of the mission -- which was focused only on chip manufacturing -- incentives under ISM 2.0 will be disbursed on a pari passu basis to successful applicants. Detailed operational guidelines and the scheme framework will be released within the next fortnight, he added.
Vaishnaw said the overall investment catalysed under ISM is expected to reach ₹4 trillion, with semiconductor production of ₹2 trillion and exports of ₹1 trillion.
Under ISM 2.0, the government has proposed a grant-plus-equity funding model for smaller startups designing strategic and commercial semiconductor chips in India, with the objective of ensuring that the intellectual property created remains within the country.
For medium-sized and large domestic companies entering strategic and commercial chip design, the government has proposed a co-investment or royalty-linked funding and incentive structure.
Manufacturers of semiconductor equipment, speciality chemicals, gases and materials setting up production facilities in India will be eligible for a flat incentive of up to 30 per cent of project cost.
The incentive structure for semiconductor fabrication units has been recalibrated under ISM 2.0. Incentives for silicon semiconductor fabrication facilities have been reduced from a flat 50 per cent under the first phase to 40 per cent, while display and compound semiconductor fabrication units will be eligible for incentives of 35 per cent.
Similarly, incentives for assembly, testing, marking and packaging (ATMP) and outsourced semiconductor assembly and testing (OSAT) facilities have been revised. Advanced packaging units will receive incentives of 35 per cent, while conventional packaging units will be eligible for 25 per cent, compared with a flat 50 per cent under ISM 1.0.
“These incentive structures had to be brought down now that we have an ecosystem where we have approved 12 semiconductor units, which include one silicon chip fabrication unit, one display fabrication unit, and a bunch of other chip packaging units. We can now use the funds to attract the ecosystem players,” said a government official, requesting anonymity.
The second phase of the semiconductor mission also proposes combined central and state support of up to 75 per cent of project cost for companies and startups engaged in research and development in advanced semiconductor technologies.
A similar combined incentive of up to 75 per cent has been proposed for companies, academic institutions, startups and colleges undertaking programmes to develop semiconductor design and manufacturing talent.
“India has demonstrated the intent and long-term commitment to the semiconductor industry with more than 12 approved projects in just four years. ISM 2.0 now builds on this strong foundation with a significant emphasis on design, R&D, capital goods, and entire supply chain and skill development,” said Pankaj Mohindroo, chairman of industry body India Cellular and Electronics Association.
As of July 15, 2026, the government has approved a dozen of projects involving a cumulative investment of more than ₹1.60 trillion under the first, ₹76,000 crore phase of ISM.
The inaugural phase of the mission, approved by the Union Cabinet in December 2021, cleared its first project in June 2023, approving Micron Technology’s $2.75 billion proposal to establish a semiconductor ATMP facility in Sanand, Gujarat.
Later that year, the government approved India’s first semiconductor fabrication project, a joint venture between the Tata group and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), with an investment of about $11 billion (₹91,000 crore).
Mobile Phone Manufacturing Scheme
Separately, the Cabinet approved the revised MPMS, which will replace the existing incremental sales- and production-linked incentive framework with a mechanism that rewards companies based on the extent of domestic value addition and sourcing in their products.
Companies investing in mobile phone design as well as research and development in India will also be eligible for incentives under the scheme, Vaishnaw said.
The MPMS further proposes that Indian brands seeking incentives must have a global market presence, demonstrate technical sovereignty, and build indigenous intellectual property through patents, research and development, and in-house innovation.
The government expects the scheme to drive mobile phone production worth ₹39 trillion over its six-year duration, compared with cumulative production of ₹22 trillion achieved under the existing production-linked incentive (PLI) scheme for mobile phones.
The revised scheme also targets mobile phone exports of ₹15 trillion over the next six years and is expected to generate an additional 60,000 jobs across mobile phone manufacturing and allied sectors, Vaishnaw added.
 "Cabinet unveils ₹1.9 trillion semiconductor, smartphone manufacturing plans")
