Govt notifies ₹1.27 trillion Semicon 2.0, offers 40% fab capex support

The scheme spans chip design, manufacturing, equipment, materials, advanced packaging, R&D and talent development, with support available for up to six years

The government on Monday notified the Semicon 2.0 scheme and laid out a detailed eligibility criteria and fiscal support for projects spanning chip design, semiconductor manufacturing, equipment and materials, advanced packaging, research and development (R&D), and talent development.

 

The scheme was approved by the Union Cabinet in July this year with a total outlay of ₹1,27,500 crore, and it is structured around six pillars and 10 categories.

 

Under the new guidelines, silicon wafer fabs will be eligible for fiscal support of 40 per cent of eligible capital expenditure (capex) on a pari-passu (equal footing) basis. To qualify, a 300 millimetre (mm) silicon fab must have an installed capacity of at least 40,000 wafer starts per month, a minimum capital investment of ₹20,000 crore, and a minimum revenue of ₹7,500 crore in at least one of the three financial years preceding the application.

  

For compound semiconductor, photonics, sensor and discrete semiconductor fabs, the minimum capital investment threshold is ₹500 crore, with government support set at 35 per cent of eligible capex. The guidelines specify minimum wafer sizes of 200 mm for sensor/MEMS (micro-electro-mechanical system) fabs, 150 mm for compound and discrete semiconductor fabs, and 100 mm for photonics applications.

 

The scheme seeks to build a domestic manufacturing ecosystem around semiconductor production. Consequently, projects setting up R&D facilities for semiconductor equipment will need a minimum investment of ₹300 crore and revenue of ₹120 crore, while facilities manufacturing semiconductor-grade raw materials will need a minimum investment threshold of ₹50 crore and revenue threshold of ₹20 crore.

 

Industry experts welcomed the notification. Aisha Ali Hussaini, partner at EY India, said: “The government's targeted support across key segments through seed funding, co-investment, royalty-linked financing, production-linked incentives (PLI) and other fiscal support is set to accelerate domestic capabilities in innovation, intellectual property (IP) creation, and critical manufacturing."

 

The scheme further stated that test and characterisation facilities will require a minimum investment of ₹100 crore and revenue of ₹40 crore. These activities will receive 30 per cent support on capex.

 

For manufacturing or assembling semiconductor equipment, sub-assemblies and components, the government has additionally proposed a PLI based on the value of components sourced from domestic manufacturers. The PLI rates range from 2-10 per cent and will apply for five years starting financial year 2028-29 (FY29).

 

The scheme also covers display manufacturing. For Gen-6 or above OLED fabs, applicants need a capacity of at least 30,000 panels a month, minimum investment of ₹10,000 crore and revenue of ₹5,000 crore. The fiscal support will be 35 per cent of eligible capex.

 

For Micro LED, the minimum investment is ₹1,500 crore, and revenue threshold is ₹600 crore. Gen-8 or above LCD fabs will require a minimum investment of ₹10,000 crore and capacity of 60,000 panels per month. Both categories will receive 35 per cent capex support.

 

For semiconductor packaging, the government has differentiated between advanced and legacy technologies. Advanced packaging projects, including 2.5D/3D packaging and wafer-level chip-scale packaging, will get 35 per cent capex support, while legacy packaging projects will receive 25 per cent support. Both categories require a minimum investment of ₹1,000 crore and minimum revenue of ₹200 crore.

 

For semiconductor research and talent development, projects under the R&D for advanced semiconductor technologies category can receive support of up to 75 per cent of project cost, including state incentives, covering eligible capex and operational expenditure (opex).

 

A similar ceiling of 75 per cent of project cost has been prescribed for talent-development projects covering chip-design tools, multi-project wafer fabrication services, post-silicon validation, nanofabrication, and industry-oriented training.

 

The scheme's project duration will be determined on a project-to-project basis, with support available for up to six years.

 

Eligible semiconductor design startups and MSMEs (micro, small, and medium enterprises) can receive seed funding of up to ₹15 crore, while milestone-linked advance seed funding can cover up to 50 per cent of project cost, subject to a ₹15 crore ceiling. For eligible companies other than startups and MSMEs, the scheme provides for royalty financing and equity co-investment.

 

The India Semiconductor Mission (ISM) will act as the nodal agency for Semicon 2.0 and will invite applications, conduct technical and financial appraisals, and recommend applicants to the Ministry of Electronics and Information Technology (Meity).

 

Commenting on the notification, Ashok Chandak, president of India Electronics and Semiconductor Association and SEMI India, said: “The official notification of Semicon 2.0 is a very significant milestone. The speed with which the government has moved from Cabinet approval to official notification sends a strong message of policy continuity, execution, and commitment. For an industry that makes investments with a 10-15 year horizon, this continuity provides the confidence required for long-term investments.”