ISM 2.0 marks a shift from fabrication incentives to ecosystem depth. Critically analyse.

India Semiconductor Mission (ISM) 2.0 was announced in Union Budget 2026–27, with ₹1,000 crore provided for FY 2026–27. It will focus on domestic semiconductor equipment and materials, full-stack Indian chip IP (chip designs and their intellectual property, owned in India) and resilient supply chains [1]. The shift in intent is real, but the shift in money is still partial.

ISM 1.0: A Fabrication-Led Base

• The Semicon India Programme (Dec 2021, ₹76,000 crore) offered up to 50% fiscal support for fabs, display units and assembly-testing plants [1].
• By Dec 2025, 10 projects worth ₹1.60 lakh crore had been approved across six states. Most were fabs and packaging units [1].

Why ISM 2.0 Signals Ecosystem Depth

• Upstream inputs: equipment and materials are the choke points of the chip supply chain. Assembly and fabrication alone leave India dependent on imports [1].
• Design and IP: the Design Linked Incentive (DLI) Scheme has 24 projects, 16 tape-outs, 6 fabricated chips and 140+ IP cores, a base that ISM 2.0 can build on [2].
• Talent: ISM 2.0 stresses industry-led research and training centres [1]. The ChipIN Centre already gives about 1 lakh engineers and students in 400 organisations access to chip-design tools [2].
• Strategic logic: US–China export controls (the "Chip War") turn supply-chain depth into a security issue, not only an industrial one [3].

Limits of the Shift

• Scale mismatch: ₹1,000 crore is small next to the ₹1.60 lakh crore committed to plants [1].
• Fabs remain central: the next phase sets a roadmap to 3nm and 2nm nodes [1]. ISM 2.0 adds to fab incentives; it does not replace them.
• Thin design support: DLI reimbursement is capped at ₹15 crore per application [2]. That is modest given how costly tape-outs are.
• Delivery gaps: fabs need workers trained in plant operations, an assured water supply and stable power. With projects spread across six states [1], this needs Centre–State coordination that budget money alone cannot buy.

ISM 2.0 widens India's chip policy from building plants to owning inputs, IP and talent. To make that real, India needs larger upstream funding, deeper funding support for fabless firms (firms that design chips but outsource manufacturing), and binding State commitments on water and power. Done well, it moves Aatmanirbhar Bharat from assembling chips to controlling the value chain, in line with SDG 9 on resilient industry and innovation.