Semiconductor manufacturing is capital- and technology-intensive. Critically examine India's policy approach through PLI-linked schemes like ISM and MPMS.

Q. Semiconductor manufacturing is capital- and technology-intensive. Critically examine India's policy approach through PLI-linked schemes like ISM and MPMS. (15 marks, 250-350 words)

A single leading-edge fab costs billions of dollars and depends on tightly held process IP, making state support unavoidable. India's answer — the India Semiconductor Mission (ISM), its ₹1,27,500 crore successor Semicon 2.0, and the ₹62,500 crore Mobile Phone Manufacturing Scheme (MPMS) — is a demand-and-capital subsidy model that has delivered early wins but not yet technological depth.

Merits of the approach - De-risks capital intensity: ISM's ₹76,000 crore framework offers fiscal support of up to 50% for silicon fabs, compound-semiconductor units, ATMP and design [1] — the only instrument that can bridge a viability gap of this scale. - Demonstrated traction: 12 units with cumulative investment above ₹1.64 lakh crore stand approved; Micron, Kaynes and CG Semi have already begun commercial production [2]. - Ecosystem, not just factories: Semicon 2.0 rests on six pillars — design, machines and materials, fabs, ATMP/OSAT, R&D and talent [2]; 105 start-ups/MSMEs have received industry-standard EDA tool access [1]. - Value-addition nudge: MPMS ties an extra 1.5% incentive to domestic sourcing of components, above its 2.25–5% base rate [3].

Critical limitations - Assembly-heavy value capture: the very need for a sourcing-linked top-up [3] concedes that mobile manufacturing remains largely screwdriver assembly. - Mature-node concentration: approvals cluster in packaging, testing and compound fabs [1]; advanced nodes remain an aspiration, not capacity. - Fiscal and sunset risk: half the capital cost sits on the exchequer, while incentives lapse by FY 2030-31 [3] — competitiveness after withdrawal is untested. - Enabling gaps: talent and R&D appear as separate pillars in Phase 2 [2], an implicit admission of Phase 1's thin base in skills, ultrapure utilities and process IP.

The approach is therefore correctly sequenced — packaging first, fabrication next — but subsidy alone cannot buy process knowledge. Sustaining it requires deep R&D partnerships, stable power and water infrastructure, and a design-talent pipeline, so that Semicon 2.0 converts today's assembly base into genuine technological sovereignty under Atmanirbhar Bharat.

(~325 words)

Sources: 1. India Semiconductor Mission 2.0, Press Information Bureau — ₹76,000 crore incentive framework, up to 50% fiscal support, project categories, 105 start-ups/MSMEs with EDA access 2. Cabinet approves Semicon 2.0, Press Information Bureau (15 July 2026) — ₹1,27,500 crore outlay, six pillars, 12 approved units worth ₹1.64 lakh crore, units in commercial production 3. Cabinet approves Mobile Phone Manufacturing Scheme (MPMS), Press Information Bureau — ₹62,500 crore outlay, 2.25–5% incentive rates, 1.5% domestic-sourcing top-up, tenure to FY 2030-31