Govt. notifies ₹1.3 lakh-crore semicon scheme’s phase two

1. At a Glance

• India Semiconductor Mission 2.0 (ISM 2.0) notified by the Ministry of Electronics and Information Technology (MeitY), with an outlay of ₹1.28 lakh crore, targeting sops for electronics/semiconductor manufacturing. [1]
• Marks a strategic shift from ecosystem creation (ISM 1.0) to ecosystem consolidation and global integration — design, equipment/materials, fabs, packaging/testing, R&D, and talent. [2]
• High UPSC relevance: intersects Digital India, Atmanirbhar Bharat, strategic technology sovereignty, and GS-III (S&T, Economy).
• Union Budget 2026-27 formally announced ISM 2.0's launch, with an initial FY27 provision of ₹1,000 crore. [3]

2. Why in the News

• MeitY notified ISM 2.0 on/around 1 September 2026 (reported), with IT Minister Ashwini Vaishnaw addressing a press conference on the same. [S1, Article]
• The notification operationalises the ISM 2.0 announcement made in the Union Budget 2026-27. [3]

3. Background & Evolution

• ISM 1.0 launched in December 2021 with a ₹76,000 crore outlay, offering up to 50% capital subsidy to chip fabrication projects. [2]
• As of June 2026, 12 projects worth ~₹1.64 lakh crore approved under ISM 1.0 — comprising one semiconductor fab, two compound semiconductor fabs, and nine packaging/testing (ATMP/OSAT) units. [4]
• India also achieved a milestone with first Made-in-India chips presented to the Prime Minister. [5]
• Budget 2026-27 announced ISM 2.0 as the successor phase, shifting focus toward design, equipment/materials, and talent — not just fab capacity. [3]
• ISM 2.0 notified by MeitY, outlay ₹1.28 lakh crore, with all "pillars" fungible for investment allocation. [6]

4. Core Static Facts

5. Multi-Dimensional Analysis

Economic

• Aims to deepen domestic value addition across the semiconductor value chain (design to packaging), reducing import dependence on chips critical to electronics, auto, telecom, and defence sectors. [2]
• Reduced fab subsidy (40% vs 50%) signals a maturing investment climate — India relying more on demonstrated global player interest and state co-funding rather than pure central sops. [6]

Scientific/Technological

• Explicit push for Indian-owned or OCI-owned IP in chip design for "strategic priority" industries — ties to defence/security self-reliance in chips. [6]
• Focus on capital equipment and chemicals/gases manufacturing addresses upstream supply-chain gaps (a major bottleneck flagged during ISM 1.0). [6]

Administrative/Governance

• Federal cost-sharing model: Centre's reduced capital subsidy share partly offset by "additional support provided by States," indicating a Centre-State co-financing shift. [6]
• Fungibility across the six pillars gives implementing agencies flexibility but could complicate outcome tracking/accountability.

Geopolitical/Strategic

• Framed by Minister Vaishnaw around building global "dependence" on India's semiconductor supply chain — positions India within the China+1 / friend-shoring global semiconductor realignment. [6]

6. Recent Developments (last 12-18 months)

• June 2026: PIB reports 12 ISM-approved projects worth ~₹1.64 lakh crore, including India's first semiconductor fab and compound semiconductor fabs. [4]
• February 2026 (Budget 2026-27): Formal announcement of ISM 2.0 launch; ₹1,000 crore provisioned for FY27. [3]
• ~September 2026: MeitY notifies ISM 2.0 with ₹1.28 lakh crore outlay and six-pillar structure. [6]

7. Prelims Hooks

• ISM 2.0 notified by the Ministry of Electronics and Information Technology (MeitY), not the Ministry of Commerce. [6]
• ISM 2.0 outlay: ₹1.28 lakh crore. [6]
• ISM 1.0 was launched in December 2021 with outlay ₹76,000 crore. [2]
• ISM 1.0 fab capital subsidy: 50%; ISM 2.0 fab capital subsidy: up to 40%. [6]
• ISM 2.0 has six pillars: Design, Machines & Materials, Fabs, Packaging & Testing, R&D, Talent Development. [6]
• R&D and Talent Development pillars receive subsidy of up to 75% of project cost. [6]
• Union Budget 2026-27 formally announced ISM 2.0's launch. [3]
• FY 2026-27 budgetary provision for ISM 2.0: ₹1,000 crore. [3]
• As of June 2026, ISM has approved 12 projects worth ~₹1.64 lakh crore. [4]
• These 12 projects include 1 semiconductor fab, 2 compound semiconductor fabs, and 9 packaging/testing units. [4]
• Under ISM 2.0's design pillar, focus is on chips owned by Indians or OCIs in strategic-priority industries. [6]
• All six pillars of ISM 2.0 are fungible in terms of investment share. [6]
• ISM 2.0 press conference statement made by IT Minister Ashwini Vaishnaw. [6]

8. Mains Relevance

• GS-III: Science & Technology — indigenization of technology; Infrastructure — Energy, Ports, Roads, Airports, Railways etc. (electronics manufacturing infrastructure); Indian Economy — resource mobilization, industrial policy.
• GS-II (tangential): Government policies and interventions for development in various sectors.
• Possible question stems: 1. Discuss the strategic significance of the India Semiconductor Mission 2.0 in reducing India's import dependence on critical electronic components. (250 words) 2. Examine how India Semiconductor Mission 2.0 differs from its predecessor in approach, and assess whether the shift from fab-subsidy to design/talent focus is appropriate for India's comparative advantage. (250 words) 3. Semiconductors are being described as the 'new oil' of geopolitics. Analyze India's positioning in the global semiconductor supply chain in light of ISM 2.0. (250 words)

9. Related Topics to Study Next

• Atmanirbhar Bharat Abhiyan — the broader self-reliance framework ISM sits within.
• PLI (Production Linked Incentive) Schemes — parallel manufacturing-incentive architecture across sectors.
• Digital India Programme — MeitY's umbrella digital ecosystem initiative.
• China+1 strategy / global supply chain diversification — geopolitical backdrop driving chip investment into India.
• Quad Semiconductor Supply Chain Initiative — international cooperation angle relevant to strategic tech.
• National Quantum Mission / DRDO chip programmes — allied strategic-technology missions with overlapping talent/R&D goals.
• Union Budget 2026-27 key allocations — fiscal policy context for ISM 2.0's provisioning.

10. Common Errors / Trap Areas

• Confusing ISM 1.0's 50% fab subsidy with ISM 2.0's 40% — aspirants often assume subsidies increased in the newer phase; they were actually reduced.
• Misattributing the scheme to the Ministry of Commerce and Industry or DPIIT instead of the correct MeitY.
• Confusing the ₹1.28 lakh crore total outlay (long-term) with the ₹1,000 crore FY27 budgetary provision (annual) — these are different figures for different purposes.
• Mixing up ISM (India Semiconductor Mission) with the broader PLI Scheme for electronics — they are related but distinct instruments.
• Assuming all six pillars have fixed individual allocations — they are explicitly fungible.