Semicon 2.0: What ₹1.27 Lakh Crore Buys That the First Chip Policy Did Not

The Union Cabinet approved Semicon 2.0 on 15 July with an outlay of ₹1.27 lakh crore, alongside a separate ₹62,500 crore Mobile Phone Manufacturing Scheme. The government projects the programme will attract close to ₹4 lakh crore in investment.

The headline number is large, but the more consequential change is what the money is now allowed to fund. India's first semiconductor mission concentrated on the expensive end of the chain — attracting fabrication plants and packaging facilities. Semicon 2.0 extends incentives outward to equipment manufacturers, raw material suppliers, research institutions, chip design firms and startups.

That widening addresses a real structural gap. A fab does not operate in isolation; it depends on a supply chain of specialised machines, ultra-pure materials and design talent that largely did not exist domestically. Funding only the fab left the rest of the chain imported, which limited how much value actually stayed in the country.

The policy is organised around six pillars: design, machines and materials, additional fabs, ATMP and OSAT packaging, R&D aimed at advanced nodes, and talent development. On the last of these, the government reports 315 universities now running semiconductor programmes with roughly 68,000 students trained to date.

For fabless design startups, the notable provision is milestone-based funding with government venture capital participation. Chip design has a long capital-intensive gap between founding and first revenue, and that gap is where most Indian design startups have historically failed or relocated.

The open question is execution. India's first semiconductor push produced fewer operational facilities than announced intentions suggested, and a broader policy is also a harder one to administer. Whether ₹1.27 lakh crore translates into working capacity will be visible in build-out announcements over the next several quarters, not in the approval itself.

Sources: Policy Circle, India Infoline