Semicon 2.0: Rs 1.27 Lakh Crore Chip Mission and What It Offers Design Startups and MSMEs

The Union Cabinet approved Semicon 2.0, the second phase of the India Semiconductor Mission, with an outlay of Rs 1.27 lakh crore on 15 July 2026. Announced by IT Minister Ashwini Vaishnaw, it is a large industrial scheme, but one part of it is aimed squarely at chip-design startups and MSMEs.

This is not a grant call. No application window, form or portal has been announced in the coverage we reviewed. What follows is what is known so far and what to watch for.

What was approved

• Outlay: Rs 1.27 lakh crore for the second edition of the mission. Trak.in reports the figure as Rs 1,27,500 crore. Republic reported Rs 1.25 lakh crore, which differs from the other outlets. We use Rs 1.27 lakh crore, as most reports do.
• Expected results: The government expects the scheme to attract about Rs 4 lakh crore in investment and lead to semiconductor production worth Rs 2 lakh crore during the scheme period.
• Duration: Republic reported that the programme's lifecycle was extended from five years to 12 years. Treat that as one outlet's report, not an official figure.
• Goal: Vaishnaw said India will be self-reliant in the production of indigenous chips by the end of the programme.

The first phase, ISM 1.0, had an allocation of Rs 76,000 crore. Under it, 12 projects with cumulative investments of about Rs 1.64 lakh crore were approved. Most of that investment came from Tata Electronics and its semiconductor arm.

Six pillars, one of them for design

Vaishnaw said the scheme covers the entire semiconductor value chain and has six pillars. Trak.in lists them as:

• chip design
• production of semiconductor equipment and materials
• more fabrication plants (fabs)
• outsourced semiconductor assembly and testing (OSAT)
• advanced research
• skilled workforce development

The aim, according to the same report, is a self-sustaining chip ecosystem rather than a focus on manufacturing alone.

What it could mean for startups and MSMEs

Chip design. Vaishnaw said the first focus will be on design companies and startups that can take products to market. Business Standard reported that the government will provide a mix of grants and equity investment for the design of strategic and commercial chips in India. Trak.in reports that more support will go to startups and MSMEs developing semiconductor intellectual property (IP), system-on-chip (SoC) solutions and advanced electronic products.

India-owned IP. Before the approval, Vaishnaw said a very significant part of the next allocation would go to full product development, including chipsets designed in India. He named two conditions: the IP rights must reside in India, and the developing company must be incorporated in India. Republic similarly reports that a significant portion of capital is earmarked for homegrown, full-stack Indian IP in chip architecture.

Materials, gases and equipment. The programme will incentivise suppliers of raw materials for chip manufacturing, including minerals and gases. Business Standard reported a flat incentive of 30 per cent for equipment, chemicals, gases and materials. This is a segment where smaller manufacturers could find a role in the supply chain.

Research and talent. Trak.in reports investment in advanced semiconductor technologies, academic partnerships and specialised training.

Not yet announced

The coverage we reviewed does not say:

• who exactly is eligible, or what size of grant or equity a design startup could receive;
• how and when to apply, or whether there will be a portal;
• how the 30 per cent incentive is calculated or capped;
• the final list of covered sectors.

Vaishnaw named sectors the next phase would cover before the approval: automotive, power electronics, consumer electronics, medical, and defence. Whether the final scheme keeps that list has not been confirmed in the reports we read.

The Cabinet also approved a separate Mobile Phone Manufacturing Scheme with an outlay of Rs 62,500 crore, running for five years from FY27 to FY31, in the same package. It is a different scheme and is not part of Semicon 2.0.

What this means for you

• If you design chips or chip IP in India: Make sure the company is incorporated in India and that the IP sits with it. Those were the two conditions Vaishnaw named, and they are cheap to get right now.
• If you make materials, gases, chemicals or precision equipment: Watch for the scheme guidelines and the incentive terms, since the 30 per cent figure is only a headline until the rules are published.
• If you are an electronics or AI-hardware founder who buys chips: This is a long-term supply story. Nothing in the reports suggests a change in what you pay for chips.
• Everyone else: Do not pay anyone who offers to "get you into Semicon 2.0". No application route has been announced.

Until guidelines and application details are published, rely on the official Cabinet release and the India Semiconductor Mission's own notices.

Sources: ThePrint (PTI report), Trak.in, Hans India, Republic World, Business Standard and The Tribune (ANI) on the Cabinet decision and the minister's statements. This is an independent explainer, not an official government communication.

Cover photo: Laura Ockel on Unsplash