The India Semiconductor Mission (ISM) is the Government of India’s flagship programme to build a complete semiconductor and display manufacturing ecosystem inside the country. Approved in December 2021 as part of the wider Semicon India programme, the mission offers financial support, design incentives and policy backing to companies that wish to set up chip fabrication plants, display fabs, compound semiconductor units and packaging facilities on Indian soil.
Semiconductors are the tiny switches and circuits that sit inside almost every modern device, from smartphones and cars to hospital scanners, satellites and missiles. India designs a great deal of the world’s chips but has, until recently, manufactured almost none of them. The India Semiconductor Mission aims to close that gap, reduce dependence on a handful of foreign suppliers and position the country as a trusted node in global electronics supply chains. This explainer covers what the mission is, how its schemes work, who the key players are and why the road ahead is difficult.
Quick Facts
| Feature | Details |
|---|---|
| Programme | India Semiconductor Mission under the Semicon India programme |
| Approved | December 2021 by the Union Cabinet |
| Nodal ministry | Ministry of Electronics and Information Technology (MeitY) |
| Implementing body | A specialised division within the Digital India Corporation |
| Initial outlay | About Rs 76,000 crore spread over several years |
| Core schemes | Semiconductor fabs, display fabs, compound semiconductors and ATMP/OSAT, and Design Linked Incentive |
| Support model | Fiscal support shared with the investor, on a pari passu basis for capital cost |
| Early anchor states | Gujarat and Assam, among others |
What Is a Semiconductor and Why Does It Matter?
A semiconductor is a material, most commonly silicon, whose ability to conduct electricity can be precisely controlled. By etching billions of microscopic switches called transistors onto a thin wafer of silicon, manufacturers create integrated circuits, or chips. These chips perform the logic, memory, power control and sensing functions in electronic equipment.
Chips matter because they are a foundational input for the modern economy. A car now contains many dozens of them; a washing machine, a power grid controller and a mobile tower all depend on them. Military systems such as radars, guided munitions and communication equipment also rely on advanced chips. A country that cannot secure its chip supply is therefore exposed in civilian as well as strategic terms.
Types of chips
- Logic chips such as processors that perform computation.
- Memory chips such as DRAM and NAND flash that store data.
- Analog and power chips that manage voltage, current and signals in vehicles and industrial machines.
- Sensors and optical chips that convert light, motion or pressure into electrical signals.
The difficulty of manufacturing varies by type. Cutting-edge logic chips need the most expensive equipment on earth, while many mature-node chips used in cars and appliances are cheaper to make and are in steady demand, which is one reason India has targeted both ends of the spectrum.
The Chip Shortage That Changed Policy Thinking
The global semiconductor shortage that followed the pandemic years, roughly from 2020 to 2022, was a wake-up call for governments. Car factories idled because a few low-cost chips were unavailable, consumer electronics prices rose and delivery times for many products stretched out. The episode revealed how concentrated chip manufacturing had become, with a very large share of advanced production located in a small number of places in East Asia.
For India, which imports almost all its chips and is a very large consumer of electronics, the shortage underlined a strategic vulnerability. At the same time, other major economies announced large support programmes, including the United States with its CHIPS and Science Act of 2022 and the European Union with its own Chips Act. India’s mission can be understood as part of this global race to localise a critical technology rather than as an isolated initiative.
India’s starting position
India already had strengths in chip design, with large design centres of global companies in cities such as Bengaluru, Hyderabad and Noida and a deep pool of engineers. It also had an older public facility, the Semi-Conductor Laboratory in Mohali, which has fabricated chips for strategic uses at relatively older technology nodes. What India lacked was commercial-scale fabrication and a robust supply chain of chemicals, gases and equipment.
Launch and Structure of the India Semiconductor Mission
The Union Cabinet approved a comprehensive programme for the development of a sustainable semiconductor and display ecosystem in December 2021. The India Semiconductor Mission was set up as a specialised, autonomous-style body within the Digital India Corporation, under the Ministry of Electronics and Information Technology. It is intended to function as the nodal agency for efficient, coordinated implementation of schemes and to act as a single window for investors.
The mission is guided by global experts from the semiconductor and display industry, who advise on technology choices, partnerships and the evaluation of proposals. Proposals from companies are examined for technical credibility, financial strength, technology tie-ups and the quality of the project plan before incentives are approved.
Objectives in brief
- Attract large investments in semiconductor and display manufacturing.
- Build a design ecosystem that encourages Indian start-ups to create chips and intellectual property.
- Develop skilled manpower across design, fabrication and packaging.
- Strengthen supply chains for materials, gases, chemicals and equipment.
- Reduce import dependence for strategically important and high-volume chips.
The Four Pillars: Schemes under the Mission
The mission works through a set of schemes, each targeting a different part of the value chain. Together they cover manufacturing, packaging, design and the broader ecosystem.
| Scheme | What it supports |
|---|---|
| Semiconductor fab scheme | Setting up silicon wafer fabrication plants that make chips |
| Display fab scheme | Setting up fabs for display panels used in phones, televisions and monitors |
| Compound semiconductors, sensors, discrete devices and ATMP/OSAT scheme | Plants for compound semiconductors, silicon photonics, sensor fabs, discrete devices and packaging and testing |
| Design Linked Incentive (DLI) scheme | Support for chip design companies and start-ups |
Over time, the support offered for different categories was harmonised so that the central government could offer a substantial share of eligible project cost, with state governments often adding their own incentives on land, power and water. This combined support has been central to attracting global names to Indian locations.
Semiconductor Fabs: The Heart of the Programme
A semiconductor fabrication plant, or fab, is where circuit patterns are printed on silicon wafers through hundreds of precise steps involving lithography, etching, deposition and chemical treatment. Fabs are among the most capital-intensive facilities in the world, with a single plant costing many billions of dollars and requiring years to build and stabilise.
Fab economics depend on the technology node, usually described in nanometres, which loosely indicates how small the transistors are. Smaller nodes are denser and faster but require far costlier equipment, particularly extreme ultraviolet lithography machines made by very few suppliers worldwide. India’s early approach has therefore focused on mature and mid-range nodes, where demand is large and the technology is more accessible, rather than racing straight to the frontier.
Why partnerships matter
A fab needs a process technology that has been perfected over years. New entrants therefore usually tie up with established foundries or technology owners, who license process know-how and train engineers. The mission’s evaluation framework places weight on such technology partners, because a fab without a proven process can fail to reach acceptable yields.
Anchor projects
Among the early large proposals cleared in 2024 was a fab in Dholera, Gujarat, by Tata Electronics in partnership with a Taiwanese foundry, intended to produce chips for automotive, power, computing and communication uses. Dholera is a planned industrial city, and its selection reflects the importance of land, power, water and logistics infrastructure.
ATMP and OSAT: Packaging and Testing
After wafers are fabricated, they are cut into individual dies, which are then packaged in protective casings, connected to the outside world and tested. This stage is called assembly, testing, marking and packaging (ATMP), and companies that specialise in it for others are known as outsourced semiconductor assembly and test (OSAT) providers.
Packaging is less capital-intensive than fabrication and offers a faster route to establishing a domestic presence. It also has growing technical importance because advanced packaging techniques, which stack or tightly connect multiple dies, are now a major source of performance gains.
Notable packaging projects
- A memory chip assembly and test facility by Micron Technology in Sanand, Gujarat.
- An OSAT facility by Tata Semiconductor Assembly and Test in Jagiroad, Assam.
- A packaging unit by CG Power in partnership with Renesas Electronics and Stars Microelectronics, also in Sanand.
The choice of Gujarat and Assam illustrates the mission’s intention to develop clusters in more than one region, though Gujarat has attracted the largest share of early approvals.
Compound Semiconductors, Sensors and Display Fabs
Not all useful chips are made from silicon alone. Compound semiconductors such as gallium nitride and silicon carbide combine two or more elements and perform better at high power, high temperature and high frequency. They are important for electric vehicles, fast chargers, renewable energy inverters, 5G equipment and defence electronics.
The mission supports compound semiconductor and silicon photonics projects because these areas are growing rapidly and have not yet been entirely captured by a few incumbents. Sensor fabs and discrete device plants, which produce simple components such as diodes and transistors in very large volumes, are also covered.
Display fabs
The display scheme supports plants that produce panels for smartphones, televisions, laptops and vehicles. India is a large assembler of such products but depends heavily on imported panels. A domestic display fab would reduce this dependence, although display manufacturing, like chip fabrication, needs substantial capital, technology partners and a dependable supply of specialised materials.
The Design Linked Incentive (DLI) Scheme
Design is where India has historic strength, and the Design Linked Incentive scheme aims to convert that into ownership of intellectual property. Many Indian engineers design chips, but they usually do so for foreign companies, and the resulting intellectual property is owned abroad. The DLI scheme seeks to nurture domestic start-ups and small firms that create chips, systems on chip and related IP for Indian and global markets.
Components of DLI
- Product design-linked incentive, which partly reimburses the eligible costs of designing a chip.
- Deployment-linked incentive, which rewards the sale of chips and designs in the market, linked to net sales over a period of years.
- Infrastructure support, including access to electronic design automation (EDA) tools and prototyping facilities, so that start-ups do not have to buy very expensive licences on their own.
The scheme is paired with academic initiatives to train students in chip design, including programmes that give universities access to design software. The goal is a steady flow of engineers who can move from classroom to industry with practical experience.
Why Self-Reliance in Chips Matters
Self-reliance in semiconductors is both an economic and a strategic objective. Economically, electronics imports, of which chips are a major part, form a large share of India’s import bill. Making chips or at least packaging them domestically can retain value, create skilled jobs and support the wider electronics manufacturing push, including mobile phone assembly and the production-linked incentive schemes.
Strategically, chips are embedded in telecom networks, defence systems, power grids, payment infrastructure and space technology. Relying on distant suppliers for these inputs creates risk if trade is disrupted by conflict, sanctions or natural disasters. Because a significant share of advanced chip production is concentrated in one geographic region, supply chain diversification has become a priority for many countries.
Self-reliance does not mean isolation
No country makes every part of the chip supply chain. Equipment, materials, design software and fabrication are spread across several nations. India’s realistic goal is therefore to become a dependable participant in this global network and to master selected links, rather than to be entirely self-sufficient.
Challenges: Water, Power, Talent and Capital
The mission faces serious practical challenges that explain why previous attempts to set up fabs in India did not succeed.
Water and power
A fab consumes enormous volumes of ultra-pure water for rinsing wafers and needs continuous, high-quality electricity, since even a brief power fluctuation can ruin batches worth a great deal of money. Sites must therefore have reliable water sources, wastewater treatment and stable grid connections. Water scarcity in some regions makes site selection and recycling technology critical.
Talent
India has many chip designers but fewer process engineers who have run a fab. Training fab technicians and engineers, or attracting experienced professionals from abroad, will take years. Academic and industry partnerships are being used to create this pipeline.
Capital and ecosystem
- High capital costs and long payback periods make private investors cautious without government support.
- Ecosystem gaps exist in specialty gases, high-purity chemicals, photomasks and equipment servicing, which are best developed in clusters close to fabs.
- Global competition from heavily subsidised programmes elsewhere makes it harder to win investment.
- Technology access is influenced by export controls and international politics.
Semicon India Events and the Wider Ecosystem
The Semicon India conference series, first held in 2022 in Bengaluru and followed by editions in later years, has served as a platform where government, global chipmakers, equipment suppliers and start-ups meet. These events have been used to announce partnerships and to showcase policy progress.
Beyond direct incentives, the mission interacts with other policies, including electronics component manufacturing schemes, production-linked incentives, state semiconductor policies and skilling programmes. States such as Gujarat, Karnataka, Odisha, Tamil Nadu and Uttar Pradesh have released their own semiconductor-related policies that offer land, power and capital subsidies on top of central support.
Timeline of key milestones
| Year | Milestone |
|---|---|
| 2021 | Union Cabinet approves the programme for a semiconductor and display ecosystem |
| 2022 | First Semicon India conference; support structure harmonised across schemes |
| 2023 | Early packaging proposals such as Micron’s Sanand facility cleared |
| 2024 | Fab and OSAT proposals in Gujarat and Assam approved |
Looking Ahead
The success of the India Semiconductor Mission will not be measured by announcements alone but by whether plants reach commercial production at acceptable yields, whether supplier clusters form around them and whether Indian design start-ups turn into globally competitive firms. Semiconductor industries mature slowly, and countries that now lead needed decades of sustained investment.
If the mission succeeds, India could add a new strategic industry to its economy, anchor its electronics manufacturing base and gain resilience in critical sectors. If it falters, the main risks will lie in cost overruns, delays in technology transfer and a shortage of skilled people. Either way, the programme marks the first sustained, large-scale attempt by India to enter semiconductor manufacturing.
Conclusion
The India Semiconductor Mission combines capital incentives, design support, skilling and state-level cooperation to address a long-standing gap in the country’s industrial profile. Its schemes for fabs, display fabs, compound semiconductors, packaging and design reflect the layered nature of the chip value chain. While water, talent and capital remain real obstacles, the mission has already brought global companies and Indian conglomerates into the field. Last reviewed: 3 October 2026.
Frequently Asked Questions
What is the India Semiconductor Mission?
The India Semiconductor Mission is a programme approved by the Union Cabinet in December 2021 to build a semiconductor and display manufacturing ecosystem in India. It sits within the Digital India Corporation under the Ministry of Electronics and Information Technology and administers incentive schemes for fabs, packaging and design.
What does ATMP/OSAT mean?
ATMP stands for assembly, testing, marking and packaging, while OSAT means outsourced semiconductor assembly and test. These units take finished silicon wafers, cut them into dies, place them in protective packages and test them before they go into electronic products.
What is the Design Linked Incentive scheme?
The Design Linked Incentive scheme supports Indian start-ups and small companies that design chips and related intellectual property. It offers partial reimbursement of design costs, rewards based on sales, and shared access to expensive design tools and infrastructure.
Why is India trying to make its own chips?
India imports almost all the chips it uses, and the global shortage after 2020 showed how risky that dependence can be. Domestic manufacturing and packaging can save foreign exchange, create skilled jobs and secure supplies for telecom, defence and industry.
Which companies are involved in the mission’s projects?
Early projects include Tata Electronics with a Taiwanese foundry partner, Micron Technology, Tata Semiconductor Assembly and Test, and CG Power with Renesas Electronics and Stars Microelectronics. Projects are located mainly in Gujarat and Assam.
What are the main challenges before the mission?
The main challenges are the large consumption of ultra-pure water and stable electricity, a shortage of experienced fab engineers, high capital costs and gaps in the supplier ecosystem. Competition from other countries’ subsidy programmes and limits on technology access add further difficulty.
