India’s semiconductor story is entering a phase where the conversation is no longer simply about attracting fabs, announcing investments or establishing assembly and packaging capacity. Those milestones remain important, but the bigger opportunity—and arguably the harder challenge—is what India builds around them.
With the Government formally notifying Semicon 2.0 with a ₹1.27 lakh crore outlay, the country is now attempting to move from creating semiconductor infrastructure to creating semiconductor depth.
A semiconductor ecosystem becomes globally competitive not merely when chips are manufactured within its borders, but when it develops the capabilities to design those chips, create the intellectual property behind them, build the equipment and materials required to manufacture them, package and test them, commercialise indigenous technologies, and continuously produce the specialised talent needed to sustain the cycle.
This is where the industry sees the real significance of Semicon 2.0.
The Next Battle Is About Value, Not Just Capacity
India has already demonstrated that it can attract large semiconductor investments. The first phase of the national semiconductor programme established the initial manufacturing and packaging base, with major projects progressing across different parts of the country.
The next question is more fundamental: how much value can India capture from the semiconductor opportunity?
For years, India has been one of the world's most important locations for semiconductor design and engineering talent. Global chip companies have built large design teams in the country, with Indian engineers contributing to processors, graphics, networking, communications and other sophisticated semiconductor technologies.
Yet much of that value has historically been captured outside India through global product companies and their international IP portfolios. Semicon 2.0 creates an opportunity to change that equation by connecting India's existing engineering strength with capital, infrastructure, research and commercialisation.
Jaya Jagadish, SVP & Country Head – Silicon Design Engineering, AMD India, believes India's talent base can become one of its biggest semiconductor advantages—but only if the ecosystem creates a pathway for that talent to translate into products and IP. She said, “India’s biggest strength in semiconductors is its talented workforce. For many years, Indian engineers have helped design some of the world’s most advanced chips. ISM 2.0 is a real chance to focus on developing talent in this field by offering advanced courses, practical chip design experience, and partnerships between industry and universities to train the next generation of chip architects.”
She further added, “India also needs a clear design-to-commercialization pipeline that moves ideas from IP creation through prototyping to globally competitive products. AMD’s experience in India shows what can be achieved when strong talent is matched with the right investment environment. ISM 2.0 can help establish this environment at scale.”
From Engineering Talent to Semiconductor IP
The ability to create intellectual property could become one of the defining indicators of India's success under Semicon 2.0.
Building a fab is capital-intensive and requires years of investment. Building globally competitive semiconductor IP is a different challenge. It requires deep technical expertise, access to advanced EDA tools, prototyping and validation infrastructure, experienced leadership, patient capital and, critically, customers willing to adopt the resulting technology. That is why the design component of Semicon 2.0 could have an impact far beyond the number of companies that receive financial support.
It could help create a pipeline where an engineer's idea moves from architecture to IP, from IP to prototype, from prototype to silicon and ultimately from silicon to a commercial product.
If that pipeline begins working at scale, India could start producing not only semiconductor engineers but also semiconductor entrepreneurs, IP companies and product companies. That would represent a qualitative shift in the country's semiconductor journey.
A More Complete Ecosystem Is Taking Shape
This design opportunity cannot exist in isolation. A successful chip-design company eventually needs access to manufacturing, packaging, testing and supply-chain partners. That is why the broader ecosystem approach of Semicon 2.0 is significant.
Arjun Malhotra, Co-Founder of HCL and Chairperson of the EPIC Foundation, sees this end-to-end approach as one of the defining strengths of the new phase. He said, “EPIC Foundation welcomes the official notification of Semicon 2.0, which formally lays out a well-calibrated, complete ecosystem approach strengthening every aspect of the entire value chain and marking an imperative step in India's journey to build a self-reliant and globally competitive semiconductor industry. This is exactly the kind of end-to-end thinking the sector needs and we have been advocating for. I see this as a pivotal moment in India's technology and manufacturing story. I would like to compliment Prime Minister Narendra Modi and Minister Ashwini Vaishnaw for their sustained vision on this decisive milestone announcement.”
He further stated, “The key focus on design this time is very, very welcome, because it will significantly increase value addition within the country. The areas have also been very clearly defined compute, memory, RF, power, networking and sensors and this is exactly the right way forward, the best way forward. I was also glad to see that the scheme has this time been opened up to OCIs companies owned by Overseas Citizens of India which is a very good decision, since they bring rich global experience that will help create truly advanced design companies in India. With Semicon 2.0, India has set the right course and I look forward to seeing this design-first, talent-first approach translate into a semiconductor ecosystem India can truly call its own.”
A fab needs chemicals, gases, equipment, components, engineering services, testing capabilities and specialised suppliers. A chip-design company needs EDA tools, fabrication access, packaging partners and customers. Universities need industry engagement, while startups need capital and commercial pathways.
The stronger these connections become, the greater the possibility that semiconductor activity in India begins generating a multiplier effect across the wider technology and manufacturing economy.
Can India Build Semiconductor Companies, Not Just Semiconductor Facilities?
This may ultimately become the most important question surrounding Semicon 2.0. India has already attracted some of the world's largest semiconductor companies and secured significant manufacturing investments. But a mature ecosystem should eventually produce companies that originate in India and compete globally.
That requires a different kind of ecosystem. Large semiconductor companies need long development cycles and significant R&D spending. Startups need access to capital long before revenues become meaningful. Universities need to work closely with industry. Engineers need opportunities to work on actual silicon rather than only theoretical designs.
The policy framework's support for startups, R&D, design and talent therefore has the potential to influence the ecosystem beyond immediate project investment. The objective should be to create an environment in which the next generation of semiconductor companies can be born and scaled in India.
The Global Market Opportunity Is Too Large to Ignore
The timing of Semicon 2.0 is also significant. Artificial intelligence is rapidly increasing demand for high-performance computing, memory, networking and specialised accelerators. Automotive electronics are making vehicles increasingly dependent on semiconductors. Data centres, telecommunications infrastructure, consumer electronics and industrial automation are creating additional demand. At the same time, companies and governments around the world are attempting to diversify semiconductor supply chains.
For India, this creates an unusual window of opportunity. The country has a large domestic electronics market, a substantial engineering workforce and an increasingly supportive policy environment. If manufacturing capacity can be combined with domestic IP and a reliable supplier ecosystem, India can potentially become both a major semiconductor market and a meaningful semiconductor production and innovation hub.
Aisha Ali Hussaini, Partner and Semiconductor Tax Leader, EY India, believes the financing architecture of Semicon 2.0 can play an important role in accelerating this transition. She said, “The launch of Semicon 2.0 today sets out the Government’s comprehensive support framework aimed at positioning India as a dependable partner in the global semiconductor ecosystem. Its targeted support across key segments through seed funding, co-investment, royalty-linked financing, production-linked incentives and other fiscal support is set to accelerate domestic capabilities in innovation, IP creation and critical manufacturing. Aligned with India’s ambition to capture 10% of the projected US$1.8–2 trillion global semiconductor market by 2035, the programme provides a robust foundation for long-term economic growth by strengthening the domestic semiconductor value chain.”
The Real Test Begins Now
The notification of Semicon 2.0 is an important policy milestone, but the real story will unfold through execution. India now needs to translate policy support into functioning ecosystems: fabs connected to local suppliers, startups connected to capital and customers, universities connected to industry, designers connected to fabrication infrastructure, and Indian IP connected to global markets.
The country also needs to ensure that the semiconductor ecosystem does not develop as a collection of isolated projects. The greater economic opportunity lies in creating clusters of capability, where manufacturing, design, packaging, equipment, materials, research and talent reinforce one another.
This is also why the industry's emphasis on design and talent is significant. The first phase established that India can attract semiconductor manufacturing investment. The second phase has the opportunity to establish that India can create semiconductor value.
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