India is preparing to significantly expand its semiconductor manufacturing support through a $20 billion incentive package, as reported by Business Standard. The government has already exhausted most of the funds under its initial $10 billion India Semiconductor Mission (ISM), which supports up to 50 per cent of the upfront cost of setting up plants. The scheme has successfully backed 14 semiconductor projects, including Tata Electronics' fabrication plant, several OSAT (outsourced semiconductor assembly and test) and ATMP (assembly, testing, marking, and packaging) units, and a compound semiconductor fabrication and assembly plant for mini/micro LED displays.
Despite the expanded push, India remains significantly behind major semiconductor powers according to World Economic Forum estimates in collaboration with Kearney. China's semiconductor support package stands at $94.9 billion, compared with $52 billion under the US CHIPS Act and approximately $47 billion by the European Union. However, a doubling of India's incentive outlay would narrow the gap with established and emerging semiconductor hubs. Malaysia has assembled incentives worth about $3.4 billion, while South Korea offers subsidies estimated at $23 billion through its Semiconductor Ecosystem Support Package.
The government plans to shift its focus in the second phase of ISM towards developing supply-chain infrastructure, as reported by Business Standard. Most semiconductor raw materials are currently imported, making domestic supply chain development crucial for long-term sustainability. The revamped scheme, announced in the last Budget with a token provision of ₹1,000 crore for 2026-27, is being finalised to attract semiconductor equipment manufacturers and expand support for chip design capabilities.
Apart from central incentives, state governments have been aggressively courting semiconductor investments through additional financial support. As a result, incentives from the Centre and states together can cover 70-85 per cent of the project cost of a semiconductor plant, with states typically contributing an additional subsidy of around 20 per cent. States are offering various incentives, with Gujarat providing a 75 per cent land subsidy for the first 200 acres allocated to fabrication plants, along with concessional power tariffs. Assam offers land and infrastructure support among other benefits.
