Archive · 23 Jul 2026
ISM 2.0 to target 4-5 new fabs
The Indian government has launched the second phase of the India Semiconductor Mission (ISM 2.0) with revamped incentives to attract larger companies and private capital for semiconductor manufacturing.
The government is targeting 4-5 new fabs, including CMOS, display, compound semiconductor, and advanced packaging.
The incentive structure has been differentiated based on the maturity of each segment, with silicon fabs receiving 40%, advanced packaging and certain other fabs 35%, equipment makers and material suppliers 30%, and conventional packaging 25%.
The Design Linked Incentive (DLI) scheme has been expanded to include domestic companies and Overseas Citizens of India (OCIs), alongside startups and MSMEs.
The government plans to co-invest with RBI-whitelisted deep-tech venture funds to crowd in private investment.
The exit strategy will be decided on a case-by-case basis, depending on the stage of each business.
The government is not prioritizing advanced-node manufacturing at this stage, focusing instead on legacy nodes to establish manufacturing capability and create an ecosystem.
ISM 2.0 targets 4-5 new fabs, including CMOS, display, compound semiconductor, and advanced packaging.
Incentive structure differentiated based on segment maturity, with support ranging from 25% to 40%.
DLI 2.0 expanded eligibility to include domestic companies and OCIs, with increased funding ceiling.
Government plans to co-invest with RBI-whitelisted deep-tech venture funds to crowd in private investment.
Exit strategy will be decided on a case-by-case basis, depending on the stage of each business.
- Who
- Ministry of Electronics & IT (MeitY), Government of India
- What
- Launch of ISM 2.0 with revamped incentives to attract larger companies and private capital for semiconductor manufacturing
- When
- Not specified in the article
- Where
- India
- Why
- To establish manufacturing capability, create an ecosystem, and emerge as a credible alternative in legacy-node manufacturing
Government Perspective
Industry Perspective
Incentive Structure
Government Perspective
The government has introduced differentiated support based on the maturity of each segment, with silicon fabs receiving 40%, advanced packaging and certain other fabs 35%, equipment makers and material suppliers 30%, and conventional packaging 25%.
Industry Perspective
Industry players may prefer a uniform incentive structure to simplify the application and approval process, and to ensure fair competition across different segments.
Eligibility for DLI Scheme
Government Perspective
The government has expanded eligibility for the Design Linked Incentive (DLI) scheme to include domestic companies and Overseas Citizens of India (OCIs), alongside startups and MSMEs, to attract larger companies and private capital.
Industry Perspective
Industry players may argue that the expanded eligibility criteria could lead to increased competition for limited funding, and that the government should provide more targeted support to specific segments or companies.
- Incentive Outlay
- Substantially increased for ISM 2.0
- Target Fabs
- 4-5 new fabs, including CMOS, display, compound semiconductor, and advanced packaging
- Incentive Structure
- Differentiated support based on segment maturity (40% for silicon fabs, 35% for advanced packaging, 30% for equipment makers, 25% for conventional packaging)
- DLI 2.0 Changes
- Expanded eligibility to include domestic companies and OCIs, increased funding ceiling, and a different evaluation framework
- Funding Model
- Co-investment with RBI-whitelisted deep-tech venture funds to crowd in private investment
- Exit Strategy
- Case-by-case basis, depending on the stage of each business
- Advanced-Node Manufacturing
- Not a priority for India at this stage, focusing on legacy nodes first