India prepares fresh $20 billion plan to woo chipmakers, build fab ecosystem

Meity has outlined four priority areas — chip design, semiconductor components, new materials, and India’s first display fabrication unit — alongside scaling up the fabless design ecosystem

India’s drive to establish itself as a semiconductor powerhouse is gathering momentum, with the government preparing a fresh $20 billion incentive programme to draw in both global and domestic chipmakers, The Mint reported.

According to the report, the Ministry of Electronics and Information Technology (Meity) has sought the finance ministry’s approval for the plan, which will eventually be presented to the Union Cabinet. A final go-ahead is expected before the close of 2025, coinciding with the end of the first phase of the India Semiconductor Mission (ISM).

Officials told The Mint that Meity is compiling a comprehensive dossier assessing ISM’s first phase outcomes, benchmarking them against similar global schemes. “The finance ministry had asked for an economic projection document from Meity, seeking clarity on the returns from ISM’s initial tranche, and how India compares with other regions, particularly the US, whose incentive packages are bigger but where market conditions are far more complex,” one official familiar with the discussions said.

Globally, the US Chips Act earmarks over $52 billion in subsidies and tax incentives for chipmakers, while the European Union’s Chips Act is targeting more than €43 billion in combined public and private capital. China, Japan, and South Korea have also pledged multi-billion-dollar support through grants, tax breaks, and direct funding.

Despite this, the finance ministry has expressed skepticism, noting that India’s earlier $10 billion semiconductor push, introduced four years ago, was shaped by protectionist policies reminiscent of former US president Donald Trump’s trade stance and questioned its sustainability. Yet, in the same period, New Delhi cleared an $11-billion fab by Tata Electronics with Taiwan’s Powerchip Semiconductor Manufacturing Co., a Micron testing and assembly facility, as well as projects from the Murugappa group’s CG Semi and HCL Technologies, The Mint noted.

Meity has argued that while India’s incentive packages will inevitably remain smaller than those of the US, the country’s policy predictability and openness give it a unique edge for attracting long-term investment.

In its second phase, ISM 2.0 proposes a $20 billion outlay spanning the entire semiconductor value chain. According to The Mint, Meity has outlined four priority areas — chip design, semiconductor components, new materials, and India’s first display fabrication unit — alongside scaling up the fabless design ecosystem. The push also targets building advanced fabs, nurturing local champions in chip manufacturing, and enabling startups to develop everything from household appliance sensors to telecom network chips, thereby cutting import reliance.

The design-linked incentive (DLI) scheme remains central to this vision, with industry experts stressing to The Mint that such support is not optional but essential for India to secure a strong position in the global semiconductor race.

The report further highlights that the global subsidy landscape is stabilizing. While the US continues to expand domestic fabs, delays and challenges around subsidy disbursement persist. India, by contrast, is still scaling its incentive structures, creating a policy window that could favor expansion by multinational chipmakers.

“India’s open, market-driven economy makes it a natural destination for the next wave of fabless design startups and component makers,” Rajat Mukherjee, managing director and partner at BCG India, told The Mint.

Echoing this sentiment, Kai Beckmann, CEO of Merck, a major supplier to the global semiconductor value chain, said: “If India can maintain its current pace, policy continuity and steady long-term subsidies will be crucial to winning investor confidence. A comprehensive ecosystem is still developing, but the potential is enormous.”