OPINION | Budget expands semiconductor focus from being fab-centric to full value chain

Sector sentiment is also supported by expectations around ISM 2.0, which is likely to focus on backward integration, including fabrication-related activities.

The Union Budget announced today marks an important inflection point for India’s electronics and semiconductor sector, reinforcing the country’s transition from policy intent to large-scale execution. Building on the momentum created under the India Semiconductor Mission (ISM), ECMS and allied ESDM initiatives, the Budget sends a strong message of continuity and confidence to global and domestic industry stakeholders.

Over the past year, India has clearly moved from aspiration to credibility, emerging as a serious and investible destination for electronics and semiconductors. As the ecosystem now enters a critical phase of execution and scale-up, sustaining policy momentum has become essential—and the Budget addresses this requirement squarely.

ISM 2.0: From fabs to full value-chain ambition – policy continuity

One of the most significant signals from the Budget is the Finance Minister’s articulation of ISM 2.0 as a semiconductor policy focus. This reflects a maturing vision that moves beyond a fab-centric approach to a full value-chain strategy. The expanded scope—covering semiconductor equipment, materials, chemicals, gases, Indian IP, design tools, R&D, training, and supply-chain resilience—is critical if India is to transition from being a participant to a structural player in the global semiconductor ecosystem.

For India, the ambition is no longer limited to manufacturing chips alone, but to develop capabilities across upstream and high-value segments that define long-term competitiveness and strategic autonomy. While further clarity on the quantum and structure of ISM 2.0 funding will be important, the policy signal itself is a strong positive for industry confidence.

Electronics manufacturing gets a decisive boost

Equally important is the sharp focus on the electronics ecosystem. The enhancement of the Electronic Component Manufacturing Scheme (ECMS) to ₹40,000 crore reflects the strong response the scheme has received and its central role in driving electronics value addition. A unique 2% profit margin support for electronic manufacturers, Components Warehousing, Logistics Hubs, to enhance their global competitiveness and efficient operations.

Measures such as emphasis on value addition, customs simplifications, SEZ-to-DTA support, capital goods incentives, MSME-focused interventions, and ease of doing business reforms provide continuity and predictability to electronics manufacturers.

The alignment of ECMS with PLI objectives strengthens the domestic component ecosystem and helps India move decisively beyond assembly-led manufacturing. This is already translating into stronger electronics exports and growing global acceptance of India-made products.

Technology, research and talent at the core

The Budget’s emphasis on technology adoption and capability building is another critical pillar. Industry-led research and training, job creation, and focused initiatives such as the AI Mission, Quantum Mission, and RDI funding recognise that advanced electronics and semiconductors are deeply intertwined with frontier technologies.

Closing the skills gap will require a shift from purely academic training to industry-integrated models that provide real “fab-floor” and manufacturing exposure. The success of the C2S programme, with over 65,000 students enrolled, demonstrates progress on the design side. The next phase must focus on manufacturing-oriented skilling and workforce development—an area where industry bodies such as IESA and SEMI are already defining structured roadmaps.

Execution discipline will define success

India’s ambition under ISM 2.0 is necessarily broader and more complex. The challenge now lies in execution discipline—phasing scale-up in line with ecosystem readiness, ensuring faster approvals, and maintaining close synchronisation between government and industry. Capital availability is no longer the primary constraint; rather, success will depend on knowledge-capital, process discipline, global partnerships, and early anchor customers who can help stabilise new manufacturing lines.

Similarly, India’s rare-earth ambitions will be judged not by resource availability alone, but by downstream processing, quality consistency, and long-term offtake arrangements that integrate these resources into global supply chains.

From vision to execution

Taken together, the Budget measures consolidate recent gains, accelerate execution of approved projects, deepen domestic value addition, and further establish India as a globally competitive and trusted hub for electronics and semiconductor manufacturing. They also lay a strong foundation for meeting a significant share of domestic semiconductor demand through local design and manufacturing in the coming years.

Importantly, the Budget reflects the sustained and applied efforts of Ministry of Electronics and Information Technology ( and ISM ) in working closely with industry to translate vision into execution. The next phase will depend on continued collaboration, predictable policy support, and relentless focus on delivery—turning India’s semiconductor ambition into scaled, globally relevant outcomes.

(Ashok Chandak, President, IESA.)

Views are personal and do not represent the stand of this publication.