Iran war: Closure of Strait of Hormuz unlikely to delay ISM 2.0 rollout

The second phase of ISM was announced in by FM Nirmala Sitharaman in Budget 2026

• Strait of Hormuz issues won't delay India's Semiconductor Mission 2.0
• ISM 2.0 focuses on equipment, materials, and chemicals approvals
• Long-term supply chain impact possible during construction phase

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The government does not expect the Strait of Hormuz disruption to delay the rollout of the next phase of the India Semiconductor Mission (ISM), a senior government official said.

The route is a key corridor for energy shipments and petrochemical feedstock used in chip manufacturing and a prolonged disruption can affect the availability and pricing of specialised gases and chemicals used in fabrication processes.

As of March 10, maritime traffic through the narrow strait, which has remained closed for more than 10 days, has effectively collapsed, with daily transits plummeting by over 94 percent following a series of missile and drone attacks on commercial vessels.

The US-Israel war on Iran coincides with the government getting ready to bring in the second phase of the ISM. Building on the first phase of the programme, ISM 2.0 is expected to shift from attracting fabrication units to focusing on semiconductor equipment, speciality materials and chemicals.

When asked if the situation in West Asia could affect the timeline for ISM 2.0, the official said currently, the programme’s at the stage of administrative approvals rather than supply-chain execution.

“ISM 2.0 is not linked with any ongoing problems. We are moving ahead with the processes that are required for the approval,” the official told Moneycontrol on condition of anonymity.

Industry executives Moneycontrol spoke to said while the introduction of the scheme may be unaffected, the long-term impact of geopolitical tensions could emerge once projects move to construction and procurement stages — when fabs and associated facilities begin sourcing large volumes of energy, chemicals and speciality gases.

For now, officials said the focus remains on moving the mission through the required government processes before it is ready for final approval.