Inside semiconductor circles, there is a saying: “Anybody can announce a fab. Very few can build and sustain one.” 

So when India unveiled its semiconductor ambitions in December 2021 through the India Semiconductor Mission (ISM), many global industry players privately dismissed it as another headline-heavy industrial policy that would struggle to move beyond announcements. India’s earlier attempts at semiconductor manufacturing had largely remained stuck at approval stages, reinforcing scepticism across the industry. 

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The doubts were not entirely unfounded. Semiconductor manufacturing is among the world’s most capital-intensive and operationally demanding industries, requiring billions of dollars in investments, uninterrupted infrastructure, deep supplier ecosystems and highly specialised talent. 

Five years later, the scepticism has not disappeared entirely, but the conversation around India has started changing.

With 12 approved semiconductor-related projects under ISM 1.0 spanning fabrication, ATMP, OSAT, compound semiconductors, display manufacturing and packaging, India is increasingly being viewed as an emerging semiconductor manufacturing destination. 

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“ISM 1.0 was a credible and substantial beginning, with the harder work still ahead. It did something India had struggled to do for decades: it moved semiconductors from policy speeches into visible execution,” said Sanchit Vir Gogia, Chief Analyst and CEO at Greyhound Research. 

India has also started building momentum across fabrication, advanced packaging, semiconductor design incentives and state-led cluster development. But industry experts say sustaining that momentum through ISM 2.0 will determine whether India can build a durable semiconductor industry or simply remain an incentive-led investment destination. 

“Semiconductor success is not measured by announcements, ribbon-cuttings, or even sanctioned investments. It is measured by whether plants move into production, whether yields improve, whether customers qualify the output, and whether suppliers co-locate,” Gogia added. 

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That is where the much-delayed ISM 2.0 becomes critical.

Harder phase begins now

Industry stakeholders say attracting the first wave of semiconductor investments was comparatively easier. The next phase will be significantly harder, ensuring these projects scale into globally competitive manufacturing operations capable of surviving semiconductor downturns, pricing pressure, supply disruptions and geopolitical volatility. 

Experts believe ISM 2.0 must now move beyond approving more fabs or extending capital subsidies. Instead, the focus should shift towards building the deeper layers of the semiconductor ecosystem.

“ISM 2.0 must strengthen supply chains (semiconductor-grade materials, specialty gases, chemicals, equipment) & ecosystems, advanced packaging, displays, and manufacturing support infrastructure to improve domestic value addition and reduce long-term import dependence,” said Ashok Chandak, President of IESA and SEMI India. 

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Chandak added that the next phase must also strengthen India’s design-led semiconductor ecosystem through expansion of DLI support, fabless semiconductor startups, indigenous IP creation, AI hardware innovation and product engineering. 

Another critical gap is customer qualification.

Gogia said semiconductor buyers do not accept chips simply because a country has strategic ambitions. Sectors such as automotive, defence, medical electronics, telecom and industrial automation require traceability, lifecycle assurance, certification, reliability data and long qualification cycles before suppliers are approved. 

Against this backdrop, several stakeholders believe ISM 2.0 will require significantly larger financial backing.

“The India Semiconductor Mission (ISM) 1.0 of $10 billion subsidy should be followed by ISM 2.0 by a $15-$20 billion framework as per the requirements assessed for burgeoning semi ecosystem growth in India,” said Danish Faruqui, CEO at FabEconomics. 

Lessons from Asia’s semiconductor playbook

As India prepares the contours of ISM 2.0, industry experts say the larger challenge is building an ecosystem capable of sustaining multiple generations of semiconductor manufacturing over decades, something several Asian economies spent years methodically developing. 

China’s semiconductor rise, experts say, was driven by a combination of state capital, domestic demand, supplier development, research programmes and long-term industrial planning.

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“That is the lesson India should absorb,” Gogia said, while also cautioning that China’s experience shows that massive capital spending alone does not guarantee technological independence, especially in advanced equipment and lithography. 

Singapore offers a different lesson.

According to Gogia, semiconductor firms do not choose countries solely based on incentives. They also evaluate operating environments, including reliable utilities, strong IP protection, efficient logistics, skilled labour, regulatory stability and predictable approvals. 

Vietnam, meanwhile, demonstrates how assembly-led integration can become a credible pathway if linked closely with electronics manufacturing, exports and workforce development. 

“India does not need to replicate any one model,” Gogia said. “But as its semiconductor ambitions move into industrial execution, each of these countries offers lessons that could shape ISM 2.0.” 

Delay in ISM 2.0 raising concerns

Five years after ISM 1.0 was launched, India is finally being viewed seriously as an emerging semiconductor manufacturing destination. But industry stakeholders warn that the momentum cannot be allowed to slow now. 

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Several stakeholders told Business Today that delays around ISM 2.0 are beginning to create uncertainty at a time when global semiconductor ecosystem players are actively evaluating India expansion plans tied to the country’s upcoming semiconductor manufacturing base. 

Suppliers, materials companies, equipment vendors and ecosystem players are now seeking greater policy clarity before committing larger long-term investments into India’s semiconductor ecosystem. 

ISM 1.0 may have given India a seat at the global semiconductor table. But industry experts say ISM 2.0 will determine whether the country can truly stay there.