Raja Manickam, Founder & CEO, iVP Semi

Semiconductors are a high-investment, long-term business. Outcomes are not determined by announcements alone, but by how consistently policy, capital, and execution align over a decade or more. In that context, the government’s decision to launch India Semiconductor Mission (ISM) 2.0 with an enhanced outlay of ₹40,000 crore is an important progression from building assets to building capability.

The intent behind ISM 2.0 deserves close attention. The mission should not be limited to adding fabs or packaging lines, but focus on creating Indian companies across the semiconductor value chain spanning design, equipment, materials, processes, and systems. Using taxpayer money to create capacity for foreign companies may deliver short-term output, but it does not create leverage. However, using public funds to build and nurture Indian companies creates ownership, resilience, and long-term strategic control.

Substitution as strategic leverage

Even a partial reduction in import dependence can significantly alter India’s position in global supply chains. If Indian companies are able to supply 30–40 per cent of domestic demand, they gain negotiating power across the ecosystem. Foundries, equipment suppliers, and material vendors begin to view India as a serious market rather than a peripheral one. Scale matters, but mindshare matters just as much. Once volumes become meaningful, global suppliers start localizing, investing, and aligning roadmaps to Indian demand.

Capital allocation, however, must be deliberate. In most semiconductor projects, close to three-fourths of the total investment sits in equipment. Much of this today is imported, resulting in capital leakage and limited domestic value creation. ISM 2.0’s focus on equipment and materials designed around full-stack Indian IP is therefore critical. The government’s move to exempt customs duties on critical minerals and to strengthen rare earth mining and processing through dedicated corridors is equally important, as secure access to materials underpins semiconductors, defence, and advanced electronics. Without control over materials, manufacturing scale alone cannot deliver resilience or strategic autonomy.

IP ownership over capacity expansion

Technology choices also matter. India does not need to compete head-on with leading-edge logic to build relevance. Mature-node technologies, particularly power and analogue are a more practical starting point. These segments align well with India’s domestic demand in power electronics, mobility, renewables, telecom, and industrial systems. They are also areas where system-level understanding matters as much as transistor scaling. When chip development is aligned to system needs, adoption cycles shorten and local manufacturing becomes viable faster. Case in point, India is installing 50GW plus solar every year for the next 10 years. Indian companies can develop all the chips required to support the solar mission. This creates large wafer demand which in turns creates attention to India by all the ecosystem players.

Advanced packaging, pilot fabs, and product IP creation deserve priority because design ownership determines margins, relevance, and long-term control. Manufacturing without IP simply shifts dependence from one geography to another. The real question is not how many fabs are announced, but how many Indian companies emerge with defensible technology and repeatable products.

Frugal innovation as structural advantage

Another dimension that often gets overlooked is the nature of innovation. Indian companies, shaped by frugal engineering and practical constraints, are naturally tuned to building efficient, lower-power, cost-effective solutions. These are not compromises but are differentiated solutions that address real problems at scale. Innovation is already reducing dependence on primary materials through substitution and lower material usage, strengthening this advantage further.

Shared facilities for testing, reliability qualification, and materials handling can dramatically shorten development cycles for startups and small companies. Connecting domestic product companies directly to local manufacturing through procurement and pricing incentives ensures that public investment strengthens Indian ecosystems.

Talent depth trumps talent volume

Semiconductors are ultimately a people-driven industry. Talent development must go beyond classroom skilling. Engineers need hands-on exposure to fabs, packaging lines, and test environments to understand how design choices affect yield, reliability, and cost. Depth of expertise across equipment engineering, materials science, yield management, thermal design, and packaging matters far more than scale when building sustainable capability. Applied learning centres, industry-embedded apprenticeships, and factory-floor experience are essential in the announced industry-led R&D and training practices.

From a broader perspective, Budget 2026 strengthens India’s semiconductor ecosystem by integrating it more cohesively, supporting not just the local ecosystem but also design, R&D, IP creation, and long-term innovation which are critical as India advances its semiconductor journey. If success is measured only by short-term capacity, India risks becoming a participant without influence. ISM 2.0 presents an opportunity to build long-term capability by aligning chips to system needs and developing deep technical talent. If executed well, India can move from assembly-led growth to design-led leadership.

(The author is Founder & CEO, iVP Semi)

Published on February 1, 2026