India’s Semiconductor Sector: Tracking Government Support and Investment Trends

India continues to support its semiconductor ecosystem in 2026 with 12 approved projects under the India Semiconductor Mission and one under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors. Learn about incentives, key fabs, locations, and investment.

India’s semiconductor manufacturing ecosystem continues to expand in 2026, with 13 approved semiconductor projects operational or under development as of 18 May 2026. This latest addition is an ATMP/OSAT facility in Bhiwadi, Rajasthan, inaugurated on 15 May 2026, under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS). The facility is notable for being the first semiconductor unit established outside the India Semiconductor Mission (ISM).

India is also strengthening its position within global semiconductor supply chains. On 16 May 2026, Tata Electronics and Dutch semiconductor equipment company ASML signed an agreement to establish India’s first front-end semiconductor fabrication plant in Gujarat.

The growing importance of semiconductors has also extended beyond traditional automotive and consumer electronics applications into sectors such as telecommunications, IoT devices, and medical technology, including MRI systems, wearable health monitors, and diagnostic equipment.

Union cabinet approves Semicon 2.0

India has launched Semicon 2.0 with an allocation of INR 1.275 trillion (US$13.23 billion), broadening government support across the semiconductor ecosystem. The initiative, announced on 15 July 2026, spans chip design, fabrication, display manufacturing, advanced packaging, semiconductor equipment, speciality materials, R&D, engineering services, and talent development. It also introduces incentives for manufacturing equipment, semiconductor-grade materials, speciality chemicals, industrial gases, and precision components to strengthen domestic capabilities and attract investment in fabrication and advanced packaging.

The expanded programme is expected to create opportunities for the following:

1. Semiconductor manufacturers
2. Fabless companies
3. EDA software providers
4. Artificial intelligence (AI) and automotive chip developers
5. Equipment suppliers and materials producers.

Companies evaluating investments in India should assess how the new incentive framework aligns with their operations while considering location strategy, infrastructure, supply chains, skilled talent, and available central and state government support.

Tata Electronics–ASML partnership for India’s first front-end semiconductor fab

India’s Tata Electronics and Netherlands-based ASML signed a strategic agreement on 16 May 2026 to support the development of India’s first front-end semiconductor fabrication facility in Gujarat.

Under the agreement, ASML will provide advanced semiconductor manufacturing technology and equipment for Tata Electronics’ proposed 300-mm wafer fabrication plant being developed in Dholera, Gujarat. This facility, backed by an estimated investment of US$11 billion, is expected to manufacture semiconductor chips for sectors including automotive electronics, mobile devices, industrial applications, and AI.

ASML CEO Christophe Fouquet stated that India’s rapidly expanding semiconductor sector presents substantial long-term opportunities, adding that the company intends to deepen its partnerships in the region as the industry matures.

The agreement was formalised during high-level bilateral engagements between India and the Netherlands. As per several media reports, India encouraged greater Dutch investment in strategic industries, including semiconductors, renewable energy, digital infrastructure, and healthcare.

The Tata-ASML partnership aligns with India’s broader semiconductor policy push. Multiple semiconductor projects are currently under development across the country, including large-scale fabrication and packaging facilities led by Tata Electronics in Gujarat.

This collaboration also reflects wider global supply chain realignment trends. Dutch semiconductor companies, including ASML, are increasingly pursuing geographic diversification and new growth markets amid evolving export controls and technology-related trade restrictions linked to ongoing US-China strategic competition.

Rajasthan launches first semiconductor facility

Rajasthan has formally entered India’s semiconductor manufacturing ecosystem with the inauguration of its first semiconductor ATMP/OSAT facility in Bhiwadi on 15 May 2026. Developed under the central government’s SPECS scheme, the project strengthens India’s efforts to expand domestic semiconductor packaging, testing, and electronics manufacturing capabilities.

Sahasra Semiconductors operates the facility, which focuses on semiconductor assembly, testing, marking, and packaging operations. Located within the Bhiwadi electronics manufacturing cluster, the project supports India’s broader semiconductor localisation strategy and growing electronics supply chain ecosystem.

CLICK HERE TO KNOW MORE: How Rajasthan’s Bhiwadi Commissioned India’s 13th Semiconductor Unit

India approves two new semiconductor projects under ISM

India’s Union Cabinet has approved two additional semiconductor projects under the ISM on 5 May 2026. These projects include the country’s first commercial mini/micro-LED display manufacturing facility based on Gallium Nitride (GaN) technology, along with a semiconductor packaging and testing unit.

The approved projects will be established in Gujarat with a combined investment of approximately INR 39.36 billion and are expected to create employment opportunities for around 2,230 skilled professionals.

One of the two new approved projects, Crystal Matrix Limited, will set up an integrated compound semiconductor fabrication and assembly, testing, marking, and packaging (ATMP) facility in Dholera, Gujarat. The project will focus on manufacturing mini/micro-LED display modules while also offering GaN foundry services, including epitaxy on six-inch wafers.

Crystal Matrix Ltd’s facility is expected to produce 72,000 square metres of mini/micro-LED display panels annually, alongside 24,000 sets of RGB GaN epitaxy wafers. The products are intended for use across multiple applications, including televisions, commercial display systems, smartphones, tablets, automotive displays, XR glasses, and smartwatches.

The second project, Suchi Semicon Private Limited, will establish an Outsourced Semiconductor Assembly and Test (OSAT) facility in Surat, Gujarat, focused on manufacturing discrete semiconductor components. Suchi Semicon’s facility is projected to have an annual production capacity of over 1 billion chips.

Products generated at this unit are expected to support applications in power electronics, analogue integrated circuits, and industrial systems, catering to sectors such as automotive, industrial automation, and consumer electronics.

India’s semiconductor push gains momentum with INR 37 billion HCL-Foxconn project

HCL Group and Foxconn have appointed Taiwan-based CTCI Corporation as the engineering, procurement, and construction (EPC) partner for their INR 37.06 billion (US$389.9 million) semiconductor assembly and testing (OSAT) facility in Jewar, Uttar Pradesh.

The facility, being developed under the ISM, will manufacture display driver chips used in smartphones, laptops, PCs, and automotive systems. Located near the upcoming Noida International Airport, the project is expected to generate over 2,000 direct and indirect jobs.

CTCI’s appointment also marks its entry into India’s semiconductor sector, building on its existing partnership with Foxconn across projects in Taiwan and the US. Unlike larger fabrication projects underway in Gujarat and Tamil Nadu, the HCL-Foxconn venture will focus on downstream chip packaging and testing — a segment increasingly viewed as critical for improving supply chain resilience and reducing dependence on imported semiconductor components.

Accelerating semiconductor manufacturing through SEZ reforms

On 9 April 2026, the central government notified a Special Economic Zone (SEZ) for Tata Semiconductor in Dholera, Gujarat, enabling the establishment of India’s first semiconductor fabrication facility. The notification formalises the regulatory framework for the project and designates the zone as an inland container depot, allowing on-site cargo handling and improved logistics efficiency.

India revised the SEZ Rules on 3 June 2025 to ease the establishment of semiconductor and electronics manufacturing units. Key changes included reducing the minimum land requirement from 50 hectares to 10 hectares, relaxing land-related conditions, allowing free-of-cost inputs to count toward export performance, and permitting domestic sales on payment of applicable duties.

Following these reforms, several semiconductor and electronics SEZ projects have been approved across the country. These span fabrication, assembly, testing, and component manufacturing and are expected to strengthen domestic production, generate skilled employment, and reduce import dependence.

Among these, the Tata Semiconductor project in Dholera stands out as India’s first fabrication facility and the largest in terms of investment and scale. Collectively, these developments indicate steady progress toward building a competitive semiconductor ecosystem in India, supported by policy reforms and increasing industry participation.

Sanand strengthens position as a semiconductor hub

Gujarat’s Sanand region has consolidated its role as a key semiconductor hub with the inauguration of Kaynes Semicon’s OSAT facility on 31 March 2026. Approved under the ISM, the project involved an investment of INR 33 billion (US$347.9 million) and focuses on chip testing and packaging, with a production capacity of around 6 million chips per day.

This followed the earlier operationalisation of Micron’s facility, contributing to rapid industrial growth and expansion of the regional semiconductor ecosystem.

Previously known for automobile manufacturing, Sanand has evolved into a prominent semiconductor cluster, driven by investments from Micron, Kaynes Semicon, and CG Semi. With several projects under the Semicon India Programme located in Gujarat, the region has emerged as a critical node in India’s semiconductor value chain.

India’s semiconductor design and manufacturing ecosystem in 2026

• India is strengthening its position as an emerging global centre for semiconductor design and research, supported by targeted government initiatives and a growing pool of engineering talent. The country hosts around 7 per cent of the world’s semiconductor Global Capability Centres (GCCs) and employs nearly 20 per cent of the global semiconductor chip design workforce, as per industry estimates.
• As per the Ministry of Electronics and Information Technology (MeitY), the Semicon India Programme has attracted investment commitments of approximately INR 1.6 trillion (US$17.31 billion). As of March 2026, 10 semiconductor units have been approved, including 2 fabrication plants and 8 ATMP/OSAT facilities. Of these projects, one unit has commenced commercial production, while three facilities are currently operating pilot production lines.
• India’s Design Linked Incentive Scheme, launched to support chip manufacturing capabilities, aims to promote the design and commercialisation of semiconductor technologies. This includes integrated circuits (ICs), chipsets, and system-on-chip (SoC) solutions. Under this program, 24 semiconductor design projects with a combined value of approximately INR 9 billion (US$94 million) have been approved, covering applications across sectors such as video surveillance, drone detection, energy metering, satellite communications, broadband systems, and Internet of Things (IoT) technologies. In addition, 14 participating companies have secured venture capital funding totalling around INR 6.5 billion (US$70.3 million) to scale up their innovations.
• In the Union Budget 2026-27, the central government announced ISM 2.0, the next phase of the initiative expected to focus on strengthening semiconductor equipment and materials manufacturing. This also entails expanding full-stack design capabilities, developing indigenous intellectual property, and improving supply chain resilience.
• The Uttar Pradesh Cabinet has approved a set of 13 major policy proposals, with a key focus on introducing targeted incentives for semiconductor manufacturing units on 6 January 2025. As part of the Uttar Pradesh Semiconductor Policy 2024, the state has unveiled a structured support framework to encourage large-scale investments in chip and advanced electronics manufacturing.
  Under the policy, eligible semiconductor manufacturers will be offered a combination of fiscal and operational incentives, including interest subsidies on project financing and reimbursement of certain employee-related expenses. Additionally, a full exemption from net state goods and services tax (SGST) will be granted for up to 10 years. These benefits are aimed at reducing upfront and operational costs, addressing the capital-intensive nature of semiconductor projects, and improving long-term commercial viability.
  Media reports, citing state government officials, have made a note that the incentive package is expected to support the financial feasibility of large semiconductor investments while fostering a robust electronics manufacturing ecosystem. Following the Cabinet’s approval, the government is likely to engage actively with domestic and international semiconductor companies, invite investment proposals, and streamline regulatory clearances to fast-track project execution.

Semiconductor market and policy push in India

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India is positioning itself as a trusted alternative hub in global semiconductor supply chains. The domestic semiconductor market was valued at about US$38 billion in 2023 and is projected to reach around US$109 billion by 2030, driven by demand from smartphones, automotive electronics, industrial automation, and data centres.

To reduce import dependence and attract fabrication and advanced packaging investments, the government launched the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India in 2021, with a total outlay of INR 760 billion (~US$10 billion) and the creation of the ISM as the nodal agency.

Also Read: India’s Semiconductor Sector Outlook 2025: Growth, Investments, and Policy Incentives

Key central schemes and state incentives for semiconductor fabs

Under the umbrella programme, multiple schemes support different parts of the value chain:

1. Modified Scheme for setting up semiconductor fabs in India

• Provides fiscal support up to 50 per cent of eligible project cost, on a pari-passu basis, to approved applicants for setting up silicon CMOS wafer fabrication units. Applies across all technology nodes under the modified program.
• Eligible project cost is defined under the scheme guidelines.
• Focus: Logic, memory, analog and mixed-signal chips, power management ICs, microcontrollers, etc.
• Government source about the scheme: https://www.ism.gov.in/semiconductor-fab

2. Modified Scheme for setting up of Display Fabs in India

• Offers fiscal support up to 50 per cent of project cost, on a pari-passu basis, for setting up large-scale TFT-LCD or AMOLED display fabrication facilities.
• Objective: Support large-scale display manufacturing for TVs, smartphones, and automotive displays.
• Government source about the scheme: https://www.ism.gov.in/display-fab

3. Modified Scheme for setting up compound semiconductor / Silicon Photonics / Sensors / discrete semiconductor fab and Semiconductor ATMP / OSAT facilities in India

• Extends fiscal support up to 50 per cent of capital expenditure, on a pari-passu basis, for:
  • Compound semiconductor fabs
  • Silicon photonics (SiPh) / sensor (including MEMS) fabs
  • Discrete semiconductor fabs
  • Semiconductor ATMP (Assembly, Testing, Marking, Packaging) / OSAT units
• Recognises advanced packaging and specialised materials segments as strategic.
• Use cases: Power electronics, EVs, telecom, defence, photonics, and high-reliability applications.
• Government source about the scheme: https://www.ism.gov.in/compound-semiconductor

4. Design Linked Incentive (DLI) Scheme

• Supports the semiconductor design ecosystem (ICs, chipsets, SoCs, IP cores, etc.) with:
  • A “Product Design Linked Incentive” reimbursing up to 50 per cent of eligible design expenditure (subject to a cap of INR 150 million per project)
  • A “deployment-linked incentive” covering a percentage (e.g., ~4–6 per cent) of net sales turnover over a period (typically 5 years) for eligible products/designs.
• Also provides access to design infrastructure (EDA tools, foundry services) via national programmes.
• Targets: Fabless startups, MSMEs, and design houses working on chips for 5G, EVs, AI, industrial automation, aerospace, and defence.
• Government source about the scheme: https://www.ism.gov.in/design-linked-incentive

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5. State-level incentives

Several states have rolled out dedicated semiconductor policies on top of central support. For example:

• Gujarat: A dedicated semiconductor policy offering land, infrastructure, and additional capital/interest subsidies for projects in regions such as Dholera and Sanand.
• Uttar Pradesh, Karnataka, Tamil Nadu, Telangana, Assam, Odisha, and Andhra Pradesh offer their own policy frameworks, typically layering state capital subsidies, stamp duty waivers, and training subsidies over central incentives.

Investors typically structure projects to stack central and state incentives while meeting localisation, technology, and capacity conditions prescribed in the scheme guidelines.

Also Read: India’s Design-Linked Scheme for the Semiconductor Sector: How Businesses Can Maximize Benefits

India semiconductor tracker: Approved semiconductor fab and ATMP/OSAT projects

There are now 13 approved projects in India: 1 unit under SPECS and 12 under ISM spanning fabs, advanced packaging, and compound semiconductors. The table below consolidates official and widely reported information; values are approximate and rounded.

Other notable semiconductor ecosystem developments for investors

Beyond ISM-approved units, several moves are reshaping India’s broader semiconductor ecosystem:

• CG Power OSAT rolls out first “Made-in-India” chips: CG Semi’s OSAT facility at Sanand is poised to deliver some of the first commercial chips under ISM, following the inauguration of its pilot line in August 2025.
• Kaynes Semicon’s early commercial ramp-up: By October 2025, Kaynes Semicon has shipped its first paid chip modules from its Sanand OSAT unit, targeting US and domestic customers.
• Lam Research’s US$1+ billion investment in India: US-based Lam Research has committed over US$1 billion in Karnataka to support semiconductor tool engineering, training programmes, and ecosystem development—bolstering India’s position in equipment and process technology.
• Large R&D and design footprints:
  • AMD opened its largest global design centre in Bengaluru, backed by a US$400 million investment.
  • NXP and other global chipmakers are scaling their India design and engineering centres, with NXP targeting up to 8–10 per cent of global revenue from India in the medium term.
• L&T’s fabless-to-fab ambitions: L&T Semiconductor Technologies (a fabless startup backed by Larsen & Toubro) has signalled an ambition to build a US$10 billion fab in India before 2027, contingent on revenue milestones and leveraging ISM-linked support.
• Strong design-talent base: India hosts roughly 20 per cent of the world’s chip design engineers, underscoring why many global players situate R&D and design centres in the country even before full-scale fabs are online.

For foreign investors, these developments mean that domestic talent, tools, and upstream/downstream suppliers are growing alongside fabrication and OSAT capacity, reducing first-mover risk.

Practical considerations for foreign investors planning a fab or OSAT unit in India

For companies looking to enter or expand in India’s semiconductor and display manufacturing ecosystem, the ISM scheme offers a compelling opportunity – but success will depend on early clarity and rigorous preparation. To capitalise on this support, foundational steps should include: (1) conducting a detailed feasibility study that aligns the project with the subsidy slabs (e.g., 28 nm or below vs other nodes) and internal rate of return; (2) verifying eligibility criteria – especially investment size and revenue history – and ensuring the corporate vehicle and strategy are structured accordingly; (3) preparing a credible deployment and technology-upgrade roadmap (showing how you’ll evolve in node/device complexity) and tie-up with global supply-chain partners; and (4) ensuring that project scheduling, state-level clearances (e.g., land, utilities) and local ecosystem support (skilling, logistics) are ready. One key advisory point: while the headline rate is up to half the cost, the actual quantum and timing of support is conditioned on milestones, node-size eligibility and government appraisal. Thus, for an investor or technology firm eyeing this scheme: don’t treat the subsidy as simply a grant – embed it into your financial model, stress-test the project without it, and assume you must meet high conditionality. By doing so you can position your business to not only qualify for the incentive but build a resilient manufacturing footprint in India’s growing electronics ecosystem. — Dezan Shira & Associates India

Pre-investment decisions

When planning a semiconductor project in India, foreign investors typically need to structure decisions around four pillars:

1. Scheme fit and project structuring

• Map whether your project fits the fab, compound/SiC, or ATMP/OSAT scheme categories and their technology-node expectations.
• Consider JV structures with global technology partners (as seen in Tata–PSMC, CG–Renesas–Stars and HCL–Foxconn) to de-risk technology access and off-take.

2. Location strategy

• Evaluate central-state incentive stacking: Gujarat (Dholera, Sanand), Assam (Jagiroad), Uttar Pradesh (Jewar), Odisha (Bhubaneswar), Andhra Pradesh, and Punjab are emerging semiconductor clusters.
• Assess access to semiconductor-grade water, power reliability, logistics connectivity, and workforce housing—areas where states like Gujarat and Assam are actively investing to support projects like Tata’s fab and TSAT OSAT.

3. Compliance, approvals, and reliability

• ISM evaluates technology, financial strength, and ecosystem impact as part of proposal approvals. The earlier collapse or rescoping of some large proposals, such as the Vedanta–Foxconn JV, underlines the government’s emphasis on credible partners and realistic demand assumptions.
• Investors must also navigate environmental, land, water-use, and labour approvals, often facilitated through the National Single Window System and state single-window interfaces.

4. Supply chain and talent partnerships

• Co-locate or partner with gas and chemical suppliers, substrate manufacturers, and tool vendors—numerous such players are already in talks or under implementation in Gujarat and other states.
• Tie up with IITs, NITs, and local universities for curriculum customisation and training pipelines, as seen in Micron and CG Power’s projects.

FAQs

Q1. What is the India Semiconductor Mission (ISM)?

A. ISM is a specialised agency under the Digital India Corporation tasked with implementing India’s INR 760 billion semiconductor and display manufacturing programme. It appraises proposals for fabs, compound semiconductors, ATMP/OSAT units, and design projects and administers fiscal support of up to 50 per cent of project cost under various schemes.

Q2. How many semiconductor projects has the Indian government approved so far?

A. As of 18 May 2026, the central government has approved 13 semiconductor projects across seven states under ISM and SPECS. These include one large logic/power fab, multiple OSAT/ATMP units, and new silicon carbide and substrate-focused projects.

Q3. What level of incentives can semiconductor investors get in India?

A. For eligible projects, the central government provides up to 50 per cent of project cost or capital expenditure for fabs, compound semiconductor units, and ATMP/OSAT facilities, plus up to 50 per cent reimbursement of design costs (capped) under the DLI scheme. States then layer their own incentives via capital subsidies, land support, power-tariff benefits, and training subsidies.

Q4. Which locations are emerging as India’s main semiconductor hubs?

A. Gujarat (Dholera and Sanand) is becoming the flagship hub with the Tata–PSMC fab and multiple OSAT and ATMP units from Micron, CG Power, and Kaynes. Assam (Jagiroad), Uttar Pradesh (Jewar), Odisha (Bhubaneswar), Punjab (Mohali), and Andhra Pradesh are also hosting approved projects under ISM, supported by tailored state policies and infrastructure plans.

Q5. Are there opportunities for fabless and design-only semiconductor firms in India?

A. Yes. The Design Linked Incentive (DLI) Scheme supports fabless startups and design houses through reimbursement of up to 50 per cent of design costs. It also grants access to EDA tools and shared infrastructure, while India’s large base of chip design engineers and R&D centres (AMD, NXP, etc.) creates a strong ecosystem for collaboration.

Archive: Semiconductor schemes in India

Modifications to the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India

On 21 September 2022, the Cabinet, chaired by Prime Minister Narendra Modi, approved key modifications to the Program for Development of Semiconductors and Display Manufacturing Ecosystem in India:

1. Fiscal support of 50 per cent of project cost on a pari-passu basis for all technology nodes under the Scheme for Setting up of Semiconductor Fabs in India.
2. Fiscal support of 50 per cent of project cost on a pari-passu basis under the Scheme for Setting up of Display Fabs.
3. Fiscal support of 50 per cent of capital expenditure on a pari-passu basis under the Scheme for Setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor ATMP/OSAT Facilities in India. Additionally, target technologies under the scheme will include discrete semiconductor fabs.

Under the modified programme, a uniform fiscal support of 50 per cent of project cost shall be provided across all technology nodes for the setting up of semiconductor fabs. Given the niche technology and nature of compound semiconductors and advanced packaging, it shall also provide fiscal support of 50 per cent of capital expenditure in pari-passu mode for setting up compound semiconductors/silicon photonics/sensors/discrete semiconductor fabs and ATMP/OSAT.

This article was originally published on 6 April 2021. It was last updated 16 July 2026.

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