India just announced a game-changing move in the global semiconductor race. Finance Minister Nirmala Sitharaman’s Union Budget 2025 revealed ISM 2.0 – and the numbers are staggering. The government is nearly doubling its commitment to electronics manufacturing, signaling that India isn’t just joining the chip-making club; it’s positioning to lead.
Here’s what makes this announcement different from typical budget promises.
The Numbers Tell a Compelling Story
The Electronics Components Manufacturing Scheme launched in April 2025 with ₹22,919 crores. Industry response? Investment commitments at double the targets. This wasn’t just meeting expectations – it was crushing them.
The government’s response is equally bold: increasing the outlay to ₹40,000 crores. This isn’t a cautious increment; it’s a decisive bet on India’s semiconductor future.
“We’ve all seen government schemes launch with fanfare and fade quietly,” you might be thinking. But here’s what most people miss…
ISM 2.0: Beyond Just Manufacturing
India Semiconductor Mission 1.0 focused on expanding capabilities – building fabs, attracting investments, and establishing India on the global semiconductor map. ISM 2.0 takes a fundamentally different approach.
The new mission targets three critical areas:
Equipment and Materials Production: Instead of importing the tools needed to make chips, India will manufacture them domestically. This addresses a crucial vulnerability in the supply chain.
Full-Stack Indian IP Design: Developing indigenous intellectual property means Indian companies won’t just assemble chips designed elsewhere. They’ll own the blueprints.
Supply Chain Fortification: Creating resilient, diversified supply chains that reduce dependency on geopolitical flashpoints.
The surprising part? The government is also establishing industry-led research and training centers. This isn’t just about building factories – it’s about building the workforce and innovation ecosystem needed to sustain them.
The Rare Earth Element Strategy
Here’s where India’s approach gets strategic. A scheme for rare earth permanent magnets launched in November 2025, targeting mineral-rich states: Odisha, Kerala, Andhra Pradesh, and Tamil Nadu.
Why does this matter?
Rare earth elements are critical for electronics manufacturing, electric vehicles, and defense equipment. China currently dominates global supply – controlling over 70% of rare earth processing. India’s move to establish dedicated rare earth corridors addresses both economic and strategic imperatives.
These corridors will integrate:
- Mining operations
- Processing facilities
- Research institutions
- Manufacturing hubs
The goal isn’t subtle: enhance domestic production and dramatically reduce import dependency.
Chemical Parks and Capital Goods: The Complete Ecosystem
But semiconductors don’t exist in isolation. The budget announcement reveals understanding of this interconnected reality.
Three Dedicated Chemical Parks: These will operate on a cluster-based, plug-and-play model through a challenge route. Chemical production supports semiconductor manufacturing, pharmaceuticals, and countless industries.
Capital Goods Enhancement: Two initiatives stand out:
- High-Tech Tool Rooms: Central public sector enterprises will establish digitally-enabled, automated service bureaus at two locations. These facilities will locally design, test, and manufacture high-precision components at scale and lower cost.
- Construction and Infrastructure Equipment Scheme: Strengthening domestic manufacturing of advanced equipment – from lifts and firefighting systems to tunnel boring machines for metro projects and high-altitude roads.
Why This Matters to You
“This sounds like industrial policy. How does it affect me?”
Job Creation: Semiconductor fabs, research centers, and manufacturing facilities require skilled workers. ISM 2.0 explicitly includes training centers – creating pathways to high-paying technical careers.
Reduced Electronics Costs: Domestic semiconductor production can eventually lower costs for smartphones, laptops, automobiles, and appliances.
Economic Security: Less import dependency means greater stability during global supply chain disruptions – like we experienced during the pandemic.
Innovation Hub Potential: When you build the infrastructure, talent, and IP capabilities, you create an environment where startups and innovation flourish.
Read Also – Budget 2026: India’s Bold Push to Become Global Sports Manufacturing Powerhouse
The Global Context
India’s semiconductor ambitions arrive at a crucial moment. The US CHIPS Act committed $52 billion to American semiconductor manufacturing. The EU Chips Act allocated €43 billion. China has invested over $150 billion in its semiconductor industry.
India’s ₹40,000 crore commitment (approximately $4.8 billion) is smaller in absolute terms, but the momentum matters. The government is building incrementally, validating success, then scaling – exactly what the Electronics Components Manufacturing Scheme demonstrated.
What Happens Next
ISM 2.0 isn’t just an announcement – it’s a framework requiring execution across multiple ministries, state governments, and private sector partners.
Key implementation questions remain: How quickly can training centers become operational? Which companies will lead equipment and materials production? How will India attract and retain the specialized talent needed?
The answers will emerge over the next 12-24 months. But one thing is clear: India has moved from tentative participant to committed player in the global semiconductor industry.
For a nation that imports the vast majority of its semiconductors, this represents more than economic policy. It’s a strategic repositioning for technological sovereignty.
