ISM 2.0 — India Semiconductor Mission 2.0
What changes, what's funded, and what it means
The Union Budget 2026-27 launched India Semiconductor Mission 2.0 with ₹1,000 crore for FY 2026-27 as part of a broader ₹8,000 crore outlay. ISM 2.0 is not a continuation of ISM 1.0 — it is a deliberate pivot from capacity creation to ecosystem depth. Here is exactly what changed and what it means.
ISM 1.0 vs ISM 2.0 — what actually changed
ISM 1.0 was correct for its moment: India needed to prove it could attract semiconductor investment and get facilities built. ISM 2.0 addresses the next layer of problems — the ones that become visible once facilities are operational.
| Dimension | ISM 1.0 (Dec 2021) | ISM 2.0 (Feb 2026) |
|---|---|---|
| Primary focus | Fab and ATMP capacity creation — attracting anchor investments | Ecosystem depth — equipment, materials, IP, supply chain, skills |
| Funding model | Up to 50% fiscal support on project capex — co-investment in facilities | ₹1,000 Cr FY27 for industry-led R&D and training centres; targeted not broad |
| Semiconductor equipment | Not a focus — imported from Japan, Netherlands, USA | Explicit priority: domestic production of semiconductor-grade equipment |
| Materials and chemicals | Not addressed — specialty gases, wafer materials all imported | Strategic priority: domestic specialty chemicals, gases, and materials |
| Design IP | DLI scheme supports chip design companies (ongoing) | Full-stack Indian IP — end-to-end indigenous semiconductor IP development |
| Workforce | C2S targets design engineers — 85,000 by 2026 | Manufacturing skills added: ATMP operators, technicians, process engineers |
| C2S scope | 315 institutions, EDA tools for design | 500 institutions targeted; manufacturing curriculum added alongside design |
| Research model | Government-led R&D through ISRO, DRDO, IITs | Industry-led R&D centres — market-aligned, faster translation to production |
| Supply chain | Facilities approved; supply chains assumed to follow | Explicit supply chain resilience programme — domestic and global diversification |
The four pillars of ISM 2.0
ISM 2.0 is organised around four strategic pillars — each addressing a specific gap that ISM 1.0's facility-creation model left unresolved.
India imports virtually all semiconductor manufacturing equipment from Japan (Tokyo Electron, Shin-Etsu), Netherlands (ASML), and USA (Applied Materials, Lam Research). ISM 2.0 targets domestic production of semiconductor-grade equipment and raw materials — specialty gases, silicon wafers, chemicals, precision tooling.
- Domestic equipment manufacturing incentives
- Specialty chemicals and gas supply chains
- Wafer-grade materials production
- Precision tooling and parts manufacturing
ISM 2.0 targets end-to-end indigenous semiconductor IP — not just chip design support (DLI scheme, ongoing) but system-level architecture, processor IP, and proprietary technology that India owns and can export. Ashwini Vaishnaw named design as ISM 2.0's "number one priority."
- 100+ advanced semiconductor design IPs targeted
- AI-enabled Semiconductor Engineering Mission
- Tiered EDA tool subsidies beyond C2S
- DHRUV64 processor and indigenous processor development
- Digital India RISC-V programme (open-source)
The ₹1,000 crore FY27 provision is specifically for industry-led research and training centres — not government labs. The model requires industry to lead and co-invest, ensuring curriculum and research is commercially relevant and translates to production faster than government-led alternatives.
- ₹1,000 crore allocated FY 2026-27
- Industry must lead — not academic institutions alone
- OSAT and ATMP manufacturing skills priority
- Institutions with running programmes are strongest applicants
- Applications expected to open after Cabinet ISM 2.0 approval
Every ISM-approved facility currently imports the inputs it needs — substrates, leadframes, EMC compounds, specialty chemicals, service equipment. ISM 2.0 explicitly targets domestic supply chain depth and global supply chain integration as parallel tracks.
- Domestic substrate and leadframe manufacturing
- EMC compound suppliers
- Specialty chemical and gas localisation
- Friend-shoring: diversifying from single-country dependencies
- ISM Investors Support Portal (launched May 26, 2026)
The ₹1,000 crore training centre provision — who qualifies
This is the part of ISM 2.0 most directly relevant to engineering colleges, polytechnics, ITIs, and private training centres. The ₹1,000 crore FY27 allocation explicitly targets industry-led training centres for semiconductor skills. Here is what is known about eligibility and what to do now.
A budgetary provision of ₹1,000 crore has been made for FY 2026-27 specifically for industry-led research and training centres. Cabinet ISM 2.0 approval is expected before September 2026 — applications are expected to open shortly after. The scheme design prioritises industry-academia partnerships over purely academic programmes.
The single most important thing institutions can do right now: Start building the programme. An institution with a running OSAT programme — even a first cohort of 20 placed students — will be a stronger ISM 2.0 training centre applicant than one that has not started. The window to build before applications open is narrow.
AICTE-affiliated institutions
- Must have ECE/EEE/Mechatronics department
- Programme should be AICTE-curriculum revised or NSQF-aligned
- Industry MoU with operational OSAT/fab strongly preferred
- C2S enrolment adds weight to application
Vocational and technical institutes
- NCVET/NSQF-aligned qualification preferred
- NITTTR Bhopal ToT for faculty is a strong signal
- Placement linkage to Sanand/Jagiroad cluster
- Industry co-investment in lab required
Industry-led is the key requirement
- "Industry-led" model aligns with private centre structure
- Must have NSQF credentialing via NIELIT or Electronics SSC
- Placement outcomes from first cohort are decisive
- Co-investment from industry partner required
ISM 2.0 — quick questions
What is ISM 2.0?
India Semiconductor Mission 2.0 (ISM 2.0) is the second phase of India's semiconductor policy, announced in Union Budget 2026-27. It builds on ISM 1.0 (launched December 2021, ₹76,000 crore) by shifting focus from facility creation to ecosystem depth — specifically semiconductor equipment, materials, indigenous design IP, industry-led training, and supply chain resilience. A budgetary provision of ₹1,000 crore was made for FY 2026-27.
What is the budget for ISM 2.0?
₹1,000 crore for FY 2026-27, as part of a broader ₹8,000 crore ISM 2.0 outlay. This is in addition to the original ISM 1.0 corpus of ₹76,000 crore, which continues to support approved fab and ATMP projects. The FY27 provision specifically targets industry-led R&D and training centres.
What is the difference between ISM 1.0 and ISM 2.0?
ISM 1.0 focused on attracting anchor investments — co-funding fabs and ATMP packaging facilities with up to 50% fiscal support. ISM 2.0 addresses what comes next: the equipment, materials, and skilled workforce that those facilities need to operate. It also expands design IP support and explicitly targets semiconductor supply chain localisation. The model shifts from broad subsidy to targeted, industry-led investment.
What is the ISM 2.0 training centre provision?
₹1,000 crore of the FY27 ISM 2.0 allocation is specifically for industry-led research and training centres. This is designed to build the skilled workforce that operational OSAT and fab facilities need — ATMP operators, process technicians, equipment engineers. The scheme is expected to open for applications after Cabinet ISM 2.0 approval, anticipated before September 2026.
Can engineering colleges apply for ISM 2.0 training centre grants?
Yes — but the scheme is "industry-led," meaning institutions need an industry partner co-investing in the programme. An engineering college with an existing OSAT training programme, NSQF-aligned curriculum, and an MoU with an operational facility (Micron, Kaynes, CG Semi, Tata TSAT) will be a strong applicant. Institutions that have not yet started a programme will be competing against those that have. Full guide to setting up an OSAT training programme →
When will ISM 2.0 Cabinet approval happen?
Cabinet ISM 2.0 approval is expected before September 2026, ahead of Semicon India 2026 (September 17-19, Yashobhoomi, New Delhi). An announcement at or around Semicon India is widely anticipated. The formal scheme details — application process, grant sizes, co-investment requirements — will be published after Cabinet approval.
What is ISM 2.0's impact on the C2S programme?
Under ISM 2.0, the Chips to Startup (C2S) programme expands from 315 to 500 enrolled institutions and adds a manufacturing curriculum alongside the existing design-focused EDA tool access. This is the first formal recognition that C2S — originally a design programme — needs to address the manufacturing skills gap. Full C2S programme guide →
Position your institution for ISM 2.0 training centre funding
The institutions that apply with a running programme will win the grants. Start building now. We work with colleges, ITIs, and private centres on the full journey — programme design to first placed cohort.