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

India is building a semiconductor ecosystem with 10 approved projects under the India Semiconductor Mission. Learn about incentives, key fabs, locations, and investment.

India’s semiconductor market and policy push

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 centers.

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 India Semiconductor Mission (ISM) as the nodal agency.

As of late October 2025, 10 semiconductor projects across six states have been approved under ISM, with total investments exceeding INR 1.6 trillion (approx. US$18–19 billion).

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 program, multiple schemes support different parts of the value chain:

1. Modified Scheme for setting up of Semiconductor Fabs in India

• Provides fiscal support up to 50 percent 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.
• The 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 percent 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 of Compound Semiconductors / Silicon Photonics / Sensors / Discrete Semiconductors Fab and Semiconductor ATMP / OSAT facilities in India

• Extends fiscal support up to 50 percent 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
• Recognizes advanced packaging and specialized materials segments as strategic.
• Use-cases: Power electronics, EVs, telecom, defense, photonics, and high-reliability applications.
• Government source about the scheme: https://www.ism.gov.in/compound-semiconductor

4. Design Linked Incentive (DLI) Scheme

• Supports semiconductor design ecosystem (ICs, chipsets, SoCs, IP cores etc.) with:
  • A “Product Design Linked Incentive” reimbursing up to 50 percent 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 percent) 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 programs.
• Targets: Fabless startups, MSMEs, and design houses working on chips for 5G, EVs, AI, industrial automation, aerospace, and defense.
• Government source about the scheme: https://www.ism.gov.in/design-linked-incentive

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 localization, 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

India now has 10 approved projects 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 center in Bengaluru, backed by a US$400 million investment.
  • NXP and other global chipmakers are scaling their India design and engineering centers, with NXP targeting up to 8–10 percent 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 signaled 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 percent of the world’s chip design engineers, underscoring why many global players situate R&D and design centers 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 India Semiconductor Mission scheme offers a compelling opportunity – but success will depend on early clarity and rigorous preparation. To capitalize 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

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, 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 re-scoping of some large proposals, such as the Vedanta–Foxconn JV, underline the government’s emphasis on credible partners and realistic demand assumptions.
• Investors must also navigate environmental, land, water-use, and labor 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 customization 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 specialized agency under the Digital India Corporation tasked with implementing India’s INR 760 billion semiconductor and display manufacturing program. It appraises proposals for fabs, compound semiconductors, ATMP/OSAT units, and design projects, and administers fiscal support of up to 50 percent of project cost under various schemes.

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

A. As of late 2025, the government has approved 10 semiconductor projects across six states under ISM, with total investments of about INR 1.6 trillion. These include one large logic/power fab, multiple OSAT/ATMP units, and new Silicon Carbide and substrate-focused projects in Odisha, Punjab, and Andhra Pradesh.

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

A. For eligible projects, the central government provides up to 50 percent of project cost or capital expenditure for fabs, compound semiconductor units, and ATMP/OSAT facilities, plus up to 50 percent 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 percent of design costs and access to EDA tools and shared infrastructure, while India’s large base of chip design engineers and R&D centers (AMD, NXP, etc.) creates a strong ecosystem for collaboration.

Archive: Semiconductor schemes in India

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

On September 21, 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 percent of project cost on pari-passu basis for all technology nodes under Scheme for Setting up of Semiconductor Fabs in India.
2. Fiscal support of 50 percent of project cost on pari-passu basis under Scheme for Setting up of Display Fabs.
3. Fiscal support of 50 percent of capital expenditure on pari-passu basis under 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 program, a uniform fiscal support of 50 percent of project cost shall be provided across all technology nodes for setting up of semiconductor fabs. Given the niche technology and nature of compound semiconductors and advanced packaging, the modified program shall also provide fiscal support of 50 percent of capital expenditure in pari-passu mode for setting up of compound semiconductors/silicon photonics/sensors / discrete semiconductors fabs and ATMP/OSAT.

This article was originally published on April 6, 2021. It was last updated November 19, 2025.

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