- ISM 1.0 used up its initial incentive corpus early to lock in major fabrication and assembly facilities.
- ISM 2.0 is shifting focus toward the wider support system: advanced packaging (ATMP/OSAT), domestic design R&D, and shop-floor technical skills.
- Without local testing, chemicals, and packaging units, standalone chip fabs risk turning into expensive, isolated setups.
- Engineering students, VLSI researchers, and Indian hardware startups will see more direct funding and hiring opportunities from this second phase.
What just happened?
Think back to how every major Indian smartphone story sounded a few years ago. We assembled phone bodies and screwed in camera modules, but the brain inside—the actual silicon—came on a cargo flight from Taiwan, South Korea, or China.
To fix that gap, the Indian government rolled out the India Semiconductor Mission (ISM 1.0) with an initial incentive budget of ₹76,000 crore. That money went fast. Big names like Tata Electronics and Micron stepped up to anchor greenfield chip plants and testing units in Gujarat and Assam.
Speaking at Semicon India 2026, Ministry of Electronics and Information Technology (MeitY) Secretary S Krishnan made it clear that the upcoming ISM 2.0 will not just be a copy-paste repeat of round one. Instead of spending every rupee trying to lure another multi-billion-dollar wafer fabrication plant, ISM 2.0 will pour energy into building the surrounding ecosystem: advanced chip packaging, domestic R&D, and shop-floor engineering talent.
Simply put, round one was about laying the foundation. Round two is about making sure the house actually has plumbing, electricity, and people who know how to run it.
How does this actually work?
Building a chip isn't a one-step job where silicon goes in one end and a ready-to-use processor pops out the other. It is a long, fussy relay race split across three big stages: chip design, wafer fabrication, and packaging.
First comes design. Indian engineers have been designing chips for global giants like Qualcomm, Intel, and Texas Instruments for decades from Bengaluru, Hyderabad, and Chennai. The catch? Almost none of the intellectual property belonged to Indian companies.
Second comes fabrication, or the "fab". This is the ultra-clean, water-guzzling, multi-billion-dollar factory that prints billions of microscopic transistors onto shiny silicon wafers. Fabs take four to six years to break even and need non-stop power and specialised gases.
Third comes packaging, also known as OSAT (Outsourced Semiconductor Assembly and Test) or ATMP. Raw silicon wafers are delicate and cannot be soldered directly onto a motherboard. Packaging facilities slice those wafers into tiny individual dies, wire them up, wrap them in protective resin, and run rigorous thermal and electrical stress tests.
This third stage is where ISM 2.0 is directing its focus. Advanced packaging is no longer just simple plastic encasing. Today's high-performance AI chips and mobile processors use "chiplet" tech, stacking multiple specialized silicon dies on top of each other. If India masters advanced packaging and testing locally, we can take wafers from anywhere in the world and turn them into finished processors ready for local manufacturing lines.
Alongside packaging, ISM 2.0 is putting money into the unglamorous parts of the supply chain: ultra-pure chemicals, cleanroom equipment servicing, domestic design tools (EDA), and specialised talent training for college labs.
What changes for people in India?
The biggest impact will hit technical hiring and hardware startups. When a multi-billion-dollar fab opens, it creates headlines, but high-end fabs are heavily automated. They need a core team of senior physicists, process engineers, and automated robotics handlers, but not hundreds of thousands of daily shop-floor workers.
Packaging facilities, testing houses, and component suppliers, on the other hand, hire at serious scale. They need test engineers, quality control analysts, precision mechanics, and cleanroom operators. For an engineering diploma holder or an electronics graduate from tier-2 and tier-3 colleges, ISM 2.0 opens up job roles that simply did not exist in India five years ago.
Local electronics makers will also feel the difference. If you run a startup building smart electricity meters, EV battery management boards, or UPI soundboxes in Pune or Coimbatore, sourcing custom packaged chips currently means dealing with long overseas lead times and high import duties. A working domestic packaging and testing base cuts turnaround times from months to weeks.
It also gives homegrown chip design startups a fighting chance. Under the expanded Design-Linked Incentive (DLI) focus in ISM 2.0, smaller teams working on RISC-V microcontrollers, power management chips, and sensor hubs can get government-backed access to expensive software licenses and domestic prototyping runs without burning all their seed capital.
What should you do now?
If you are an electronics, electrical, or mechanical engineering student, start looking beyond basic coding bootcamps. The chip sector is hungry for people who understand VLSI design, semiconductor physics, embedded firmware, and precision manufacturing. Look out for short-term certification modules and lab training programs supported by the Indian Semiconductor Mission at technical universities.
If you run a hardware or deep-tech startup, keep a close watch on MeitY's updated DLI portal and state-level electronics subsidy schemes. Applying for design support grants and local testing credits early can save your team millions in prototyping costs.
For everyone else following Indian tech, keep your eyes on how quickly local component supply chains form around the big fab sites over the next couple of years. A chip revolution isn't won just by pouring concrete for big factories. It is won when the entire neighbourhood around those factories is buzzing with testing labs, tool suppliers, and skilled engineers building real hardware.
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