ISM 2.0 Is Live with ₹1.28 Lakh Crore: A Closer Look at Where the Investments Are Flowing

Introduction : India's semiconductor ambition has entered a new phase. With the Government of India approving India Semiconductor Mission (ISM) 2.0, backed by an overall outlay of approximately ₹1,27,500 crore (US$15.3 billion), the discussion has shifted from whether India can build a semiconductor manufacturing ecosystem to where the investments are actually flowing and which technology segments are expected to benefit the most.

While much of the media attention continues to focus on semiconductor fabrication plants, the more significant opportunity lies across the broader semiconductor value chain. Advanced packaging, semiconductor manufacturing equipment, specialty materials, semiconductor design, testing infrastructure, automation technologies, and intellectual property are emerging as strategic investment areas. Companies looking to participate in India's semiconductor growth story should therefore look beyond wafer fabrication and understand where the next wave of capital deployment is taking place.

ISM 1.0: Establishing the Foundation

The India Semiconductor Mission (ISM) was launched in December 2021 with a financial outlay of ₹76,000 crore to establish a domestic semiconductor ecosystem. The objective of ISM 1.0 was to create manufacturing capability within India while reducing dependence on imported semiconductors and strengthening supply chain resilience.

The Government announced fiscal support of up to 50% of eligible project costs for semiconductor fabrication facilities, compound semiconductor units, Assembly, Testing, Marking and Packaging (ATMP) facilities, Outsourced Semiconductor Assembly and Test (OSAT) facilities, and semiconductor design companies.

Over the past few years, the initiative has translated policy into tangible industrial investments. According to the official Government release, ISM 1.0 has resulted in:

• Approval of 10 semiconductor projects

• Total approved investments exceeding ₹1.60 lakh crore

• Projects spread across six Indian states

• Investments covering silicon fabs, silicon carbide manufacturing, memory packaging, advanced packaging, and assembly and testing facilities

Several leading projects approved under ISM 1.0 include:

• Tata Electronics Semiconductor Fab at Dholera

• Tata Semiconductor Assembly and Test Facility in Assam

• Micron Technology Assembly and Test Facility

• CG Power, Renesas Electronics and Stars Microelectronics ATMP Facility

• Kaynes Semicon OSAT Facility

• Additional compound semiconductor and silicon carbide manufacturing projects

These approvals have laid the foundation for India's semiconductor manufacturing ecosystem. However, ISM 1.0 was primarily focused on creating manufacturing infrastructure. ISM 2.0 represents a broader strategy aimed at strengthening the complete semiconductor value chain.

ISM 2.0: Expanding Beyond Manufacturing

The recently announced ISM 2.0 significantly expands the Government's vision. Rather than concentrating solely on fabrication facilities, the new mission seeks to develop capabilities across the entire semiconductor ecosystem.

The Government has identified several strategic focus areas, including:

• Semiconductor manufacturing equipment

• Semiconductor materials

• Indigenous semiconductor intellectual property

• Semiconductor design

• Industry-led research and development

• Skilled workforce development

• Supply chain resilience

This broader approach reflects the reality that a globally competitive semiconductor ecosystem requires far more than fabrication plants. Every semiconductor manufactured requires sophisticated equipment, high-purity materials, design expertise, testing capabilities, software tools, and strong intellectual property.

This naturally raises an important question.

Where Is the Capital Actually Going?

Although the headline investment figure attracts considerable attention, the actual deployment of capital is concentrated in four major technology segments that are expected to define India's semiconductor ecosystem over the coming decade.

Advanced Packaging (ATMP and OSAT): India's Immediate Manufacturing Opportunity

Advanced semiconductor packaging has become one of the fastest-growing segments of the global semiconductor industry. Packaging is no longer viewed as a backend manufacturing process. It has evolved into a critical technology that directly influences chip performance, power efficiency, thermal management, and system integration.

India has already approved multiple ATMP and OSAT facilities under ISM, demonstrating that advanced packaging is expected to become one of the country's strongest manufacturing capabilities.

The opportunities extend well beyond the construction of packaging facilities. Significant investment is expected across:

• Packaging equipment

• Die attach technologies

• Flip-chip assembly

• Wire bonding systems

• Inspection and metrology tools

• Reliability testing equipment

• Burn-in systems

• Thermal management solutions

• Packaging materials

• Manufacturing automation platforms

For global equipment suppliers, process technology providers, automation companies, and manufacturing solution providers, advanced packaging presents one of the most accessible entry points into India's semiconductor ecosystem.

Semiconductor Manufacturing Equipment: India's Largest Capability Gap

Perhaps the largest opportunity under ISM 2.0 lies in semiconductor manufacturing equipment.

Every semiconductor fabrication or packaging facility depends upon highly sophisticated manufacturing systems that include lithography, deposition, etching, inspection, testing, metrology, wafer handling, robotics, and process automation technologies.

Today, India imports the overwhelming majority of these technologies. As additional fabs and packaging facilities become operational, demand for domestic equipment manufacturing and servicing is expected to increase substantially.

Key opportunity areas include:

• Lithography systems

• Thin-film deposition equipment

• Plasma etching systems

• Chemical Mechanical Planarization (CMP) systems

• Inspection and metrology tools

• Wafer handling robotics

• Process control systems

• Manufacturing automation platforms

• Semiconductor testing equipment

• Yield management software

The Government has identified semiconductor equipment manufacturing as an important strategic area under ISM 2.0. This creates opportunities not only for global equipment manufacturers but also for precision engineering companies, industrial automation firms, robotics developers, software providers, and maintenance service companies.

Specialty Materials: Building Domestic Supply Chains

A competitive semiconductor ecosystem cannot be sustained without reliable access to advanced materials. At present, India remains heavily dependent on imports for several critical semiconductor materials.

These include:

• Silicon wafers

• Photoresists

• Specialty gases

• Electronic chemicals

• Wet process chemicals

• Ceramic substrates

• Glass substrates

• Packaging compounds

• High-purity metals

• Advanced polymers

Strengthening domestic manufacturing of these materials has become an important objective under ISM 2.0. As geopolitical uncertainties continue to reshape global semiconductor supply chains, local availability of semiconductor-grade materials is expected to become increasingly valuable.

This presents significant opportunities for:

• Chemical manufacturers

• Industrial gas companies

• Advanced materials suppliers

• Specialty chemical companies

• Ceramic manufacturers

• Material science innovators

Semiconductor Design: India's Strongest Competitive Advantage

Unlike semiconductor manufacturing, chip design is an area where India already enjoys a significant competitive advantage.

India hosts one of the world's largest semiconductor design talent pools. Most leading global semiconductor companies operate major design centres across Bengaluru, Hyderabad, Noida, Chennai, and Pune.

Recognizing this strength, ISM 2.0 continues to promote semiconductor design through the Design Linked Incentive (DLI) Scheme and initiatives aimed at encouraging indigenous IP creation, semiconductor startups, research, and skilled workforce development.

Future investment opportunities are expected across:

• Semiconductor IP development

• Electronic Design Automation (EDA) tools

• Chip verification platforms

• AI-assisted chip design

• Embedded software

• Functional safety solutions

• RISC-V ecosystem development

• Fabless semiconductor startups

Among all semiconductor segments, design represents India's strongest opportunity to compete globally through innovation rather than manufacturing scale alone.

Intellectual Property Will Become a Strategic Differentiator

While semiconductor fabs and manufacturing facilities attract the greatest public attention, long-term competitiveness will increasingly depend upon intellectual property.

Every innovation within the semiconductor value chain generates valuable IP. This includes process technologies, packaging innovations, device architectures, semiconductor materials, manufacturing equipment, automation software, testing methodologies, and reliability improvements.

As investments under ISM 2.0 accelerate, companies will need to strengthen their IP strategies by focusing on:

• Patent portfolio development

• Freedom-to-Operate (FTO) analyses

• Patent landscaping

• Technology scouting

• Licensing opportunities

• Competitive patent monitoring

• Commercialization strategy

Organizations entering India's semiconductor ecosystem without a well-defined IP strategy may face significant commercial and legal challenges as competition continues to intensify.

Looking Ahead

The Government estimates that India's semiconductor market could grow from approximately ₹3.15 lakh crore in 2023 to nearly ₹8.30 lakh crore to ₹9.15 lakh crore by 2030. At the same time, India aims to achieve the capability to design and manufacture semiconductors for approximately 70 to 75 percent of domestic applications by 2029.

The announcement of ₹1.28 lakh crore under ISM 2.0 should therefore not be viewed merely as another government incentive package. It represents a strategic roadmap for developing an integrated semiconductor ecosystem.

The real story is not simply how much capital has been allocated. The more important question is where that capital is actually flowing. Advanced packaging, semiconductor equipment, specialty materials, semiconductor design, and intellectual property are emerging as the sectors that will shape India's semiconductor future.

As India advances its semiconductor ambitions under ISM 2.0, long-term success will depend not only on technological capability but also on robust intellectual property protection, strategic partnerships, regulatory compliance, and effective commercialization.

At Khurana & Khurana, we advise stakeholders across the semiconductor value chain on patent strategy and IP, including patent filing, portfolio development, patent landscaping, FTO, infringement analysis, licensing, commercialization, and technology transfer. We also assist with manufacturing and government incentives for fab, fab-lite, fabless, ATMP, and OSAT projects under schemes such as ISM, DLI, SPECS, and EMC 2.0; strategic growth initiatives including joint ventures, technology collaborations, and cross-border expansion; investment and transaction support covering IP valuation, due diligence, fundraising, and M&A; as well as legal and commercial advisory relating to technology licensing, manufacturing and supply agreements, OEM/ODM arrangements, regulatory compliance, taxation, labour, environmental, and export control matters. As India's semiconductor ecosystem continues to evolve, aligning innovation with a well-defined IP and business strategy will be essential for building long-term competitive advantage.

Author: Sanjay Sharma in case of any queries please contact/write back to us via email to content@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.