ISM 2.0: India’s Semiconductor Opportunity Moves Beyond Fabs

India has announced India Semiconductor Mission (ISM) 2.0, the much-awaited successor to the program that helped place the country on the global semiconductor map in 2021.

ISM 1.0 was backed by a ₹76,000 crore programme outlay. By mid-2026, the government had approved 12 semiconductor manufacturing projects representing an investment pipeline of approximately ₹1.64 lakh crore. These included a semiconductor fab, compound semiconductor facilities and a number of assembly & testing (OSAT) plants. Further, under the Design Linked Incentive (DLI) scheme, 24 fabless chip design companies received cash and in-kind support across diverse applications including high-performance compute, energy metering, power delivery and intelligent surveillance.

Startups supported by the DLI scheme have completed 16 tape-outs and produced 6 ASICs that are all ready for commercialization while raising over ₹400cr in venture capital funding. On the manufacturing front, three ISM-supported OSAT plants started commercial operations in the last six months, and the biggest "front-end" milestone will be Tata Electronics' wafer fab commencing operations later this year.

India also joined Pax Silica earlier this year, a US-led initiative to strengthen global semiconductor supply chains. The domestic industry now needs to come together more holistically to be more than simply the sum of its disconnected parts and a meaningful player in the global landscape. This is the vision that ISM 2.0, or Semicon 2.0, is trying to deliver with a ₹1.27 lakh crore outlay spanning 12 years. 

From Plants to Ecosystems

The new mission broadens the focus towards semiconductor-manufacturing equipment, materials used in fabrication, a larger chip-design ecosystem, industry-led R&D and expanded talent development. This broadening will enable more arms of the ecosystem to work with each other. Think of microcontrollers not just designed in India, but also fabbed or at least assembled domestically, or of input consumables for domestic fabs and OSATs coming from Indian chemical and gas plants.

ISM 2.0 formalises this approach through six pillars: chip and system design; semiconductor machines and materials; additional fabs; advanced assembly, testing and packaging; collaborative R&D; and talent development. These are the same broad pillars that India’s efforts have been clustered around, but the language around ISM 2.0 formalizes them concretely.

The Fabless Opportunity Evolves

It's well known that India employs nearly 20% of the global semiconductor design workforce, and that much of that talent has worked within multinational design centres. The opportunity to leverage that huge talent base to move up the ladder from a service- to a product-centred industry remains one of the largest in the global semiconductor industry. The same talent behind the bleeding-edge design in projects such as Qualcomm's 2nm design and Etched's recent data centre chip is now moving to starting their own enterprises for Indian-owned design and intellectual property blocks.

This move has seen startups design bleeding-edge, cutting-edge and mass-market mature node chips across sectors. The overall ecosystem has a patchwork feel to it. ISM 2.0 is attempting to address this fragmentation by placing fabless design within its broader full-stack strategy. Its stated ambition is to create Indian-owned intellectual property across the stack and connect design companies more closely with prototyping facilities, packaging and testing capacity, research institutions, electronics manufacturers and end customers.

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The Ministry of Electronics and Information Technology has expressed the goal for 3-nanometre and 2-nanometre semiconductor manufacturing in the early 2030s. The ISM 2.0 announcement, though, takes a more measured view, stating an ambition to move beyond the 28nm-110nm technologies that were core to India’s first fab but not stating hard timelines for this movement. 

From Policy Momentum to Commercial Momentum

ISM 1.0 proved that India could mobilize political intent and the first layer of capital required to build a domestic semiconductor industry. After multiple attempts in the 2000s and 2010s to kickstart the industry, ISM 1.0 put India on the map and set the stage for India to cater to both domestic and global demand for chip manufacturing and packaging. India's internal map, now, needs to be drawn in more detail as the first set of plants become operational. ISM 2.0 is refining the original vision by moving from isolated plants to holistic ecosystems, leveraging design talent to enable Indian-owned products, and investing more broadly in talent and upskilling.  

When we first started to look at the semiconductor value chain in 2023, our investment thesis was limited to fabless chip design companies building innovations for high-performance computing, AI inference and edge applications. ISM 2.0 catalyzing the move to a more full-stack semiconductor ecosystem opens up the opportunity landscape significantly for early-stage investors like us. These include innovations around precision equipment, cleanroom automation, specialty chemicals, metrology & inspection equipment and prototyping platforms.

Not only are new areas opening up around manufacturing, but the fabless chip-design landscape is also expanding to include founders and teams with audacious and global ambition, a case in point being Turiyam AI. One of our portfolio companies, Turiyam is building silicon solutions to drive world-leading total cost of ownership for AI inference. Newer opportunities are opening up in the fabless space too, with neo-EDA companies and agentic chip design & verification platforms being built out of India.

We are excited as the Indian semiconductor industry continues to grow to achieve critical mass and start to sustain itself across multiple product areas, capital cycles and geopolitical developments. The ISM 2.0's vision creates multiple opportunities for startups, MSMEs, and larger corporates, and we at Ankur Capital are excited to continue backing semiconductor technologies built in India for the world.