India Advances Semiconductor Self-Reliance with Semicon 2.0 Focusing on Domestic Chip Design and IP Development

In a significant move to bolster India’s semiconductor industry, the Union Cabinet has approved Semicon 2.0, a long-term policy framework designed to accelerate domestic chip design and intellectual property (IP) development. Sources familiar with the initiative told ANI that the policy aims to transition India from primarily assembly and services to becoming a ‘product nation’ with indigenous semiconductor capabilities.

The government’s focus under Semicon 2.0 is to develop IP across six critical semiconductor segments: radio frequency (RF), compute, memory, power management, sensors, and network. This strategic emphasis is expected to strengthen India’s electronics manufacturing base and enhance defense production, including for drones and missile technologies.

According to sources, the vision extends beyond manufacturing to building a comprehensive electronics ecosystem. This includes fostering capital equipment production, nurturing deep-tech startups, and creating IP to reduce reliance on imports and boost strategic autonomy.

India is increasingly viewed by the United States and other global partners as a trusted supplier in the semiconductor supply chain. By 2029, the country aims to have domestically designed inference chips under the ‘Make in India’ banner.

Semicon 2.0’s incentive structure is designed to reward companies that design chips in India, manufacture them domestically, and own the brand within the country. This approach ensures that benefits accrue to truly indigenous innovation and production.

In parallel, the government is refining incentive schemes for smartphone manufacturing. Following the Union Cabinet’s approval of the Mobile Phone Manufacturing Scheme (MPMS), a forthcoming incentive program—likely under the Production Linked Incentive (PLI) or the second phase of the Bulk Manufacturing Incentive (BMI 2.0)—will offer a 3% incentive specifically for Indian smartphone brands. These adjustments reflect lessons learned from earlier PLI schemes such as BMI 1.0 and IT hardware initiatives.

The policy also prioritizes the development of a full domestic components ecosystem. Over time, the government aims to localize the manufacture of most semiconductor components, with a strong focus on attracting manufacturers of capital equipment, chemicals, gases, and materials essential to chip production.

Indian semiconductor firms are encouraged to compete on quality and cost efficiency. While global majors typically design their own chips and others rely on standard chips, Indian companies are being urged to leverage these models to build their own IP portfolios.

Sources emphasized that BMI 2.0 and related schemes have been crafted based on direct industry input rather than government assumptions. These policies clearly define national objectives, address specific challenges in design, distribution, and talent acquisition, and align incentives accordingly.

Global Capability Centres (GCCs) in India, which account for approximately 7% of the world’s semiconductor GCCs and employ nearly 20% of the global semiconductor chip design workforce, are expected to spin off or establish separate product teams and startups focused on chip design and manufacturing.

Importantly, the initiative does not conflict with existing outsourced design work for global firms. Instead, it aims to create an environment where Indian companies can own and develop their own intellectual property, fostering a robust domestic semiconductor industry.

Semicon 2.0 thus represents a pivotal step in India’s ambition to become a self-reliant semiconductor powerhouse, supporting both commercial electronics and strategic defense sectors through indigenous innovation and manufacturing.