Semicon 2.0 notified: Govt offers 40% capex support for silicon fabs under ₹1.27 lakh crore scheme

The government on Monday formally notified the Semicon 2.0 scheme with an outlay of ₹1.27 lakh crore, expanding policy support beyond chip fabrication to design, semiconductor equipment and materials, advanced packaging, research and development and talent development.

The notification, issued by the Ministry of Electronics and Information Technology (MeitY), said the scheme seeks to build a self-reliant and globally competitive semiconductor design and manufacturing ecosystem, strengthen supply-chain resilience and establish technological leadership in critical sectors.

"The government has decided to provide ... sustained policy support to the semiconductor sector in India by notifying the Semicon 2.0 Scheme for the development of semiconductor design and manufacturing ecosystem in India," the notification said.

"Semicon 2.0 provides fiscal support to various verticals across the complete value chain of the semiconductor industry, ranging from chip design, fabrication and packaging to various segments of the semiconductor ecosystem," it added.

The six pillars are design; machines and materials; setting up more fabs; further strengthening the ATMP/OSAT industry; research and development; and talent development.

Design

Under the design pillar, the scheme will support development of semiconductor intellectual property (IP) cores, chips, system-on-chips (SoCs) and modules for strategic applications as well as commercial products.

Indian companies owned and controlled by Indian citizens will be eligible, including those participating in consortia with global companies, research organisations and academic institutions. IP rights will be co-owned by the applicant and C-DAC.

The government will provide design infrastructure support for commercial chip design and will seek to catalyse venture capital funding for domestic semiconductor companies.

IP rights and associated design and development files under this category will have to remain in India.

The scheme provides 9% reimbursement on net sales for five years under a deployment-linked incentive for eligible new semiconductor IPs, chips and SoCs, subject to a ceiling of ₹30 crore per application and ₹120 crore per company across multiple products.

For start-ups and MSMEs, product design support includes seed funding of up to ₹15 crore, with milestone-linked advance funding capped at 50% of project cost or ₹15 crore, whichever is lower. Equity co-investment is also available to companies that have raised funding from venture capital or private equity investors.

Support for machines, materials

The second pillar covers the manufacturing ecosystem, including research and development facilities for semiconductor equipment, semiconductor-grade raw materials, manufacturing or assembly of capital equipment and semiconductor testing and characterisation facilities.

For example, companies setting up semiconductor-equipment R&D facilities will need a minimum capital investment of ₹300 crore and can get government support equivalent to 30% of capital expenditure.

Manufacturing facilities for semiconductor-grade raw materials have a minimum investment threshold of ₹50 crore, while semiconductor testing and characterisation facilities require a minimum investment of ₹100 crore.

For manufacturing or assembly of equipment and components used in semiconductor fabrication and packaging, the minimum investment threshold is ₹300 crore. Besides 30% capex support, eligible companies can receive a production-linked incentive (PLI) based on the value of components sourced from domestic manufacturers.

More fabs, display manufacturing

Under the third pillar, the government has laid down separate support frameworks for silicon wafer fabs, compound semiconductor/photonics/sensor fabs and display fabs.

For 300-mm silicon wafer fabs with a capacity of at least 40,000 wafer starts per month, the minimum capital investment is ₹20,000 crore and the minimum revenue threshold is ₹7,500 crore.

The government support will be 40% of eligible capital expenditure.

For compound semiconductor, photonics, sensor and discrete semiconductor fabs, the minimum investment is ₹500 crore and government support will be 35% of eligible capex.

The scheme also covers display fabs based on OLED, Micro LED and LCD technologies. For instance, an OLED facility will require a minimum investment of ₹10,000 crore and a capacity of at least 30,000 panels per month, with government support of 35% of eligible capex.

Push for advanced packaging

The fourth pillar seeks to strengthen India's ATMP/OSAT ecosystem, including advanced packaging technologies such as 2.5D/3D packaging, wafer-level chip-scale packaging and heterogeneous integration, besides advanced substrates.

Advanced packaging projects will have a minimum capital investment threshold of ₹1,000 crore and can receive 35% of eligible capex.

Legacy packaging projects with the same investment threshold will receive support equivalent to 25% of eligible capex.

Up to 75% support for R&D, talent development

The fifth pillar provides for R&D support for advanced semiconductor technologies, including advanced CMOS fabrication, silicon photonics, display fabrication and chiplet-based technologies for advanced packaging.

Such projects can receive up to 75% of project cost, including state incentives, covering eligible capital and operational expenditure.

The sixth pillar focuses on building a multi-tier semiconductor workforce covering undergraduate, postgraduate and doctoral students as well as shop-floor technicians and operators.

It provides for training infrastructure, access to advanced chip design tools, multi-project wafer fabrication services and post-silicon validation tools, along with practical training for manufacturing workers.

Talent-development projects can also receive up to 75% of project cost, including state incentives.

The government has said the semiconductor initiative now covers the electronics value chain from raw materials and wafers to fabrication, packaging and finished electronic products.

Duration and approvals

The projects under Semicon 2.0 will generally have a duration determined on a project-to-project basis, preferably up to six years.

The scheme will initially remain open for applications for three years through the portal of the nodal agency.

The India Semiconductor Mission (ISM) will be the nodal agency, responsible for inviting applications, technical and financial appraisal and recommending applicants. It may implement the three design-related categories with the help of C-DAC.

For design and talent-development projects, those costing below ₹100 crore can be approved by the MeitY secretary, projects above ₹100 crore and up to ₹500 crore by the electronics and IT minister, and projects above ₹500 crore will require Cabinet approval.

All other categories will also require Cabinet approval after appraisal and recommendation by the nodal agency.

The notification said the schemes will undergo a mid-term appraisal after three years of implementation, or as required, to assess their impact and determine whether they should be continued or modified.