India Semiconductor Mission: meaning, how it works in India

The ISM is a unit of the Ministry of Electronics and Information Technology. It runs the Semicon India Programme, which was launched in December 2021 with an outlay of ₹76,000 crore to build a chip industry in India. A semiconductor, or chip, is the tiny circuit inside phones, cars, servers and most machines.

India imports most of its chips. The programme aims to bring chip making, packaging and design inside the country. Startups matter mostly on the design side.

Support goes to several kinds of projects. A fab is a factory that makes chips on wafers. An OSAT, or outsourced assembly and test unit, packages and tests finished chips. Display fabs and compound semiconductor plants are also covered. The government shares project cost with the company, and the company runs the plant.

Press reports in 2026 said that 12 manufacturing projects with over ₹1.64 lakh crore of investment had been approved under the first phase, among them one silicon fab, one silicon carbide fab, a micro-LED display plant and nine packaging units. Reports differ on how many were in production, with Micron, Kaynes and CG Semi named as having begun.

The Design Linked Incentive (DLI) scheme is the part meant for chip design startups and small firms. It has three pieces: support for design tools and infrastructure, a product design incentive and a deployment incentive. Under published scheme notes, the product design part reimburses up to 50% of eligible costs, capped at ₹15 crore per application, and the deployment part pays a share of net sales, from 6% down to 4% over five years, capped at ₹30 crore.

Approved applicants must keep domestic status for three years. Reports differ on uptake, and some sources cite figures from different dates, so the live ISM page should be checked. The government also said 105 startups and small firms have received access to design software tools.

• Programme start: December 2021, ₹76,000 crore.
• Approved manufacturing projects: 12 reported, above ₹1.64 lakh crore of investment.
• Product design support: up to 50% of eligible cost, ₹15 crore cap.
• Deployment support: 6% to 4% of net sales, ₹30 crore cap.
• ISM 2.0: Cabinet approval 15 July 2026, ₹1.27 lakh crore.

The Union Cabinet approved a second phase, called ISM 2.0, on 15 July 2026, with an outlay of about ₹1.27 lakh crore, according to Outlook Business and other outlets. Budget 2026-27 had already said that a second phase would roll out because the first phase money was nearly used.

Coverage says ISM 2.0 widens support beyond fabs to chip design, intellectual property, equipment, materials, specialty chemicals and industrial gases. Some reports say fab subsidy rates are lower than the earlier 50%, but the figures differ by source, so they are not given here.

As of November 2026, details of the scheme rules, such as application windows and per-project limits, should be read from the official notices, since coverage in the press has been uneven.

A fabless company designs chips and gets them made by a fab elsewhere. This is where Indian startups can compete without building a factory. The DLI scheme and design tool access are aimed at them. Startups in electronics, EV, defence and AI hardware can also benefit from a local chip supply.

Government support is not a quick source of cash. Approvals take time, and the money is tied to design costs or sales. Investors look at whether a chip startup has a customer and a path to production.

Chip projects need years and large capital. Approval is only the first step, since a plant must be built, equipment bought and staff trained before output. Analysts quoted in the press have pointed to low early use of funds and a gap between approved and operating capacity.

This is a reason for caution when reading an approval headline. An approved investment is a plan, and output is what counts.

A production-linked incentive (PLI) pays a company a share of its sales after it makes and sells goods. The ISM mostly works the other way for plants: it helps with the project cost up front, often topped up by state governments, and the company then builds and runs the factory. The DLI scheme sits closer to a PLI, since its deployment part is tied to net sales.

The difference matters for risk. Up-front support lowers the cash a company must raise, but it also means public money is committed before output exists. Sales-linked support pays only when the company succeeds. The guide on EV maker subsidies, PLI and PM E-DRIVE explains the PLI model.

Check whether a number is an approved investment, a government subsidy or actual output. Check which phase of the mission it belongs to. And check whether a company is a fab, a packaging unit or a design startup, since the support differs.

This guide is general information and not investment or legal advice, so check the official ISM notices for any application.