India's Semicon 2.0 Backs Full Chip Value Chain With Rs 1.27 Lakh Crore

India has committed roughly ₹1.27 lakh crore to Semicon 2.0, the second phase of its semiconductor strategy, and the programme now covers the entire value chain rather than fabrication alone. Design, R&D, materials, advanced packaging, testing and commercialisation all fall within its scope. The initiative is not aimed at automotive specifically, but vehicles now depend on chips for power management, sensing, connectivity, safety and computing.

The COVID-era chip shortage exposed that vulnerability. It forced production slowdowns across automotive markets worldwide. That episode gave the policy debate its urgency.

What changed from Semicon 1.0?

The first phase, Semicon 1.0, focused on building domestic manufacturing capacity. It supported fabs, ATMP/OSAT facilities and chip design initiatives. For the automotive sector, fabrication is only one link in the chain. Automotive semiconductors also require design, R&D, packaging, testing and system-level integration before deployment on vehicle platforms.

Semicon 2.0 widens the frame. Three pillars matter most for automakers and component suppliers:

• Design and R&D: The initiative emphasises chip design, intellectual property creation, R&D and talent development. This could accelerate semiconductor solutions for electric mobility, connectivity, power management and advanced safety systems.
• Materials and critical inputs: The programme supports domestic capability in semiconductor-grade materials, chemicals and gases. These feed compound semiconductors such as silicon carbide (SiC) and gallium nitride (GaN), which are essential to electric vehicles and power electronics.
• Commercialisation incentives: Beyond the fab incentives available under Semicon 1.0, support is now linked to successful commercialisation and sale of semiconductor products, pushing vendors toward market-ready automotive solutions.

How did the policy evolve?

The National Policy on Electronics 2019 identified automotive electronics as a priority area for capability development. Its themes — R&D in electric vehicle technologies, IP creation and a Centre of Excellence for EV electronics — resurfaced in later policy and industry assessments.

NITI Aayog's April 2025 report, Automotive Industry: Powering India's Participation in Global Value Chains, sharpened the argument. It found that the shift to electric, connected and software-defined vehicles would significantly raise the semiconductor content of each vehicle. It also listed structural constraints: supply-chain vulnerabilities, limited participation in higher-value segments, technology gaps, R&D shortfalls and skilling challenges. India's ability to move up the automotive value chain, the report stated, would increasingly depend on domestic technology and semiconductor capabilities.

NITI Aayog's 2026 roadmap, Future of India's Semiconductor Industry, then proposed a targeted route. Rather than chasing advanced fabrication alone, it recommended building capability in specialty analog and mixed-signal devices, compound semiconductors and advanced packaging — the categories that map most directly onto automotive requirements.

What should businesses and investors do now?

The opportunity lies not merely in accessing incentives but in positioning within a semiconductor ecosystem. Companies must assess eligibility requirements, ownership conditions and commercial obligations for each category of support, because every pillar of Semicon 2.0 carries its own incentive structure and compliance regime.

Semicon 2.0 is also likely to drive cross-sector dealmaking. Joint ventures, technology partnerships and long-term supply arrangements between automotive and semiconductor businesses should multiply. Negotiators will face questions on IP ownership, technology licensing, governance, supply commitments and regulatory compliance. Structuring will determine whether commercial interests align and execution risks stay contained.

Early evidence is visible. The Tata Electronics–Nexperia partnership combines domestic manufacturing ambitions with Nexperia's expertise in automotive and power semiconductors. Japanese investors have shown strong interest. No official country-wise break-up of Semicon 2.0 MoUs has been disclosed, but Japanese companies are understood to feature prominently, including JSR, Fujifilm, Sumitomo Chemical, Sojitz, Enomoto Co. Ltd. and Ajinomoto.

Deeper engagement by end-use industries could shape what comes next. As policymakers gain visibility into industry requirements, incentives may become more targeted toward specific technologies, applications and commercial outcomes, including automotive and electric mobility. In a market defined by rapid technological change, the Government may see merit in more flexible, application-specific support — and the automotive sector is positioned to be a leading test case.