Semicon 2.0: Can India Build True Chip Sovereignty?

India has spent the last few years trying to answer one question: can it become a serious semiconductor manufacturing destination?

Semicon 2.0 asks a harder question.

Can India control enough of the semiconductor value chain to protect its economy, defence capabilities and digital infrastructure when global supply chains come under pressure?

The policy has now moved beyond announcement. The Union Cabinet approved Semicon 2.0 on July 15, 2026 with a total outlay of ₹1,27,500 crore. On August 31, the Government issued notifications for all six pillars, covering chip design, machines and materials, additional fabs, ATMP and OSAT packaging, research and development, and talent development.

That distinction matters. Cabinet approval establishes the policy and budget framework. The August notifications give the six pillars an implementation framework. Neither step by itself means every supported project has been built, commissioned or reached commercial production.

That is the standard by which India’s semiconductor progress should now be judged.

What Semicon 1.0 Actually Built

The first Semicon India Programme was approved with an outlay of ₹76,000 crore.

By July 2026, the Government reported that 12 semiconductor manufacturing projects had been approved, with cumulative investment commitments exceeding ₹1.64 lakh crore. These included one silicon fab, one silicon carbide fab, an integrated gallium nitride Micro LED display fab and nine packaging units.

Three approved projects associated with Micron, Kaynes and CG Semi had started commercial production by that point.

That is meaningful progress, but the stages should not be confused.

An approved project has received government approval.

A project under construction has moved into physical implementation but is not yet producing commercially.

A facility in commercial production is actually manufacturing products for the market.

And technological capability is broader still. It involves the ability to operate the process reliably, achieve competitive yields, develop engineering know-how, control critical intellectual property and sustain production without excessive dependence on external suppliers.

India has made progress on approval, construction and packaging production. It has not yet completed every stage of semiconductor sovereignty.

The clearest example is wafer fabrication.

The Tata Electronics fab in Dholera, Gujarat, was approved in February 2024 with an investment of ₹91,526 crore and planned capacity of about 50,000 wafer starts per month in partnership with Taiwan’s PSMC.

But approval is not production. The Government’s July 2026 Semicon 2.0 note states that India’s first fab is scheduled to be commissioned in 2028.

So, as of September 2026, India has commercial semiconductor assembly, testing and packaging activity, while its first major silicon wafer fab remains a project in development rather than an operating commercial wafer facility.

That is why Semicon 2.0 matters.

The Difference Between a Chip Hub and Chip Sovereignty

Semiconductor sovereignty does not mean manufacturing every chip, machine, chemical and material within national borders.

No major semiconductor economy is completely self-contained.

The more realistic objective is resilience: enough domestic capability, technological knowledge and trusted external partnerships to ensure that disruption in one country or one input does not paralyse strategic sectors.

For India, this means building strength across several layers.

It needs domestic chip design and intellectual property.

It needs operational wafer fabs.

It needs advanced packaging and testing.

It needs semiconductor manufacturing equipment and components.

It needs specialty gases, chemicals, substrates and wafers.

It needs trained engineers and technicians.

And it needs customers capable of creating sustained demand for chips designed and manufactured in India.

Semicon 2.0 reflects this broader approach. Its six notified pillars explicitly extend support beyond fabs into machines, materials, design, packaging, research and talent.

This is closer to a value-chain strategy than a factory-attraction strategy.

The same lesson appears in India’s wider debate over critical minerals and value-chain dependence: controlling a final manufacturing stage does not necessarily mean controlling the inputs and technologies on which that stage depends.

Why Chip Design May Be Semicon 2.0’s Most Important Shift

India already possesses significant semiconductor design capability, but domestic technological ownership remains a different challenge.

Under Semicon 1.0, the Government says 24 semiconductor design projects had been approved for financial support, while 105 startups and MSMEs had received access to industry-standard Electronic Design Automation tools.

Semicon 2.0 expands that focus.

Its design pillar covers semiconductor intellectual property, chips, systems-on-chips and modules for strategic and commercial applications, along with deployment-linked incentives.

That is important because design activity and ownership of design are not the same thing.

An Indian engineering team can contribute to a chip developed by a multinational company without the resulting intellectual property being Indian-owned. Semiconductor sovereignty therefore depends not only on how many engineers work in India, but also on whether Indian companies and institutions create commercially useful designs, retain valuable intellectual property and successfully deploy those products.

A fab can be built with large amounts of capital.

Creating globally competitive semiconductor firms with proprietary technology is a slower institutional challenge.

Odisha’s 3D Glass Project Shows Why Project Status Matters

Odisha’s 3D Glass Solutions project is a useful example of why semiconductor announcements must be described carefully.

The project is real and officially supported, but it is not yet an operational commercial plant.

A February 2026 government reply described 3D Glass Solutions Inc. as establishing a semiconductor manufacturing facility in Odisha with an investment of about ₹1,943 crore. The planned facility covers products including Flip Chip Ball Grid Array assembly, RF System in Package, antenna-in-package systems, glass interposers and 3D heterogeneous integration modules.

The Government listed proposed capacity of around 5,800 glass panels per month, 4.20 million assembly units per month and 1,100 3DHI modules per month.

The next stage occurred on April 19, 2026, when the foundation stone was laid at Info Valley in Khordha district.

That official release identifies the project as a greenfield, vertically integrated advanced packaging and embedded glass substrate ATMP facility being implemented by 3D Glass Solutions through Heterogeneous Integration Packaging Solutions Pvt. Ltd.

It also gives the development timeline: commercial production is expected to begin by August 2028, with full-scale volume production targeted for August 2030.

So the correct description is that the project has been approved and has entered the development and construction phase. It should not be described as though Odisha is already producing these products commercially at the announced capacity.

Its strategic significance remains substantial.

Advanced packaging, embedded glass substrates and heterogeneous integration can occupy high-value positions in the chip supply chain. But the technological capability will be demonstrated only when the facility is commissioned, production ramps successfully and the processes operate at commercial scale.

This distinction also matters when assessing the separate Odisha semiconductor substrate initiative involving Intel and 3D Glass Solutions. Agreements and planned facilities can strengthen the ecosystem, but they remain different from proven operating capability.

The Helium Shock Is a Supply-Chain Warning, Not Evidence of an Indian Fab Shutdown

Semiconductor production depends on much more than silicon.

The Government itself recognises this problem. The machines and materials pillar of Semicon 2.0 provides support for companies involved in semiconductor manufacturing equipment and for materials, chemicals and gases required by the industry.

Helium provides a useful illustration.

On July 10, 2026, China’s Ministry of Commerce and General Administration of Customs announced a temporary prohibition on helium exports. The measure took effect immediately.

At a July 16 press conference, China’s Ministry of Commerce explicitly identified semiconductor manufacturing as one of the high-end industries in which helium is used. The ministry said the temporary measure was intended to protect domestic supply and could later be adjusted according to domestic and international supply conditions.

The timing coincided with wider pressure on the international helium market. An Associated Press report described global supply disruption and rising prices linked to the Iran war.

What does this establish?

It establishes that China imposed a temporary helium export ban, that helium is used in semiconductor manufacturing and that the global helium market was already under supply pressure.

It does not establish that an Indian semiconductor facility was forced to stop production because of the Chinese measure.

The Indian implication is therefore analytical rather than a documented disruption.

The episode shows why semiconductor self-reliance cannot be measured only by the location of fabs and packaging plants. A domestic facility can still depend on imported gases, chemicals, substrates, machinery or replacement components. If those inputs are concentrated in vulnerable supply chains, localisation at the factory level may coexist with strategic dependence upstream.

India’s semiconductor strategy therefore needs the same kind of supply-chain intelligence being discussed in the India-UK Critical Minerals Global Supply Chain Observatory: identify concentration risks before a geopolitical event turns them into production bottlenecks.

Defence Makes Semiconductor Resilience More Urgent

Semiconductors are not only an industrial-policy issue.

The Union Cabinet’s Semicon 2.0 approval explicitly links the programme with national security and semiconductor supply-chain resilience.

That link is straightforward.

Defence electronics, radar, communications, sensors, drones, computing systems and critical digital infrastructure all depend on semiconductor components.

The policy challenge is therefore not simply to maximise the number of chips processed in India.

India must identify which semiconductor capabilities are strategically important, which technologies remain dependent on a small number of foreign suppliers and where domestic capacity or trusted partnerships are necessary for continuity during a crisis.

A consumer-electronics chip and a semiconductor used in a strategic communications system may belong to the same broad industry while carrying very different national-security consequences.

Semiconductor policy should therefore be connected with defence procurement, telecommunications, artificial intelligence, critical infrastructure and broader technology policy.

What Semicon 2.0 Must Fix

The first priority should be domestic value addition.

Government support should be judged not simply by how much investment is announced, but by whether projects progressively deepen engineering, supplier development, materials capability, process knowledge and intellectual property within India.

The second priority should be commercial production.

Approval is necessary.

Construction is progress.

Commissioning is another milestone.

But reliable commercial output at competitive yields is what demonstrates that manufacturing capability actually exists.

The third priority should be technology absorption.

Foreign partnerships can accelerate India’s entry into semiconductor manufacturing, but long-term success depends on whether Indian engineers, suppliers and institutions acquire enough knowledge to operate, improve and eventually develop technologies themselves.

The fourth priority should be research and development.

Semicon 2.0 explicitly includes an R&D pillar aimed at advanced semiconductor technologies. India should use it to connect universities, research institutions, startups and manufacturing firms rather than treating research as separate from industrial policy.

The fifth priority should be demand creation.

Indian-designed chips need customers. Strategic public procurement, defence electronics, telecommunications, power systems and public infrastructure can create early markets, provided procurement supports capability without permanently insulating firms from competition.

Finally, India needs supply-chain mapping.

The Government should know which gases, chemicals, machines, wafers, substrates and components represent concentrated external dependencies and where alternative suppliers, domestic production or strategic inventories may be justified.

From Market Share to Strategic Capability

At the August 31 Semicon 2.0 briefing, Electronics and Information Technology Minister Ashwini Vaishnaw said that close to 10 percent of the global semiconductor industry’s market is expected to be in India in the coming years.

That should be described as a government projection, not as an achieved market share.

Even if India eventually reaches that scale, market share alone would not prove semiconductor sovereignty.

India could capture a significant share of packaging and testing while remaining dependent on imported wafers, manufacturing equipment, specialty materials and foreign-owned intellectual property.

The more useful questions are about capability.

Can an Indian firm design the chip?

Who owns the intellectual property?

Can it be fabricated in India?

Can the necessary materials and equipment be secured during a disruption?

Can Indian engineers modify and improve the process?

Can the chip be packaged and tested domestically?

Can production continue during a geopolitical crisis?

Those questions reveal more about technological resilience than investment announcements alone.

The Larger UPSC Takeaway

Semicon 2.0 marks an important evolution in India’s industrial policy.

Semicon 1.0 demonstrated that large incentives could attract semiconductor projects and help move parts of the manufacturing chain into India.

Semicon 2.0 attempts to go further by supporting design, fabs, advanced packaging, equipment, materials, research and talent as parts of one ecosystem.

But the success of that strategy cannot be measured by adding together projects at different stages and calling them technological sovereignty.

An approval is not a factory.

A factory under construction is not commercial production.

Commercial production in packaging is not the same as domestic wafer fabrication.

And the ability to manufacture a product with imported technology and inputs is not automatically the same as controlling the underlying technological capability.

India’s semiconductor strategy will become more credible as more projects cross each of those stages.

The next test is therefore not whether India can announce more semiconductor investment.

It is whether approved projects are built, commissioned and operated successfully; whether domestic firms acquire deeper technological capability; whether critical material and equipment dependencies are reduced; and whether Indian-designed chips find sustained commercial and strategic use.

If Semicon 2.0 succeeds on those measures, India will not simply become another location where chips are assembled, packaged or fabricated.

It will become a more resilient participant in the global semiconductor economy, with greater control over the technologies and supply chains on which its economic and national security increasingly depend.