ISM 2.0 and Semicon 2.0: What India's Chip Mission Means for Silicon Materials

From ISM 1.0 to ISM 2.0

India Semiconductor Mission 1.0 was approved by the Union Cabinet in December 2021 with an incentive framework of Rs 76,000 crore. A PIB backgrounder dated 7 February 2026 says it offered fiscal support of up to 50 per cent for silicon fabs, compound semiconductor facilities, assembly and testing units, and chip design. PIB's 15 July 2026 release counts twelve approved manufacturing units under the first phase, with cumulative investment of over Rs 1.64 lakh crore, of which Micron, Kaynes and CG Semi had started commercial production.

The Union Budget 2026-27 announced the second phase. The same PIB backgrounder says ISM 2.0 will focus on producing semiconductor equipment and materials in India, designing full-stack Indian semiconductor IP and fortifying domestic and global supply chains, with a provision of Rs 1,000 crore made for FY 2026-27. On 15 July 2026 the Cabinet approved Semicon 2.0 with a total outlay of Rs 1,27,500 crore, and MeitY notified the scheme on 31 August 2026.

The six pillars

PIB's Cabinet release describes Semicon 2.0 as resting on six pillars. The second one is the important change for upstream suppliers: the first phase did not have a dedicated materials pillar.

• Design: chip and system IP, building on the design-linked support of phase one
• Machines and materials: incentives for makers of equipment and of materials, chemicals and gases essential to semiconductor manufacturing
• More fabs: silicon, compound semiconductor, discrete and display fabs
• ATMP/OSAT: with a focus on advanced packaging technologies
• Research and development: towards more advanced nodes
• Talent development: including clean-room and fab-construction training

What the notified scheme says about equipment and materials

Reporting on the notification (Business Today, 31 August 2026) says MeitY set out eligibility and incentives across six pillars and ten categories, and that materials and equipment makers are among the eligible applicants. Equipment and materials facilities in specified segments are reported to receive capital-expenditure support of up to 30 per cent, with an additional production-linked incentive for equipment makers tied to domestically sourced bills of materials. A separate category for semiconductor-grade raw materials is reported with a lower entry threshold than the equipment categories.

Two cautions apply. First, these terms come from press reporting of the notification; detailed operational guidelines, application formats and the exact list of specified segments are what decide whether a given product qualifies. Second, neither PIB's release nor the reporting we reviewed names polysilicon, quartz or crucibles as a funded category, so no supplier should assume eligibility from the pillar title alone. Projects are reported to run for up to six years, with applications open initially for three years.

Does ISM 2.0 cover silicon wafers?

Partly, and the wording causes confusion. The 'silicon wafer fab' category is for front-end chip fabs that process wafers into integrated circuits. Business Today reports it at 40 per cent of eligible capex, down from up to 50 per cent in the first phase, with thresholds that include 300 mm wafers and at least 40,000 wafer starts per month. That is a chip factory, not a plant that grows ingots and slices bare wafers.

Bare silicon wafers, the polished substrates a fab starts from, are a material input. Whether a substrate or ingot project fits the materials and raw-materials categories depends on the detailed guidelines, so treat that as an open question to check with the India Semiconductor Mission rather than a settled answer.

Where silicon and quartz sit in the chip supply chain

A chip fab sits at the end of a long materials chain. Quartz is refined into metallurgical silicon and then into high-purity polysilicon. Polysilicon is melted in a high-purity fused-quartz crucible and pulled into a single-crystal ingot by the Czochralski method, then sliced, polished and cleaned into wafers. Semiconductor-grade silicon needs far higher purity and tighter defect control than solar-grade material, which is why crucible quartz purity, hot-zone materials and contamination control carry into wafer quality.

India has some of these links for solar, and is adding ingot and wafer capacity ahead of ALMM List-III from 1 June 2028. The semiconductor-grade versions of those links are a harder, separate qualification step, and they are the layer that the machines-and-materials pillar points towards.

• Quartz and high-purity quartz sand
• Polysilicon (semiconductor grade)
• Fused-quartz crucibles and graphite hot-zone parts
• Czochralski ingot growth
• Wafer slicing, polishing and cleaning
• Process chemicals and specialty gases at the fab

What materials suppliers should do now

Read the notified scheme and the guidelines when issued, map your product to a named category, and confirm eligibility with the India Semiconductor Mission before planning around an incentive. Qualification by a fab or wafer customer, not the scheme, is the gate that decides whether semiconductor-grade material sells.

• Map the product to a specific Semicon 2.0 category, not just a pillar
• Check thresholds and the detailed guidelines before planning capex
• Plan customer qualification and purity documentation early
• Keep solar-grade and semiconductor-grade specifications clearly separate