The Union Cabinet’s approval of the Mobile Phone Manufacturing Scheme (MPMS) with an outlay of ₹62,500 crore and Semicon 2.0 with a budget of ₹1,27,500 crore marks one of the most significant industrial policy interventions in India’s electronics sector.
Together, the two schemes represent a coordinated strategy to move India beyond being primarily an assembly destination and transform it into a globally competitive hub for electronics design, semiconductor manufacturing, research and intellectual property creation.
The combined investment of ₹1.9 lakh crore signals the government’s intention to build an integrated electronics ecosystem that spans semiconductor fabrication, chip design, component manufacturing, mobile phone production, advanced packaging, research and skilled manpower.
Rather than treating electronics manufacturing as a standalone industry, the new policies seek to establish complete value chains capable of supporting India’s long-term technological and strategic ambitions.
Moving Beyond PLI
The Mobile Phone Manufacturing Scheme effectively succeeds the Production Linked Incentive (PLI) Scheme for Large Scale Electronics Manufacturing, whose tenure concluded in March 2026.
The PLI scheme fundamentally changed India’s position in global electronics manufacturing. During the past decade, electronics manufacturing expanded seven-fold while exports increased eleven-fold.
India has emerged as the world’s second-largest mobile phone manufacturer by volume, with over 99% of mobile phones sold domestically now being manufactured within the country. Smartphones have also become India’s single largest export product category, overtaking traditional export leaders such as refined petroleum products and cut diamonds.
Having established manufacturing capacity, the government’s next objective is to deepen domestic value addition. This represents an important shift in policy focus. While the first phase concentrated on attracting global manufacturers and increasing production, the second phase seeks to ensure that a larger share of the economic value remains within India through local sourcing, design capabilities and indigenous brands.
Incentivising Higher Domestic Value Addition
The MPMS, which will operate from FY2026-27 to FY2030-31, offers production-linked incentives ranging from 2.25% to 5% on eligible sales of mobile phones manufactured in India. More importantly, it introduces two additional incentive structures that reflect evolving policy priorities.
Manufacturers sourcing key components and sub-assemblies domestically can receive an additional incentive of up to 1.5%, directly encouraging localisation of supply chains. A further 3% incentive has been earmarked for Indian brands investing in product design and research and development.
This marks a notable policy evolution. Instead of rewarding manufacturing volume alone, the scheme encourages companies to develop proprietary technology, create intellectual property and build globally competitive Indian brands. Such an approach aims to capture a greater portion of the value generated within global electronics supply chains.
The government expects cumulative mobile phone production of approximately ₹39 lakh crore during the scheme period while generating around 60,000 direct jobs. Given the multiplier effect associated with electronics manufacturing, indirect employment across logistics, components, services and ancillary industries is expected to be considerably larger.
Semicon 2.0: Building the Missing Foundation
If MPMS focuses on the final product, Semicon 2.0 seeks to address the most critical upstream segment of the electronics ecosystem—the semiconductor industry.
Semiconductors are the foundational technology behind smartphones, automobiles, telecommunications, defence systems, industrial automation, artificial intelligence and virtually every modern electronic device. Dependence on overseas semiconductor supply chains became a major global concern during the pandemic and subsequent geopolitical disruptions, prompting many countries to launch large-scale semiconductor incentive programmes.
India’s semiconductor strategy, launched under the India Semiconductor Mission, was designed to establish domestic capabilities in an industry characterised by extremely high capital costs, technological complexity and long investment cycles. Semicon 2.0 extends this effort by providing long-term policy certainty.
Rather than concentrating solely on fabrication plants, the scheme adopts a comprehensive ecosystem approach based on six strategic pillars.
Six Pillars of Semiconductor Development
The first pillar focuses on chip design, where India already enjoys significant strengths through its engineering talent. More than 100 startups are already developing semiconductor designs. The new programme seeks to deepen indigenous intellectual property creation and establish India as a global centre for semiconductor design.
The second pillar targets machines, specialty materials, chemicals and industrial gases required for semiconductor production. These upstream industries are often overlooked but are essential for creating resilient domestic manufacturing capabilities.
The third pillar aims to establish additional fabrication facilities beyond those already approved. The government expects the country’s first semiconductor fabrication plant to become operational in 2028 and intends to leverage growing investor confidence to attract additional silicon, compound semiconductor, discrete component and display fabrication units.
The fourth pillar seeks to expand India’s presence in Assembly, Testing, Marking and Packaging (ATMP) and Outsourced Semiconductor Assembly and Testing (OSAT) operations. These activities require lower capital investment than fabrication while enabling India to integrate into global semiconductor supply chains.
The fifth pillar places emphasis on advanced research and development. India’s semiconductor journey currently begins with mature technology nodes between 28 nanometres and 110 nanometres. Future efforts will seek to develop more advanced process technologies through collaboration with leading domestic and international research institutions.
The sixth pillar addresses one of India’s greatest comparative advantages—human capital. More than 315 universities are already participating in semiconductor education, and approximately 68,000 students have received training in advanced chip design using Electronic Design Automation (EDA) tools.
The programme proposes to expand this talent pipeline further while introducing specialised training in fabrication, clean-room operations and semiconductor manufacturing.
Progress Under the India Semiconductor Mission
Semicon 2.0 builds upon substantial progress achieved under the first phase of the India Semiconductor Mission.
The government has approved 12 manufacturing projects involving cumulative investments exceeding ₹1.64 lakh crore. These include one silicon fabrication plant, one silicon carbide fabrication unit, one integrated gallium nitride Micro LED display fabrication facility and nine semiconductor packaging units.
Three companies—Micron, Kaynes and CG Semi—have already commenced commercial production, while another manufacturing unit is expected to begin operations during 2026.
On the design front, 24 semiconductor design projects have received financial support, while 105 startups and MSMEs have gained access to industry-standard EDA tools. These companies are developing chips for satellite communications, drones, surveillance systems, artificial intelligence, telecommunications equipment, Internet of Things devices and smart infrastructure.
Although most of these products remain at various stages of development, they represent the emergence of a domestic semiconductor design ecosystem that barely existed a few years ago.
Strategic Importance Beyond Manufacturing
Both schemes extend beyond industrial policy and have significant geopolitical implications.
Electronics and semiconductors have increasingly become strategic technologies influencing economic competitiveness, national security and technological sovereignty. Global supply chains remain concentrated in relatively few geographies, making diversification a priority for governments and multinational corporations alike.
By simultaneously expanding mobile manufacturing and semiconductor capabilities, India seeks to position itself as a trusted alternative manufacturing destination while reducing vulnerabilities associated with external supply disruptions.
For sectors such as defence electronics, telecommunications, aerospace, automotive manufacturing and critical digital infrastructure, stronger domestic semiconductor capabilities also enhance strategic resilience.
Opportunities and Challenges
Despite the scale of the investment, implementation will determine the success of both programmes.
Semiconductor fabrication remains among the world’s most capital-intensive industries, demanding uninterrupted power, ultra-pure water, specialised chemicals, precision engineering, advanced logistics and sustained policy support over decades. Global competition is equally intense, with several major economies offering substantial incentives to attract semiconductor investments.
Similarly, increasing domestic value addition in mobile manufacturing will require rapid development of local component suppliers, improved manufacturing competitiveness and continued integration with global value chains.
Building globally recognised Indian smartphone brands will also require sustained investments in product innovation, design, software ecosystems, marketing and intellectual property development.
Outlook
Taken together, MPMS and Semicon 2.0 represent the next phase of India’s electronics manufacturing strategy. The earlier policy emphasis on attracting assembly operations has now evolved towards creating integrated manufacturing ecosystems, indigenous technology capabilities and higher domestic value creation.
If successfully implemented, the two schemes could significantly strengthen India’s position across the global electronics value chain—from chip design and semiconductor manufacturing to component production, smartphone exports and advanced technology development.
More importantly, they indicate that India’s industrial policy is increasingly focused not merely on expanding manufacturing volumes but on securing technological leadership, building resilient supply chains and generating long-term economic value through innovation, research and intellectual property.
