Cabinet Clears Rs 1.9 Lakh Crore Push for Semiconductors and Mobile Manufacturing

The Union Cabinet has approved two large manufacturing schemes aimed at strengthening India's electronics and semiconductor base, together carrying an outlay of close to Rs 1.9 lakh crore. The Cabinet Committee on Economic Affairs cleared Semicon India Programme 2.0 with roughly Rs 1.275 lakh crore in support, alongside a separate Mobile Phone Manufacturing Scheme worth Rs 62,500 crore, marking one of the government's most significant industrial policy moves of the year.

Building on the First Semiconductor Push

Semicon 2.0 extends the original India Semiconductor Mission, which was launched to reduce the country's near-total dependence on imported chips. The revamped programme broadens its scope to six areas: chip design, semiconductor equipment and materials, fabrication facilities, advanced packaging and testing, research and development, and talent development. Officials expect the scheme to draw around Rs 4 lakh crore in fresh investment over its lifetime, with a target of generating roughly Rs 2 lakh crore worth of domestic semiconductor production and up to Rs 1 lakh crore in chip exports.

The emphasis on packaging and testing, not just fabrication, is notable. India's first wave of semiconductor investment concentrated heavily on assembly and testing units and a handful of fab commitments. Widening support to design and R&D signals an attempt to move up the value chain rather than remain limited to lower-margin assembly work, which has been a common criticism of early-stage electronics manufacturing incentives globally.

A Fresh Bet on Mobile Manufacturing

The companion Mobile Phone Manufacturing Scheme will run for five years, from FY27 through FY31, and replaces or supplements earlier production-linked incentive structures for handset makers. Under the new scheme, incentives will range from 2.25 percent to 5 percent on eligible sales, with an additional incentive of up to 1.5 percent for manufacturers that source key components domestically. A further 3 percent incentive is earmarked specifically for Indian brands that invest in product design and research and development within the country, a provision aimed at nudging homegrown players beyond contract assembly.

The government is projecting cumulative mobile phone production worth roughly Rs 39 lakh crore over the scheme's duration and expects it to support around 60,000 direct jobs. India has already emerged as one of the world's largest mobile phone manufacturing bases by volume in recent years, driven substantially by contract manufacturers producing for global brands; this scheme appears designed to convert that manufacturing scale into deeper local value addition.

Why the Timing Matters

The approval comes as global supply chains for chips and electronics components remain sensitive to geopolitical disruption, and as several countries compete aggressively for semiconductor and electronics investment through their own incentive packages. For India, sustaining momentum on both fabrication and component sourcing is seen as necessary to avoid the incentive schemes becoming primarily import-substitution vehicles for finished assembly rather than genuine manufacturing depth.

Industry watchers will be looking for how quickly companies commit fresh capital under Semicon 2.0, given that earlier semiconductor mission approvals took time to translate into operational fabs. For mobile manufacturing, the local sourcing and R&D incentive tiers will be the areas to track, since they determine whether the scheme meaningfully shifts component supply chains onto Indian soil rather than simply extending existing assembly arrangements.

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