Semicon 2.0 Scheme 2026: Eligibility, Incentives and How to Apply
India spent phase one of its chip mission building fabs. Phase two is about building everyone who sells to them. Semicon 2.0, notified on 31 August 2026 with an outlay of about ₹1.27 lakh crore, opens the India Semiconductor Mission to startups, MSMEs, research bodies and training institutions for the first time. If you make precision components, specialty chemicals, industrial gases or engineering services, this is the first chip scheme that was actually written with you in mind. At StartupFlora, we help MSMEs and startups identify the right scheme category and build a fundable application.
Who Is Eligible for the Semicon 2.0 Scheme?
The Category You Apply Under
The ten categories are semiconductor design and IP development, wafer fabrication, compound semiconductors and display fabs, ATMP and OSAT, semiconductor manufacturing equipment, specialty chemicals and industrial gases, semiconductor grade materials, engineering services, semiconductor research, and workforce development.
For most Indian MSMEs, the realistic categories are numbers five through eight.
Demonstrated Technical Capability
Semiconductor supply chains don't run on intent. Purity specifications for electronic grade chemicals are measured in parts per billion, and equipment tolerances in microns. Applications are assessed on whether you can actually meet the specification, which usually means existing certifications, test data and a customer in an adjacent high-purity industry like pharmaceuticals or aerospace.
A Costed, Financed Project Plan
Capital support is paid against eligible capital expenditure. You need a defined project with a site, a costed plan and financing lined up for your share. A 30% incentive on equipment still leaves you funding 70%.
Proper Entity Status and Registrations
A properly constituted Indian entity with active Udyam registration for MSMEs. Startups applying for the design seed funding route will normally need DPIIT recognition under Startup India, so get that done before you apply, not after.
Benefits of the Semicon 2.0 Scheme
Process to Apply for the Semicon 2.0 Scheme
Identify Your Category and Read Its Notified Conditions
Don't start with the money. Start with which of the ten categories your project fits and what that category specifically requires. Applying under the wrong head is the fastest way to lose a quarter.
Build the Technical and Financial Case
Prepare the project report: technology, capacity, capex breakdown, financing structure, timeline and the specifications you'll meet. For supply chain categories include existing quality certifications and any customer validation. For design projects include the chip specification, target node, tape-out plan and team credentials.
Complete Your Registrations
Udyam registration for MSMEs, DPIIT recognition for startups on the design and seed funding routes. Both take time and both are checked.
Apply Through the India Semiconductor Mission
Applications go through the ISM portal at ism.gov.in, with the project report, corporate documents, financial statements and evidence of the technical capability you've claimed.
Go Through Technical and Financial Appraisal
ISM appraises the proposal, and larger categories go through consultants and expert committees. Expect questions. Applicants who answer with data rather than assurances do better.
Sign the Agreement and Draw Milestone-Linked Disbursal
On approval you sign an agreement with defined milestones. Money is released against verified progress, usually capital deployed and capacity commissioned, not on signature. Plan your working capital assuming the incentive arrives after you've spent.
Identify Your Category and Read Its Notified Conditions
Don't start with the money. Start with which of the ten categories your project fits and what that category specifically requires. Applying under the wrong head is the fastest way to lose a quarter.
Build the Technical and Financial Case
Prepare the project report: technology, capacity, capex breakdown, financing structure, timeline and the specifications you'll meet. For supply chain categories include existing quality certifications and any customer validation. For design projects include the chip specification, target node, tape-out plan and team credentials.
Complete Your Registrations
Udyam registration for MSMEs, DPIIT recognition for startups on the design and seed funding routes. Both take time and both are checked.
Apply Through the India Semiconductor Mission
Applications go through the ISM portal at ism.gov.in, with the project report, corporate documents, financial statements and evidence of the technical capability you've claimed.
Go Through Technical and Financial Appraisal
ISM appraises the proposal, and larger categories go through consultants and expert committees. Expect questions. Applicants who answer with data rather than assurances do better.
Sign the Agreement and Draw Milestone-Linked Disbursal
On approval you sign an agreement with defined milestones. Money is released against verified progress, usually capital deployed and capacity commissioned, not on signature. Plan your working capital assuming the incentive arrives after you've spent.
Target Beneficiaries of Semicon 2.0
Seed Funding for Chip Design Startups
Getting a chip from design to silicon usually costs more than a seed round can carry, because mask sets and wafer runs are expensive. Semicon 2.0 offers up to ₹15 crore, capped at 50% of project cost. Under the Design Linked Incentive route in phase one, 105 startups and MSMEs already received EDA tool access and 24 design projects were approved.
Free Access to Design Infrastructure
Startups and MSMEs can use national EDA tool licences and multi-project wafer services. For a fabless team, EDA licences alone can cost more per year than the entire salary bill.
Supply Chain Support at Up to 30%
Specialty chemicals, industrial gases, semiconductor grade materials, manufacturing equipment and engineering services all qualify for up to 30% support. These aren't billion-dollar businesses. They're precision manufacturing businesses, which many Indian MSMEs already run.
A Buyer With a Reason to Buy Indian
Equipment manufacturers get a PLI style incentive of 2% to 10% on domestic sourcing bills. Twelve approved fabs and packaging units are being built right now, and the incentive design pushes them to source locally.
75% Support for Research and Training
This is unusually high for an Indian incentive scheme and it's the line item most relevant to engineering colleges, training institutes and industry-led research centres. If you run a technical training business, read this category closely.
9% Demand-Side Incentive on Net Sales
Companies that deploy qualifying chips in their products earn 9% of net sales for five years. Electronics and hardware manufacturers routinely skip this because they assume ISM is only for chip makers.
Semicon 2.0 vs Semicon 1.0
FAQs
Costs and Charges
There's no fee to apply to the India Semiconductor Mission. The costs are the ones your project carries, and they aren't small.
You fund the share of capital expenditure the incentive doesn't cover: 60% for a silicon fab, 65% for compound and display fabs and advanced packaging, 75% for legacy packaging, and at least 70% for equipment and materials. Add the cost of preparing a credible project report, which for a serious application usually means paid technical consultants. Add working capital through the gap between spending and disbursal. And add qualification and certification costs while you wait to enter a customer's supply chain.
Penalties for missing committed milestones are set in the agreement you sign. Read that clause before you commit to an aggressive timeline.
Conclusion: Find Your Category Before You Chase the Funding
Semicon 2.0 puts about ₹1.27 lakh crore behind a simple idea. India has started making chips, and now it needs everything that goes around making chips. The fab incentives get the headlines. The categories that matter for most Indian companies are equipment, materials, chemicals, gases, engineering services and design.
The hardest question isn't the funding one. It's whether you can meet a semiconductor customer's specification, because that's what the appraisal will focus on.
If you have manufacturing or engineering capability that's close to semiconductor grade, map your existing certifications against your category's requirements and cost the gap. Do that before you touch an application form.
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