Semicon 2.0: the gates are revenue, ownership and technology you already hold, not the capital you propose to spend

Semicon 2.0, notified on 31 August 2026, cut fiscal support for a silicon wafer fab to 40 per cent of eligible capital expenditure from the up to 50 per cent the first programme carried. The percentage is the least of it. An applicant for that pillar must already show minimum capital investment of INR 20,000 crore, revenue of INR 7,500 crore in any of the three financial years before it applies, and production grade technology it owns or licenses. The design pillar adds a condition on who owns and controls the applicant.

What changed, and from when?

The Ministry of Electronics and Information Technology notified the scheme on 31 August 2026, as F. No. W-38/6/2025-IPHW, in the Gazette of India Extraordinary, Part I, Section 1. It builds on the first Semicon India Programme rather than replacing its approved projects. Eligible work is divided into six pillars and ten categories: chip design, machines and materials, further fabs, the assembly and test industry, research and development, and talent.

The India Semiconductor Mission is the nodal agency. Applications go through the nodal agency's portal during an application window. For the design pillar the Centre for Development of Advanced Computing issues the request for proposal and evaluates applications on technical and financial parameters, and support is disbursed on the terms approved in that request for proposal. Two pillars, research and development and talent, carry only an outer figure in the notification, up to 75 per cent of project cost including state incentive, and their eligibility criteria are left to separate guidelines that had not issued when this note was written.

What must an applicant already be?

Every manufacturing pillar sets three conditions before the percentage matters: a minimum capital investment for the proposed unit, a minimum revenue already earned in one of the three financial years preceding the application, counted across group companies and joint ventures, and production grade technology the applicant owns or holds under licence. The revenue condition is the one that decides most cases. It cannot be met by the project. It has to exist before the application.

Pillar and category                         Minimum        Minimum       Fiscal
                                            capital        revenue       support
Silicon wafer fab, 300 mm,                  20,000 cr      7,500 cr      40 per cent
  40,000 wafer starts a month or more
Compound, photonics, sensors                   500 cr        200 cr      35 per cent
  and discrete fabs, 500 wafer
  starts a month or more
Display fab, OLED generation 6 or           10,000 cr      5,000 cr      35 per cent
  above, 30,000 panels a month
Display fab, Micro LED,                      1,500 cr        600 cr      35 per cent
  500 sq m a month
Display fab, LCD generation 8 or            10,000 cr      5,000 cr      35 per cent
  above, 60,000 panels a month
Advanced packaging and advanced              1,000 cr        200 cr      35 per cent
  substrate
Legacy packaging                             1,000 cr        200 cr      25 per cent
Research facilities for                        300 cr        120 cr      30 per cent
  semiconductor equipment
Equipment, sub-assemblies and                  300 cr        120 cr      30 per cent
  components, including refurbishment                                    plus a
                                                                         production
                                                                         incentive
Semiconductor grade raw materials               50 cr         20 cr
Test and characterisation facilities           100 cr         40 cr

Figures are in rupees crore and are taken from the tables in the notification. Support is paid on a pari passu basis, which means it tracks the applicant's own spending rather than arriving ahead of it. Test and characterisation is the one category the notification exempts from the requirement to own or license the technology.

The equipment and components category carries a second layer: a production linked incentive of 10, 8, 6, 4 or 2 per cent of the bill of materials value sourced domestically, running for five years from the financial year 2028 to 2029, subject to an overall ceiling of 50 per cent of eligible capital expenditure.

Who may apply, and who is shut out?

For the design pillar the notification states two eligibility formulations. One category is open to companies incorporated and headquartered in India, with significant operational and manpower presence in the country, owned and controlled by Indian citizens. Another is open on the same terms to companies owned and controlled by Indian citizens or Overseas Citizens of India.

Our position is that an Indian subsidiary owned or controlled from outside India does not satisfy either formulation, whatever its operational presence here, and that the condition is on the shareholding and control rather than on the place of incorporation. A foreign group that wants the design support has to reach it through an Indian owned vehicle, and the structuring question then becomes whether control genuinely sits where the shareholding does. That is a question about the shareholders agreement, not about the incentive.

What does the design support cost in return?

The design pillar is not a grant. Three mechanisms sit under it and each has a price.

Seed funding for eligible start-ups and small and medium enterprises is a milestone linked advance of 50 per cent of project cost or INR 15 crore, whichever is lower, per application. Beyond INR 15 crore the government co-invests in equity, and only where the company has already raised from venture capital or private equity investors, on terms similar to those investors took.

For companies other than start-ups and small and medium enterprises, royalty financing is available on a co-investment basis, and the company pays a royalty of 5 per cent of the net revenue of the product or technology until the government has recovered 1.5 times what it put in.

Exit is priced, and this is the part worth reading before signing. A company that took seed funding or equity co-investment may exit by paying the aggregate of the seed funding and the prevailing market value of the government's equity, or 1.5 times the total support, whichever is higher. A company that took royalty financing may exit by repaying 1.5 times the support if it does so within four years of the last disbursement, and two times the support if it does so later. The same exit mechanism applies where the company ceases to meet the eligibility or other conditions of the scheme. So a breach of a continuing condition is not only a disbursement problem. It converts into a repayment obligation at a multiple.

Separately, deployment of a designed product draws reimbursement of 9 per cent of net sales in the target segments for five years, capped at INR 30 crore per application and INR 120 crore for a company and its group companies across several products.

Who approves what?

Approval authority follows project cost, and it is worth knowing before a timetable is promised to a board. For semiconductor design categories and talent development, a project costing less than INR 100 crore is approved by the Secretary, Ministry of Electronics and Information Technology. Between INR 100 crore and INR 500 crore it goes to the Minister. Above INR 500 crore the ministry places the recommended proposal before the Cabinet. Disbursement is made by the nodal agency on the approval conditions, against budgetary provision made by the ministry.

What remains unsettled?

Three things.

The eligibility criteria and the percentage of support for the research and development pillar and the talent pillar are left to separate guidelines. Until those issue, the only figure available is the outer limit of 75 per cent of project cost including state incentive.

The application window is referred to but the notification does not fix its dates in the text. Timing therefore comes from the nodal agency's portal, and a project plan built on an assumed window is built on nothing.

What counts as owning or possessing production grade licensed technology is not defined. A licence limited by field of use, or terminable on a change of control, may satisfy the eligibility condition on the day of application and fail it later, at which point the continuing conditions and the repayment multiple above become the live question. What an applicant has to decide, before it applies, is whether its technology licence is drafted to survive the whole incentive period rather than the approval.