New Delhi is making its most bold move yet to become a serious contender to the world's semiconductor supply chain. The Union Cabinet, led by Prime Minister Narendra Modi, approved the second and sizeable part of the India Semiconductor Mission on Wednesday with a budget of Rs 127,500 crore, equivalent to about $13.2 billion at prevailing exchange rates, compared to the first phase, which was launched in 2021 with an allocation of Rs 76,000 crore, or $8.5 billion. It is not a coincidence. It's hitting the middle of what is emerging as the worst memory chip shortage in the electronics industry in nearly 15 years, and is changing the way the world thinks about who should be in control of silicon.

The new scheme will take care of all the stages of the value chain, from designers of chips and raw material suppliers to the finished fabrication and packaging, Ashwini Vaishnaw, minister for information and broadcasting and also holding the electronics and IT portfolio, told reporters after the Cabinet meeting. It is grounded on six foundations: design, materials and equipment for the supply chain, fabrication capacities, assembly and testing, research on next-generation nodes and talent development, he said. The programme is estimated to attract additional investment worth of Rs 4 lakh crore and semiconductor production of Rs 2 lakh crore in its lifetime. But Vaishnaw was straightforward about the ambition, stating that by the time the programme comes to fruition, the country would like to be self-reliant in chip manufacturing.

The fact that this is believable, or even worthy of consideration, is because of what occurred under the original mission. There are already approved 12 manufacturing units with over Rs 1.64 lakh crore of investment, which include a silicon fab, a silicon carbide fab, a gallium nitride/micro LED display plant and nine packaging units. Three of them, operated by Micron, Kaynes, and CG Semi, have already started to produce commercially, while a fourth is joining as soon as the end of this year. As far as design is concerned, 24 startups and MSME projects have been funded, and 105 small enterprises are now able to access design software which were only able to be accessed by industry giants with massive funds to spare. Some 315 universities are educating students on the same tools and some 68,000 have already completed the programme. That is the part of this story that is buried under the headline number India isn't just trying to build factories, it's trying to build the workforce and design talent that otherwise takes a generation to build.

This is relevant to India's role beyond its borders, given the backdrop of the global situation. The world has been experiencing a memory chip supercycle since late 2025, which is unprecedented to the pandemic era's memory chip shortage. The data centres that power artificial intelligence systems like Microsoft, Google, Meta and Amazon are investing in high-bandwidth memory for their operations, taking a lot of the wafer capacity out of laptops and phones. The resulting contract price rises are believed to be around 90 percent quarter on quarter this year, after which they are expected to rise by 58 to 63 percent for DRAM and 70 to 75 percent for NAND flash, according to TrendForce. The company's stock was the biggest single-day loser in more than a year after Apple hiked prices on its MacBook and iPad products in June a rare occurrence for a company that's historically tried its best to pass on price increases. Even Elon Musk of Tesla has mentioned the “chip wall,” and the power company is saying you either take the wall or construct your own chip factory. Goldman Sachs analysts have declared this to be the tightening memory market in 15 years, with the majority of predictions indicating that the relief will not be seen until at least 2027 or 2028.

In that light, it appears more of a necessity than an ambition for India to be in that race. The nation continues to rely almost entirely on imports for its semiconductor requirements, and the government has been straight-forward that its first locally-built fabrication plant, which is under construction with Tata's participation, will not start commercial production until 2028. It's a long runway in an industry that sees China, the U.S. and the E.U. all investing in the same subsidy programmes, but with larger amounts of money. The difference is the focus on the earlier and later steps in the value chain, chip design, skilled manpower in India, as opposed to just fabrication. This seems to be the safer move for a latecomer nation. The fabrication costs are high, and the payback period is long, while the pipeline of engineers designing chips for AI systems, telecom gear, satellites, and industrial sensors is non-depreciating and pays off right out of the gate and continues to grow as new fabs open elsewhere.

The Cabinet has given a green light to a Rs 62,500 crore mobile phone manufacturing scheme and a few infrastructure projects in Varanasi, which, along with Semicon 2.0, brought the total outlay of the day to Rs 2,19,353 crore, with a new investment policy to make India self-reliant in urea production also approved. Nothing of this alters the central issue surrounding the Rs 1.27 lakh crore initiative under the 6 pillars over several years that is under question for Semicon 2.0 whether it is sufficient to rival programmes that are both significantly larger and backed by the government in other quarters, or whether it is just the cost of being part of a discussion that is going on around the world without India being present.