Budget FY25-26: Can India’s Semiconductor Industry Secure a Bigger Boost?

New Delhi: As the Ministry of Finance prepares to present Union Budget 2025-26 on Saturday, 1 February, industry leaders and experts are outlining key expectations to strengthen India’s semiconductor and electronics ecosystem.

The upcoming budget is widely regarded as a crucial inflexion point for India’s ambitions to become a global semiconductor hub. Stakeholders anticipate strategic investments in domestic manufacturing, research and development (R&D), policy reforms, and incentives aimed at bolstering the semiconductor value chain.

Increased Outlay for Semiconductor Mission and Design Incentives

Anurag Awasthi, semiconductor policy specialist and industry expert, believes that the government should allocate a tranche similar to or greater than the previous financial outlay under India Semiconductor Mission (ISM 2.0).

“A greater financial outlay for ISM 2.0 with an emphasis on advanced packaging and design is essential,” he noted.

He also highlights the need for an increased budget allocation for the Design Linked Incentive (DLI) scheme to enhance traction in semiconductor design, which is crucial for future advancements.

Furthermore, Awasthi suggests reductions in import tariffs on semiconductor and electronics manufacturing equipment, which could significantly benefit the industry.

“Incentives for raw materials in the electronics value chain, including PCB laminates, resins, and components required for HDI and multilayer bare board manufacturing, should also be considered,” he added.

Additionally, he stresses the importance of incentivizing high-value components and warehousing, which could be a game-changer for India’s semiconductor ambitions. A viable Public-Private Partnership (PPP) model is also necessary to foster innovation, incubate disruptive technologies, and support startups and SMEs in semiconductor and electronics manufacturing.

Expanding R&D, Skilling, and Supply Chain Resilience

Ajit Manocha, President & CEO of SEMI, emphasizes that the budget must address investments in domestic semiconductor manufacturing capabilities, increased R&D funding, and sustainable innovation.

“India is currently at the cusp of becoming a major global semiconductor hub, and the 2025 budget will be a key inflexion point for the industry at large,” he said.

Manocha highlights the need to develop a resilient supply chain and a highly skilled workforce. “Collaborations with premier universities and institutions like IITs and NITs to create specialized curricula tailored to semiconductor technologies will be critical in addressing the industry’s rising demand for talent,” he noted.

Drawing comparisons with leading semiconductor economies, he points out that Taiwan holds over 50 per cent of global semiconductor manufacturing, with South Korea following close behind.

Multiple governments worldwide are investing heavily in semiconductor expansion, and India must adopt optimized duty structures for critical component imports to remain competitive. He also stresses the importance of export incentives to strengthen India’s global market position.

“This is a marathon, not a sprint. India needs a long-term perspective on semiconductor policies, sustained commitment, and alignment of fiscal policies, duty frameworks, and skilling initiatives. With these in place, India can establish itself as a foundation of the global semiconductor ecosystem, driving both innovation and economic growth,” he added.

PLI Expansion and Domestic Manufacturing Boost

Rajesh Jain, CFO at RR Kabel, underlines the importance of policies that align with India’s economic growth and global competitiveness.

“The electrical and electronics sector plays a crucial role in safety, efficiency, and sustainability across applications. Simplified tariff structures, an expanded Production Linked Incentive (PLI) scheme, and investment in energy-efficient infrastructure will strengthen India’s position as a global manufacturing hub,” he explained.

Similarly, Gaurav Sahay, Practice Head – Technology & General Corporate, Fox Mandal & Associates LLP, underscores the need for increased funding under the PLI scheme for semiconductors.

He advocates for fostering collaborations with global semiconductor giants, investing in skill development for VLSI design and manufacturing, and leveraging PPP models to accelerate research and implementation in key areas such as defence, industrial electronics, and telecommunications equipment.

Arijeet Talapatra, CEO of itel India, also sees the budget as an opportunity to accelerate growth in the electronics and smartphone manufacturing sector. He recommends expanding the PLI program to cover semiconductors, high-capacity batteries, and display technologies.

“This will strengthen India’s value chain, reduce dependence on imports, and enhance global competitiveness,” he states.

Strengthening the Ecosystem

Hitesh Garg, Vice President and India Managing Director at NXP Semiconductors, highlights the progress made by the Indian semiconductor industry in 2024.

“With the government’s transformative Semiconductor Mission and incentives surpassing Rs 76,000 crore, India has attracted investments in state-of-the-art fabrication facilities and design ecosystems,” he says.

Looking ahead, he sees system design and AI-driven innovations playing a pivotal role. “Semiconductors will be at the heart of India’s transition into the intelligent age. Initiatives like the India AI mission and advancements in edge computing, 5G, and IoT are creating unparalleled opportunities for integrating cutting-edge AI capabilities into system design. These innovations will revolutionize industries such as automotive, healthcare, and telecommunications, enabling smarter and more efficient solutions,” Garg elaborated in his year-end statement.

With a vibrant talent pool and strong digital infrastructure, India is well-positioned to leverage its semiconductor and electronics system design and manufacturing (ESDM) ecosystem.

“The focus should be on shaping a future defined by intelligence on the edge and connectivity,” he added.

The Union Budget 2025-26 holds immense significance for India’s semiconductor industry. As experts across the ecosystem highlight, a multi-faceted approach—encompassing increased financial outlays, optimized duty structures, expanded incentives, skill development initiatives, and strong public-private collaborations—is essential for India to compete on a global scale.

By focusing on long-term strategies, fostering global partnerships, and ensuring sustained policy support, India has the potential to solidify its place as a leading semiconductor hub, driving technological advancements, economic growth, and self-reliance in the ever-evolving semiconductor landscape.

Also Read –

IndiaAI Mission Empanels 18,693 GPUs to Strengthen AI Research and Development: IT Minister