Summary: Semicon 2.0 represents the next stage of India’s semiconductor strategy, moving beyond chip manufacturing to support the entire semiconductor value chain, including design, R&D, materials, packaging and commercialisation. While the initiative is not specifically aimed at the automotive sector, it has significant implications for automotive and auto-component businesses, which are becoming increasingly dependent on semiconductors. This article examines the evolution of India’s semiconductor policy, the growing connection between semiconductors and automotive competitiveness, and the opportunities that Semicon 2.0 may create for businesses and investors across the automotive value chain.
Introduction
Semicon 2.0 marks the next phase of India’s semiconductor strategy, building on the foundations of the India Semiconductor Mission and seeking to strengthen the country’s capabilities across the semiconductor value chain, including chip design, manufacturing, advanced packaging and related infrastructure. Its significance, however, extends beyond the semiconductor sector. For industries such as automotive and auto-components, which are among the principal consumers of semiconductor technologies, the initiative comes at a time when vehicles are becoming increasingly dependent on semiconductors for a wide range of functions, including power management, sensing, connectivity, safety and computing. The global chip shortage during and after the COVID-19 pandemic highlighted the strategic importance of semiconductors. It also exposed the automotive industry’s vulnerability to supply-chain disruptions, causing production slowdowns across markets.
Against this backdrop, the opportunity presented by Semicon 2.0 extends beyond import substitution for India. While its full impact is still unfolding, the initiative could have significant implications for the automotive value chain given the sector’s growing reliance on semiconductors. This article traces the evolution of India’s semiconductor policy in the automotive industry and explores the opportunities presented by Semicon 2.0 across the automotive value chain.
Towards a More Holistic Semiconductor Policy
Building on the progress of the first phase (Semicon 1.0) and supported by an outlay of approximately ₹1.27 lakh crore to strengthen capabilities, Semicon 2.0 expands India’s semiconductor strategy beyond manufacturing. The initiative supports the entire value chain, including design, R&D, materials and commercialisation.
Semicon 2.0 provides a broader framework for advancing India’s semiconductor ambitions, moving away from the targeted segments that Semicon 1.0 focused on. The first phase focused primarily on establishing domestic semiconductor manufacturing capacity through support for fabs, ATMP/ OSAT facilities and chip design initiatives. For the automotive sector, however, fabrication is only a part of the value chain. Automotive semiconductors also depend on capabilities in design, R&D, packaging, testing and system-level integration before they can be deployed in vehicle platforms. The ‘broader’ Semicon 2.0, while not specifically targeted at the automotive sector, has the potential to generate significant downstream benefits for semiconductor-intensive industries, including automotive and auto-components, in the following manner:
- Design and R&D: Semicon 2.0 places significant emphasis on chip design, intellectual property (IP) creation, R&D and talent development, which could accelerate semiconductor solutions for electric mobility, connectivity, power management and advanced safety systems, while strengthening domestic technological capabilities and value creation.
- Materials/ Critical Inputs: Strengthen domestic capabilities in semiconductor-grade materials, chemicals and gases, for use in compound semiconductors such as silicon carbide (SiC) and gallium nitride (GaN), which are essential to electric vehicles and power electronics.
- Commercialisation Incentives: In addition to supporting manufacturing activities, as was available in Semicon 1.0 (such as through incentives for fabs), it links incentives to successful commercialisation and sale of semiconductor products, encouraging market-ready automotive semiconductor solutions.
The prospect of such benefits has, in fact, been a recurring theme in the evolution of India’s semiconductor policy, as discussed in the following section. Tracing this evolution illustrates how policymakers have sought to realise these benefits over time, while providing insights into the future direction of the automotive sector and the potential commercial implications of an increasingly semiconductor-driven value chain.
Tracing the Automotive-Semiconductor Policy Interface
The National Policy on Electronics 2019 (NPE 2019) had identified automotive electronics as a priority area for capability development, recognising the sector’s growing reliance on semiconductors and electronics.
The themes identified in NPE 2019, such as R&D and concept-to-market innovation in electric vehicle technologies, promotion of IP creation, establishment of a Centre of Excellence for EV electronics, were subsequently reinforced in later policy and industry assessments. As the automotive sector’s reliance on electronics and semiconductors continued to grow, the focus expanded from capability creation to the broader question of automotive competitiveness. In this regard, the NITI Aayog’s April 2025 report, Automotive Industry: Powering India’s Participation in Global Value Chains, observed that the transition towards electric, connected and software-defined vehicles would significantly increase the semiconductor content of vehicles and deepen the automotive sector’s reliance on advanced electronics.
The report identified many structural challenges that could constrain India’s ability to benefit from this transition, including supply-chain vulnerabilities, limited participation in higher-value segments, technology gaps, R&D needs and skilling challenges. More fundamentally, it highlighted that India’s ability to move up the automotive value chain would increasingly depend on the development of domestic technology and ‘semiconductor capabilities’.
The next question was how India could build the capabilities required to support this growing demand. This was addressed in the NITI Aayog’s 2026 roadmap, Future of India’s Semiconductor Industry, which advocated a more targeted approach to semiconductor development. Rather than focusing solely on advanced fabrication, the roadmap emphasised developing capabilities in areas such as specialty analog and mixed-signal devices, compound semiconductors and advanced packaging. This is particularly relevant for the automotive sector – access to semiconductor technologies that meet specific automotive requirements.
Looking ahead, increased participation by automotive businesses and closer collaboration between the automotive and semiconductor sectors could act as a catalyst for future policy development. As policymakers gain greater visibility into industry requirements, future incentives may become increasingly targeted towards specific technologies, applications and commercial outcomes.
In this context, understanding and engaging with existing incentive frameworks is likely to become increasingly important. The policy evolution discussed above provides useful insights into how incentives are being designed and refined, which may in turn help industry participants engage more effectively in future policy discussions and incentive negotiations (at both central and state level).
What Businesses and Investors Should Do Now
For businesses interested in semiconductors, the opportunity lies not merely in accessing incentives, but in positioning themselves within a semiconductor ecosystem.
Businesses exploring opportunities under Semicon 2.0 should assess not only the availability of incentives, but also eligibility requirements, ownership conditions and commercial obligations applicable to the relevant category of support. This is particularly important because Semicon 2.0 extends beyond manufacturing incentives to cover areas such as design, R&D, materials, packaging, testing and talent development, with each pillar subject to its own eligibility criteria, incentive structure and compliance requirements.
From a transactional perspective, Semicon 2.0 is likely to drive greater collaboration between automotive and semiconductor businesses through joint ventures, technology partnerships and long-term supply arrangements. As these relationships evolve, issues relating to intellectual property ownership, technology licensing, governance, supply commitments and regulatory compliance will become increasingly important. Careful structuring of these arrangements will be essential to align commercial interests and manage execution risks.
Conclusion
The evolution of India’s semiconductor policy reflects an increasing focus on downstream industrial applications and end-use demand. Semicon 2.0 is a continuation of this approach. Industry developments such as the Tata Electronics-Nexperia partnership, which combines domestic manufacturing ambitions with Nexperia’s expertise in automotive and power semiconductors, illustrate how semiconductor policy is beginning to translate into sector-specific outcomes. Investors and businesses from critical jurisdictions such as Japan have also shown significant interest in India’s semiconductor sector. Although an official country-wise break-up of the MoUs and strategic initiatives announced under Semicon 2.0 has not been disclosed, Japanese companies are understood to have featured prominently among the participants, including JSR, Fujifilm, Sumitomo Chemical, Sojitz, Enomoto Co. Ltd. and Ajinomoto.
Greater collaboration between semiconductor and automotive companies could influence the direction of future policy. Greater engagement by end-use industries can help align incentives with commercial requirements and emerging technologies. In an industry characterised by rapid technological change, the Government may also see merit in providing more targeted and flexible incentives for strategic applications, including for automotive and electric mobility.
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