/ Foreign Clients · Semiconductor ISM · Updated 2026-10-15

India Semiconductor Mission, what foreign chip companies get.

India Semiconductor Mission (ISM) launched December 2021 with INR 76,000 crore (~USD 9.2B) outlay. Updated with Modified SPECS 2022, Design Linked Incentive (DLI), ATMP / OSAT scheme. Combined with Section 115BAB (15% corporate tax), state-level incentives, and Gujarat / Tamil Nadu / Karnataka semiconductor cluster development, India now offers one of the most generous chip-manufacturing incentive packages globally. Here's the complete 2026 framework.

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Written by CA Durgesh Chavda

Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · US incorporation, India-US DTAA, FEMA ODI, NRI taxation, cross-border structuring · LinkedIn

/ The ISM framework

Four schemes.

Modified SPECS (Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors): up to 50% capex subsidy for semiconductor fabs. INR 76,000 crore outlay (shared across schemes).
Design Linked Incentive (DLI): up to 50% reimbursement of eligible expenses for semiconductor chip design — silicon IP, chip tape-out, prototyping. Targets Indian chip design startups + foreign fabless entering India.
Compound Semiconductor Fab / SiC / GaN / Display Fab: up to 50% capex subsidy for compound semiconductor fabs + display fabs (OLED / LCD / MicroLED).
ATMP (Assembly, Test, Marking, Packaging) / OSAT (Outsourced Semiconductor Assembly and Test): up to 50% capex subsidy. Lower threshold than fab; faster path to Indian presence.

Combined with PLI Mobile Phones + Specified Electronic Components (adjacent scheme), India has comprehensive electronics-manufacturing incentive coverage.

/ Who's benefiting + current state

Projects announced + under construction.

Tata Group + Powerchip (PSMC Taiwan): Dholera (Gujarat) 28nm chip fab. INR 91,000 crore investment; up to INR 45,000 crore subsidy. Operational 2026-2027.
Micron Technology (US): Sanand (Gujarat) ATMP facility. USD 2.75B investment; up to USD 1.3B subsidy.
Tata Group + ASIP (Advanced Semiconductor Imaging Partners): Assam compound semiconductor plant. Approved 2024.
CG Power (Murugappa Group) + Renesas + Stars Microelectronics: Sanand (Gujarat) OSAT. INR 7,500 crore investment.
Kaynes Semicon: Gujarat ATMP.
Several design-stage startups: DLI beneficiaries — Mindgrove, Netrasemi, Signalchip (foundational IP).

As of 2026-10, India has approvals for 5+ semiconductor + display facilities totaling USD 20B+ in investment commitments.

/ Entry structures for foreign chip company

Four routes.

Full fab via JV with Indian partner: Tata-PSMC model. Foreign semiconductor company brings technology + know-how; Indian partner brings local relationships, land, state partnerships, project execution. Equity split varies 26-74% depending on partner leverage.
Full ATMP / OSAT via WOS or JV: Micron model (WOS). Lower capex than fab; faster execution. 100% FDI automatic route.
Design centre via WOS: fabless semiconductor company sets up Indian chip-design centre. No ISM subsidy for pure design (DLI available for specific IP / tape-out). Section 115BAB applies if designated as manufacturing.
Joint-venture with Indian fabless + co-investment: for foreign chip company wanting partnership route; Indian partner handles ISM / state co-ordination.

/ Combined incentive stack for foreign fab

The total value.

ISM Modified SPECS: up to 50% capex subsidy. For INR 50,000 crore investment, up to INR 25,000 crore subsidy.
Section 115BAB: 15% corporate tax (effective 17.16%). For large fab with substantial profit, material tax saving vs 25% / 22% standard.
State incentives: Gujarat Semiconductor Policy 2022 (land at 50% subsidised rate + 25% capex subsidy + electricity rebate + SGST reimbursement + stamp duty + registration exemption). Tamil Nadu Semicon Policy 2024 similar. Karnataka Policy 2022.
Customs duty exemption: specified semiconductor manufacturing equipment / tools / consumables import duty exempt.
Interest subsidy: specific state schemes offering 5-7% interest subsidy on term loans.
Skilled workforce support: PMKVY (Pradhan Mantri Kaushal Vikas Yojana) + semiconductor-specific skill development partnerships (IIT / IISc / IIIT).
R&D grants: SERB / DST + semiconductor-specific research grants.

For a USD 10B fab investment, total realised incentive stack can reach USD 4-5B over 5-7 years — among the most aggressive globally.

/ State-level ecosystem

Where to locate.

Gujarat (Dholera + Sanand): dedicated Semiconductor City; land + infrastructure + state policy aggressive. Current leader with Tata-PSMC + Micron + CG Power all here.
Tamil Nadu (Hosur / Krishnagiri / Sriperumbudur): Semiconductor Policy 2024; adjacent to existing electronics manufacturing cluster. Strong ecosystem.
Karnataka (Bengaluru / Mysuru): strongest design talent pool; Semicon Policy 2022; adjacent to IISc + IITs.
Assam: compound semiconductor fab approved (Tata-ASIP); state offers unique advantages for compound semiconductor supply chain.
Odisha / Telangana / Maharashtra: emerging semiconductor policy; state governments actively courting investments.

Choice of state affects: subsidy quantum, land cost, electricity cost, workforce availability, logistics access, infrastructure quality.

Last updated: 2026-10-15.

/ Ready when you are

Foreign semiconductor / chip / display company evaluating India?

Up to 50% capex subsidy + 15% corporate tax + state incentives. BQP end-to-end: entity + ISM application + state negotiation + ongoing compliance. Standard engagement for strategic foreign investment.

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FAQ

Common questions, answered.

What is India Semiconductor Mission (ISM)?

Launched December 2021 with INR 76,000 crore (~USD 9.2B) outlay to develop India's semiconductor ecosystem. Four schemes: Modified SPECS (up to 50% capex subsidy for silicon fabs), DLI (up to 50% reimbursement for chip design expenses), Compound Semiconductor + Display fab subsidies, ATMP/OSAT subsidy (up to 50% capex). Combined with Section 115BAB 15% corporate tax + state-level incentives, among the most generous chip-manufacturing incentive packages globally.

Can a foreign semiconductor company get full ISM capex subsidy?

Yes - via Indian subsidiary (WOS or JV). Up to 50% of eligible capex subsidised by Government of India under Modified SPECS (for silicon fab) or compound semiconductor scheme or ATMP/OSAT scheme. Micron (US) ATMP in Sanand received USD 1.3B subsidy on USD 2.75B investment. Tata-PSMC fab in Dholera approved for INR 45,000 crore subsidy on INR 91,000 crore investment.

What's the fastest entry route for foreign chip company?

ATMP / OSAT via WOS - lower capex (INR 1,000-10,000 crore range vs INR 50,000+ crore for silicon fab), faster project execution (18-24 months vs 36-48 for fab), 100% FDI automatic route, up to 50% capex subsidy, Section 115BAB 15% corporate tax. Micron Sanand ATMP is the model. Suitable for foreign chip companies wanting India presence without full fab commitment.

Which Indian states have the strongest semiconductor policies?

Gujarat (Dholera + Sanand Semiconductor City, dedicated land + infrastructure + 25% state capex subsidy on top of central ISM): current leader. Tamil Nadu (Hosur / Krishnagiri cluster, Semiconductor Policy 2024). Karnataka (Bengaluru design talent + Semicon Policy 2022). Assam (compound semiconductor focus, Tata-ASIP partnership). Odisha + Telangana + Maharashtra emerging. Choice affects land cost + electricity + workforce + logistics.

What total incentive stack is available for a USD 10B foreign fab in India?

Approximate stack: ISM Modified SPECS up to USD 5B (50% capex subsidy); State capex subsidy 20-25% up to USD 2.5B; Section 115BAB 15% corporate tax saving vs 25%+ over 5-7 years (depending on profit); customs duty exemption on manufacturing equipment; interest subsidy; skilled workforce support; R&D grants. Total realised incentive can reach USD 4-5B over 5-7 years - among the most aggressive globally.

Does BQP handle India entry for foreign semiconductor / chip companies?

Yes - specialised semiconductor advisory. Entity structure (WOS vs JV), state selection + state incentive negotiation, Modified SPECS / DLI / ATMP application to IT Ministry, Section 115BAB opt-in, land acquisition + infrastructure co-ordination, workforce development partnerships, ongoing capex certification + claim submission. Co-ordinated with Indian regulatory counsel + state industrial development authority. Scope-based engagement for strategic foreign investment. WhatsApp +91 78018 87130.