India has revised its semiconductor and electronics manufacturing incentives, lowering chip fabrication subsidies from 50% to 30% of capital expenditure while expanding coverage to 12 value chain segments — including PCB assembly, power semiconductors, and display drivers. A new smartphone scheme mandates 60% domestic component content and requires 1 million units/year minimum production. Approved on July 15, 2026, the policy targets Chennai–Bengaluru and National Capital Region corridors, aiming to strengthen supply chain resilience amid geopolitical shifts away from China. The expansion reflects a strategic pivot toward integrated electronics ecosystems rather than isolated fab projects.
According to www.digitimes.com, India approved two major incentive packages on July 15, 2026, recalibrating its semiconductor and electronics manufacturing support framework — reducing per-project subsidy rates while extending eligibility across 12 segments of the electronics value chain.
Subsidy restructuring targets breadth over depth
The new policy replaces earlier project-specific grants with a tiered, output-linked incentive (PLI) model that lowers headline subsidy percentages but applies them more widely. Under the revised Semiconductor Mission framework, subsidies for chip fabrication projects were trimmed from up to 50% of capital expenditure to a capped 30%, contingent on achieving defined production milestones and local value-add thresholds.
The broader electronics PLI scheme — now expanded to cover 12 categories including printed circuit board assembly, power semiconductor modules, display drivers, and advanced packaging equipment — aims to attract investment beyond wafer fabs into upstream and downstream activities. This shift reflects New Delhi’s strategic pivot from subsidizing isolated megaprojects toward building integrated clusters. As noted in the report, the government intends to “anchor the entire electronics supply chain — not just silicon — within national borders,” a goal aligned with its Production Linked Incentive program’s second phase.
New smartphone manufacturing push complements chip incentives
Simultaneously, India launched a dedicated smartphone manufacturing incentive under the same July 15 announcement. The scheme offers financial support to companies producing devices with at least 60% domestic component content — a threshold raised from the previous 50%. Eligible firms must achieve minimum annual production volumes of 1 million units to qualify for payouts tied to incremental sales growth year-on-year.
This smartphone initiative directly supports India’s ambition to become the world’s second-largest mobile phone manufacturer by 2027, a target first articulated in the National Policy on Electronics 2019 and reinforced in the 2024 Union Budget. The policy explicitly names China as the primary reference point for supply chain diversification, citing geopolitical risk exposure and rising logistics costs as key drivers behind the accelerated push.
Geographic and sectoral targeting
The updated incentives prioritize investment in designated industrial corridors: the Chennai–Bengaluru Industrial Corridor, the National Capital Region, and newly designated zones in Maharashtra and Tamil Nadu. Each region offers supplementary state-level benefits — including land allotment at subsidized rates and single-window clearance — to accelerate time-to-production.
Under the revised framework, eligible sectors now include not only chip design and wafer fabrication but also semiconductor testing, PCB manufacturing, electronic components like connectors and sensors, and even battery management systems for electric vehicles. The expansion brings total covered categories to 12, up from 7 in the prior iteration. According to the report, this deliberate widening is intended to de-risk India’s electronics ecosystem by avoiding overreliance on any single node — particularly high-capital, long-cycle fab investments.
Supply chain implications for global electronics OEMs
For multinational electronics original equipment manufacturers (OEMs), the recalibrated incentives lower entry barriers to Indian localization. Companies previously deterred by the high capital intensity and regulatory complexity of setting up semiconductor fabs can now access subsidies for less capital-intensive, faster-deployment activities — such as system-level assembly, testing, and component integration.
This approach mirrors recent moves by Vietnam and Malaysia, both of which have expanded their electronics PLI schemes to cover contract manufacturing and EMS services since 2025. Industry practitioners note that India’s move significantly improves its competitiveness in mid-tier electronics manufacturing — particularly for consumer audio, wearables, and industrial IoT devices — where lead times and total landed cost matter more than cutting-edge node capability. As one supply chain executive observed: “It’s no longer about chasing the most advanced process node — it’s about securing reliable, tariff-advantaged access to a diversified regional footprint.”
Source: digitimes.com
Compiled from international media by the SCI.AI editorial team.
