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Cabinet approves India semiconductor mission (ISM 2.0) & Mobile Phone Manufacturing Scheme (MPMS)

ICICIdirect Research 18 Jul 2026 DISCLAIMER

Both these schemes aim to accelerate backward integration and domestic value addition in electronics, thereby deepening value chain and electronics ecosystem.
ISM 2.0, with an outlay of ₹1.27 lakh crore, shifts the focus from creating semiconductor capacity to building the entire ecosystem spanning chip design, manufacturing equipment, materials, specialty chemicals, precision engineering, R&D and talent development. Unlike ISM 1.0’s flat 50% fiscal support, the revised scheme offers differentiated incentives ranging from 25–40% across manufacturing segments, 30% support for semiconductor equipment and materials, and up to 75% for R&D and talent development.
While India’s semiconductor journey under ISM 1.0 began with 28nm–110nm process nodes, ISM 2.0 expands the focus towards more advanced nodes and technologies, alongside strengthening the broader semiconductor ecosystem. ISM 1.0 generated about ₹1.64 lakh crore of investments while for ISM 2.0, government expects investment of ~₹4 lakh crore and production of ~₹2 lakh crore including ~₹1 lakh crore of exports.
Further, the Cabinet also approved MPMS with a ₹62,500 crore outlay for FY27–FY31, replacing the smartphone PLI scheme. The scheme targets ₹39 lakh crore of cumulative production, ₹15 lakh crore of exports and an increase in domestic value addition from 23–24% to 44–45% by FY31, supporting deeper localization, backward integration, and higher domestic sourcing across the smartphone supply chain.
Among companies, Dixon Technologies is a key beneficiary from MPMS as it alleviates the potential margin pressure that could have emerged following the expiry of the smartphone PLI scheme by providing continuity of incentives for mobile manufacturers. In addition, it is making investments on components side – i.e. in display modules, camera modules and enclosures, thus well set to increase value addition which strengthens its business model alongwith margin enhancement. We maintain our BUY rating on Dixon Technologies (TP: ₹16,300).
From ISM 2.0 scheme, CG Power is one of the key beneficiaries: CG Power's subsidiary CG Semi has commenced commercial production at its G1 OSAT facility in Sanand, Gujarat, which was approved under ISM 1.0 with a ₹3,501 crore (50% of eligible capex) government subsidy for the ₹7,600 crore project with an initial capacity of 300 million packaged semiconductor units annually. Under the expanded ₹1.27 lakh crore ISM 2.0, the company plans to commission its G2 advanced packaging facility by late CY26, scaling overall production to 14.5–16 million chips per day, with exports targeted to Japan, the US and Europe. Beyond manufacturing, CG Power is strengthening its upstream capabilities through Axiro Semiconductor, its fabless chip design subsidiary, which generated ~₹500 crore revenue in FY26, has developed 150+ semiconductor IPs and completed 200+ chip designs. We have BUY rating on the stock with target price of ₹1120.
Besides, we have Buy rating on Syrma (TP: ₹1550), Amber enterprises(TP: ₹8250), Cyient DLM (TP: ₹650).

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