India Plans Precision Manufacturing Institute as Semicon 2.0 Pivots to System Design

Key facts

According to reporting by Business Standard, Cabinet Minister Ashwini Vaishnaw outlined a two-pronged strategy aimed at expanding India's advanced technology manufacturing capabilities. The first component centers on establishing a specialized Precision Manufacturing Institute. This planned center is designed to address workforce shortages in high-precision fabrication, cleanroom operations, advanced tooling, and sub-micron machining required for semiconductor fabrication plants, display units, and complex electronic hardware.

The training framework within the institute will operate across a multi-level skilling model. Under this structured architecture, educational programs will provide training paths ranging from shop-floor vocational certifications for specialized machine operators to advanced post-graduate engineering modules covering process control, thermal dynamics, and materials science.

Concurrently, Vaishnaw introduced the strategic direction of Semicon 2.0, the forthcoming phase of India's national semiconductor strategy. While previous government initiatives concentrated heavily on building baseline semiconductor fabrication infrastructure, packaging facilities, and encouraging fabless chip design startups, Semicon 2.0 will shift primary emphasis toward system design. This approach encourages engineers to design integrated hardware architectures—combining microprocessors, power management units, sensors, and customized printed circuit boards into fully functional commercial devices rather than treating microchip design as an isolated software-like discipline.

Why it matters

The shift toward system-level engineering and precision manufacturing represents a critical evolution in how developing economies position themselves within global technology value chains. Historically, microchip design and final product assembly have occupied distinct segments of the electronics market. High-income economies frequently dominate system design, intellectual property creation, and precision machine tooling, while mid-tier economies perform contract assembly or basic component manufacturing.

By establishing a specialized Precision Manufacturing Institute, India aims to build the domestic capability required to maintain equipment tolerances measured in nanometers and micrometers. Precision tooling is essential not only for silicon wafer fabrication and chip packaging, but also for medical technology, aerospace systems, electric vehicle power electronics, and defense hardware. Without a domestically trained workforce capable of operating and maintaining advanced precision tooling and metrology equipment, high-tech manufacturing facilities remain reliant on foreign technical expertise and imported capital goods.

Furthermore, moving from standalone chip design to system design allows domestic firms to capture higher profit margins. System design involves defining how chips, software, firmware, thermal enclosures, and board-level components interact within a completed product. Aligning domestic semiconductor design with domestic system design ensures that microchips designed within India are directly tailored for locally produced consumer electronics, automotive computers, industrial automation tools, and telecommunications infrastructure, reducing import dependence and fostering domestic intellectual property ownership.

India launched its formal push into the semiconductor ecosystem in December 2021 with the announcement of the India Semiconductor Mission (ISM), backed by an initial financial outlay of ₹76,000 crore (approximately $10 billion). The original policy targeted four main pillars: setting up silicon CMOS semiconductor fabs, display fabs, compound semiconductor and packaging facilities (ATMP/OSAT), and supporting chip design startups through Design Linked Incentive (DLI) schemes.

Over the subsequent years, the policy attracted major commercial investments. Key projects approved under the initiative include Micron Technology's semiconductor assembly and test facility in Sanand, Gujarat, as well as joint ventures between Tata Electronics and Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC) to construct India's first commercial semiconductor fab in Dholera, Gujarat. Additional packaging facilities proposed by CG Power and Renesas Electronics, alongside Tata's packaging plant in Assam, further expanded the physical footprint of the sector.

Despite these capital-intensive projects, structural gaps remained. India has long possessed a major share of global semiconductor design talent, with over 20 percent of the world’s VLSI (Very Large Scale Integration) design engineers residing in tech hubs such as Bengaluru, Hyderabad, and Noida. However, the vast majority of these engineers work for multinational design houses, creating intellectual property that is transferred offshore to be integrated into foreign systems.

Moreover, the physical operational workforce needed to maintain ultra-clean environments, calibrate lithography tools, and manage complex chemical vapour deposition equipment was virtually non-existent at scale in India. The newly announced Precision Manufacturing Institute and the Semicon 2.0 framework are structured directly to address these structural mismatches by cultivating high-precision technicians on the shop floor while guiding senior engineering talent toward home-grown system-level architecture.

Reaction

Following the announcement, initial responses from industrial associations, academic leaders, and manufacturing bodies reflect ongoing discussions surrounding India's industrial transformation. While detailed corporate statements on the specific policy draft remain forthcoming, industry stakeholders in the electronics manufacturing services (EMS) sector have long advocated for dedicated precision training programs to reduce equipment downtime and improve yield rates in advanced manufacturing plants.

Academic institutions and technical universities are expected to review the multi-level skilling framework to evaluate how vocational modules can be integrated into existing engineering curricula or technical institutes. Meanwhile, foreign original equipment manufacturers (OEMs) and semiconductor toolmakers will closely evaluate the Precision Manufacturing Institute's standards to determine whether local workforce capabilities will meet global equipment operation and maintenance standards.

What we don't know yet

Several crucial details regarding both the Precision Manufacturing Institute and the Semicon 2.0 policy framework remain unconfirmed in the initial announcement. The government has not yet disclosed the prospective geographic location for the institute, whether it will operate as a single centralized campus or a distributed network of regional centers, or the total financial budget earmarked for its construction and initial operations.

Additionally, the exact governance structure of the institute—specifically whether it will function as an autonomous public entity, a public-private partnership (PPP), or an institution operated in collaboration with international technological universities—has not been detailed. Regarding Semicon 2.0, the specific financial outlay, incentive caps, and qualifying criteria for system design projects have not yet been published by the Ministry of Electronics and Information Technology. How the new system design incentives will interface with existing mobile manufacturing incentives under the Production Linked Incentive (PLI) scheme also remains to be clarified.

What to watch

In the coming months, several milestones will indicate the trajectory of these twin policy initiatives. Key developments to monitor include the formal publication of the Semicon 2.0 policy document by the Union Cabinet, which will specify the financial allocations and eligibility guidelines for hardware system design companies.

Observers should also watch for official announcements detailing the land allocation, founding charter, and industry partnerships for the Precision Manufacturing Institute. Corporate announcements from global semiconductor tooling firms regarding training partnerships or equipment donations to the new institute will serve as a key benchmark of international industry backing. Furthermore, progress on ongoing semiconductor fabrication plant construction sites in Gujarat and Assam will provide a practical timeline for when the first cohorts of precision manufacturing graduates will need to be deployed on operational factory floors.

This report is based on original reporting published by Business Standard.