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Report tracks ISM 2.0 shift, startup funding reality, and what execution actually looks like over next 18 months
Bengaluru/Hyderabad, February 26, 2026 – Endiya Partners released “India Semiconductor Ecosystem: From Policy to Execution” today at the IESA Vision Summit 2026, outlining how India’s semiconductor ambitions are entering a critical new phase, moving from building fabs under ISM 1.0 to developing the capabilities needed to actually run them under ISM 2.0.
The report examines the evolving ecosystem dynamics, investment realities, and execution milestones that will shape India’s semiconductor trajectory over the next 18 months.
What’s Changed
ISM 2.0 Fills Critical Gaps
The Union Budget 2026–27 allocated ₹1,000 crore for ISM 2.0, with a sharper focus on equipment, materials, indigenous IP, and specialized talent development. This shift addresses a key gap left unresolved by ISM 1.0: while infrastructure investments accelerated, foundational ecosystem capabilities remain limited.
India continues to import over 90% of semiconductor equipment and materials, and domestic capabilities in analog, RF, and compute design IP are still evolving. The report notes that building fabs marked the first phase of India’s semiconductor journey. Operating them competitively now requires a far broader and deeper ecosystem.
Next 18 Months: Execution Over Announcements
According to the report, the next 18 months will serve as the most important test of India’s semiconductor ambitions. Tata’s Dholera fab, targeting December 2026 production, represents the most visible milestone. However, success will depend not merely on first chip output, but on achieving target yields on 28nm/40nm nodes within 6-12 months of operations. Three OSAT facilities need to scale to volume. Twenty-three DLI startups need to move from tape-outs to actual revenue. These milestones will show whether India’s semiconductor moment is real or aspirational.
Why VC Funding Remains Limited
Semiconductor startup funding grew tenfold, from $5 million in 2023 to $50 million in 2025, but remains modest. The report attributes this to structural challenges, including high capital requirements ($5–15 million to reach first silicon), long commercialization timelines of three to
five years, and limited exit visibility, with Steradian’s acquisition by Renesas remaining a rare example. As a result, venture capital is increasingly shifting toward horizontal infrastructure opportunities such as design automation, manufacturing intelligence, and specialized IP platforms that offer faster time-to-revenue and broader market applicability.
What Endiya Sees
“The question has shifted from ‘will we build fabs?’ to ‘can we operate them competitively?'” said Sateesh Andra, Managing Partner at Endiya Partners. “That changes the investment landscape. The ecosystem needs design tools and manufacturing AI more urgently than another chip startup competing for foundry capacity.”
Endiya’s Bets
Endiya has invested in chip design (Steradian, acquired by Renesas) and ecosystem infrastructure (Maieutic’s design automation, ThirdAI’s fab intelligence). The firm’s current thesis is that horizontal productivity tools have better risk-adjusted returns than application-specific chips.
Download
Full report available at https://www.endiya.com/demo from February 25, 2026.
Report Contents
Ecosystem mapping: 10 approved projects, Rs 1.6 lakh crore mobilized
Startup funding: $50M deployed across 8+ companies in 2025
Global players: Qualcomm’s 2nm tape-out (Feb 2026), AMD, Intel, ARM expanding
Critical gaps: Analog IP, manufacturing intelligence, equipment, business talent
18-month outlook: Milestones, success scenarios, risks
