Companies related to semiconductors have sought financial incentives, such as capital subsidies and rebates on power and taxes, to help achieve the stated goals of the second phase of the India Semiconductor Mission (ISM), underscoring the criticality of building a broader ecosystem beyond fabs. Inox Air Products , for instance, sought a dedicated semiconductor materials localisation policy within the next six months.“We don’t see in the ISM 1.0 or SPECS scheme a very strong support for the semicon ecosystem players. The fab itself or the OSAT itself gets lots of incentives,” said Diganta Kumar Sarma, head of strategy and business development at Inox Air Products.“We got zero as of today. Neither on the capital subsidy side, electricity, or tax rebate side. The need of the hour would be to have this very focused approach within the next six months or so to have a semiconductor materials localisation policy for India in place," Sarma said.The company is building a Rs 500 crore Electronic Specialty Gas Hub in Dholera, Gujarat, to supply high-purity gases such as nitrogen, oxygen, argon, and hydrogen to semiconductor fabs, including Tata Electronics’ proposed $11 billion facility.Industry experts say the next phase of policy evolution, ISM 2.0 , is expected to address precisely this gap by focusing on upstream supply chains.Neil Shah, vice president, research, Counterpoint Technology Market Research, said ISM 2.0 is likely to pivot toward strengthening the materials, equipment, and R&D backbone around fabs.“I believe ISM 2.0 aims to focus on the upstream supply chain of materials, equipment, and R&D to be built around the fabs,” he said.Shah said that early signs of this shift are already visible, with global industrial gas players exploring investments.“We are already seeing players such as Linde, Inox, Air Liquide, and others looking to commission infrastructure for critical gas supplies required for a fab to run. More players will follow. The Dholera supplier park and policies are the step in the right direction,” he said.Ashwath Rao, senior analyst, semiconductor research at Counterpoint Research , said fast-track customs clearance and dedicated warehousing for chemicals and gases are “mission-critical” for uninterrupted fab operations.He added that these high-frequency consumables must be prioritised in customs processes.India has approved 10 semiconductor units under ISM 1.0, and demand for high-purity gases and chemicals is beginning to take shape. However, Sarma pointed out that globally, supplier resilience depends on co-location: building gas and chemical facilities within or near fab campuses.“This is done everywhere in the world: in Taiwan, in the US, in Korea,” he said, citing South Korea’s tightly integrated ecosystem under the K-CHIPS Act and similar models in Taiwan and Singapore that offer subsidies and viability gap funding.A typical fab requires 40–50 gases and chemicals, including nitrogen, helium, hydrogen, NF3, and silane. Currently, over 90% of such inputs are imported.Industry bodies said this transition is already underway but requires coordinated policy.Ashok Chandak, president of Semiconductor Equipment and Materials International (SEMI) India, said, "Momentum is now naturally extending to the materials, gases, and supply chain ecosystem. As demand gets anchored, opportunities for localisation and co-location are becoming both viable and attractive."Similarly, Rajoo Goel, secretary general of the Electronic Industries Association of India, said, "A reliable and adequate value chain of specialised chemicals and gases is critical for the success of the ISM. Capital equipment, tooling, and servicingequally critical.”He added that such investments depend on sufficient demand visibility.He noted that the government’s initial focus on fabs, OSATs, and design under ISM 1.0 was necessary to create that demand base. “We do expect that the ISM 2.0 will offer attractive incentives to the companies setting up such units,” he said.Goel added that states are also likely to play a key role by topping up central incentives, as seen in earlier semiconductor approvals.