India's Union Cabinet on Wednesday approved 1.9 trillion rupees ($19.7 billion) in funding for domestic semiconductor and smartphone manufacturing amid increasing competition from players like China.

Of the total, 1.28 trillion rupees will fund Semicon 2.0, a second-phase expansion of India's semiconductor push, while 625 billion rupees will go toward the Mobile Phone Manufacturing Scheme, according to two separate government releases.

India launched its Semicon 1.0 program in December 2021 with an outlay of 760 billion rupees. To date, the program has helped fund 12 manufacturing units with a total investment of 1.64 trillion rupees. A total of 24 semiconductor design projects from startups and MSMEs have also been approved for funding.

Meanwhile, Semicon 2.0 is built on what the government calls six pillars, including chip design, manufacturing equipment and materials, new fabrication plants, assembly and testing facilities, research and development, and talent development.

On design, the government said 105 startups are already developing chips.

"Under Semicon 2.0, the aim is to develop IPs, designs of chips and systems with this approach. The work under Semicon 2.0 will place India as a key semiconductor chip design IP count," the Union Cabinet said in the press release.

On equipment and materials, the scheme will offer incentives to companies making the machines, chemicals and gases used in chip manufacturing, which the government said will also help build out India's broader precision manufacturing industry.

The separate mobile phone scheme will run for five years from fiscal year 2026-2027 through 2030-2031.

It will pay manufacturers incentives on eligible sales ranging from 2.25% to 5%, with an additional incentive of up to 1.5% tied to sourcing key components and sub-assemblies domestically.

Over the scheme's tenure, the government expects cumulative mobile phone production of roughly 39 trillion rupees, along with a significant rise in exports and about 60,000 direct jobs.

Last week, India approved a smartphone manufacturing joint venture between China's Vivo and Indian electronics manufacturer Dixon Technologies (India) (NSE:DIXON, BOM:540699). To attract more manufacturers, India also removed import duties on some electronics and smartphone parts last week.

However, the company still lags behind China in terms of global smartphone production. China produced 63% of the world's smartphones in 2025, while India only accounted for 18%, TechCrunch reported, citing data from Counterpoint Research.

"The Prime Minister has given us clear guidance that we must create an Indian mobile brand," Indian Technology Minister Ashwini Vaishnaw was quoted by Bloomberg as saying on Wednesday.