The ministry of electronics and IT (Meity) is working on a proposal to double the subsidy under the design-linked incentive (DLI) scheme, a key component of India’s Rs 76,000-crore semiconductor incentive programme.
Officials said that the proposal, which is under examination, plans to increase the startup subsidy from the current Rs 15 crore to Rs 30 crore as part of the upcoming semiconductor incentive scheme 2.0.
Meity is also considering a capex-linked subsidies to attract larger fabless companies interested in designing chips with intellectual property (IP) developed within the country. This new structure could be similar to the fiscal support provided for setting up fabrication units.
The proposed enhancements follow a lacklustre response to the existing DLI scheme, which has benefited 14 startups out of approximately 60 applications.
The scheme initially aimed to fund 100 startups, but many applicants lacked a stable client base or failed to secure approvals from companies manufacturing end products.
In an effort to improve the programme’s reach and effectiveness, the ministry is conducting roadshows to raise awareness among startups and encourage high-quality proposals. The government is also engaging with industry stakeholders to refine the scheme, including proposals to involve venture capitalists (VCs) who could supplement initial funding rounds.
A key challenge faced by startups is the capital-intensive nature of semiconductor design, particularly at stages like prototype production and tapeout – the final phase manufacturing.
“Tapeout is a huge milestone for any chip design company. The government should consider providing an additional Rs 15 crore to Rs 30 crore for startups that achieve this stage,” said Raja Manickam, founder and CEO of iVP Semi. He also emphasised the need for easier disbursement processes, urging the government to move away from reimbursement-based models.
To expand the semiconductor footprint, MeitY is also planning to extend the DLI scheme to larger firms capable of generating commercial IPs. Companies like L&T Semiconductor Technologies and MiPhi –a joint venture between Micromax and Phison – have expressed interest in participating.
“There should not be any capping on incentives, especially for bigger companies focused on creating commercial IPs in chips for India,” said V Veerappan, chairman of the India Electronics and Semiconductor Association (IESA). He added that fostering Indian product companies is crucial for value addition in the semiconductor ecosystem.
Of the Rs 76,000 crore allocation for the semiconductor incentive programme, Rs 1,000 crore has been earmarked for the DLI scheme for startups. While startups qualifying under the scheme are entitled to a subsidy of Rs 15 crore, none have yet claimed the deployment-linked incentives of 4-6% of net sales (up to Rs 30 crore per application over five years), as no designs have reached the deployment stage.
Experts believe that the limited funding and complex disbursement processes have hindered progress. “The government needs to ease the disbursement process and ensure startups have sufficient support at critical stages,” Manickam said.
By revising the scheme, the government aims to establish a robust chip design ecosystem and position India as a global hub for semiconductor innovation.
