The Centre is redesigning its semiconductor support strategy under the newly approved Semicon 2.0 programme, shifting from one-time grants to a model based on milestone-linked funding and equity investments in semiconductor startups.
Approved with an outlay of ₹1.27 lakh crore, Semicon 2.0 expands India’s semiconductor mission beyond fabrication and assembly, with a stronger focus on building a sustainable domestic chip ecosystem.
India Semiconductor Mission (ISM) CEO Amitesh Kumar Sinha said the new approach recognises the unique capital needs of semiconductor companies, which require significant long-term investment well beyond the chip design stage.
Unlike software startups, semiconductor firms need substantial funding for product qualification, commercialisation and large-scale manufacturing before generating revenue. Sinha said many startups supported under the earlier Design Linked Incentive (DLI) scheme successfully developed chip designs but struggled to secure the large investments required to bring products to market.
To address this gap, the government plans to introduce a phased funding model. Startups will initially receive seed capital, followed by larger investments tied to predefined technical and commercial milestones.
The Centre also plans to take minority equity stakes in selected startups, generally keeping its holding below 50% while avoiding board representation or involvement in day-to-day operations. This structure is intended to ensure founders retain management control while gaining access to patient capital.
As companies grow, founders will have the option to buy back the government’s stake, while businesses can continue raising private investment or pursue acquisitions. The government expects to exit its investment at the prevailing market valuation and recycle the proceeds into future semiconductor ventures.
The proposed model reflects a broader global trend of governments using equity investments alongside grants to support strategically important technology sectors. Similar approaches have been adopted in countries including the United States to strengthen domestic semiconductor capabilities and reduce dependence on global supply chains.
