MeitY plans to double subsidy for startups under revamped semiconductor incentive scheme

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,according to Financial Express report.

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 report said.

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, it added.

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.

To expand the semiconductor footprint, MeitY is also planning to extend the DLI scheme to larger firms capable of generating commercial IPs, according to the report.

Companies like L&T Semiconductor Technologies and MiPhi –a joint venture between Micromax and Phison – have expressed interest in participating, the report said.

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, the report said.

Experts believe that the limited funding and complex disbursement processes have hindered progress.

By revising the scheme, the government aims to establish a robust chip design ecosystem and position India as a global hub for semiconductor innovation.