Overview: Following the notification of the ₹1.27 Lakh Crore Semicon 2.0 Scheme on August 31, 2026, the Ministry of Electronics and Information Technology (MeitY) has paved a clear runway for domestic tech founders, MSMEs, and OCI-led enterprises to scale indigenous semiconductor innovation. The policy prioritizes domestic IP development, fabless architecture, and System-on-Chip (SoC) integration.

The expansion of India’s semiconductor roadmap under Semicon 2.0 shifts significant operational focus toward building high-value, domestic silicon IP. While early policy iterations concentrated heavily on attracting multi-billion dollar manufacturing plants, this refreshed framework lowers financial hurdles for local fabless design units and specialized system houses.

By providing structured non-dilutive grants, infrastructure support, and equity matching, the central government is actively nurturing a self-reliant domestic chip ecosystem.

For Indian entrepreneurs and Overseas Citizen of India (OCI) technology leaders, the high entry barrier to semiconductor design has historically centered around expensive Electronic Design Automation (EDA) licenses and initial tape-out runs. Semicon 2.0 directly targets these capital bottlenecks.

Through combined seed support, risk-capital funding, and volume sales incentives, domestic enterprises can engineer strategic integrated circuits across power, AI, computing, and communications domains without bearing complete capital expenditure risk.

Homegrown startups can now leverage up to ₹15 Crore in seed capital, state-of-the-art EDA tool access, tape-out subsidies, and multi-year Deployment-Linked Incentives (DLI) to take homegrown microchips from concept stage to commercial deployment.

Key Points:

Chip Design Seed Grants: Eligible MSMEs and DPIIT-recognized tech startups can claim seed financial backing up to ₹15 Crore (or up to 50% of total project costs) to build native semiconductor IPs, SoCs, and custom ASICs.
Deployment-Linked Incentive (DLI): Commercial chip designers earn a DLI benefit equal to 9% of net sales turnover over a 5-year period (capped at ₹30 Crore per applicant company) upon successfully commercializing their microchips.
EDA Tools & Prototyping Offsets: Government support grants subsidized access to cloud-hosted EDA software design suits, common IP blocks, and financial offsets for MPW (Multi-Project Wafer) tape-out expenses.
Strategic Technology Focus: Comprehensive funding structures cover design projects across Artificial Intelligence compute, power management ICs (PMIC), Radio Frequency (RF) components, and sensor interfaces.
Flexible Capital Structures: Financial assistance is structured as direct grants and equity co-investment models for early-stage startups, alongside royalty-linked cash flow assistance for established domestic firms.

Frequently Asked Questions:

Who is eligible to apply for chip design grants and DLI incentives under Semicon 2.0?

Indian-incorporated startups, MSMEs, and domestic companies where majority ownership and management control remain with Indian citizens or Overseas Citizens of India (OCI) can apply.

How does Semicon 2.0 assist startups with prohibitive tape-out and validation expenses?

The policy provides capital support mechanisms through direct grants, chip prototype subsidies, and deployment incentives specifically designed to absorb high physical tape-out and silicon testing costs.

Are foreign-owned Indian subsidiaries eligible to claim domestic Design-Linked Incentives (DLI)?

No. The DLI and startup design funding windows are exclusively reserved for Indian-owned, Indian-controlled, or OCI-owned entities. Wholly owned foreign subsidiaries can instead take advantage of capex subsidies (25% to 40%) available under the fab and OSAT/packaging legs of the scheme.

SetIndiaBiz Support

SetIndiaBiz provides complete techno-legal advisory, corporate incorporation, and regulatory compliance support for Indian tech founders and MSMEs navigating the Semicon 2.0 framework. Our multidisciplinary team assists with:

Company Formation (Pvt Ltd, LLP), MSME Registration, and DPIIT Startup India Recognition
MeitY, ISM, and C-DAC Incentive Application Drafting & Regulatory Filings
Intellectual Property (IPR) Protection, Patent Filings, and Technology Licensing Agreements
Post-Incorporation Compliance, Secretarial Audits, and Grant Disbursement Reporting

Position your enterprise at the centre of India’s microchip transformation. Contact SetIndiaBiz today to access expert corporate and regulatory guidance and secure your Semicon 2.0 incentives.

Author Bio

Editorial Team

Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.

Semicon 2.0: Tech Startups & MSMEs Can Get Up to ₹15 Cr in Chip Design Funding