DLI scheme 2.0: Centre mulls picking up equity stake in homegrown chip design firms

The government is reportedly mulling a proposal to support domestic Indian semiconductor chip design companies by picking up equity stake, as part of the second phase of the design-linked incentive (DLI) scheme.

According to a report by Business Standard, while the framework and timeline for the implementation of the second phase is yet to be decided, there is reportedly a broader consensus to offer equity support to domestic semiconductor chip design firms through the equity route to help them achieve maturity and scale up.

The aim, the publication reported, is to ensure that India can build a few 'fabless companies' and chip design ecosystem.

Senior people aware of the development further told BS that an equity infusion from the State would help such domestic companies overcome the pressure of selling their shares or even their company to bigger global players in a bid to scale up.

The first phase of the DLI scheme has already been implemented in India, and has seen a good response.

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Under the scheme, the government provides 50 per cent of the capital required to set up chip design firms, in addition to various other incentives to help such domestic semiconductor chip design companies.

Further, the government is also offering such companies electronic design automation tools needed to design and verify integrated circuits, printed circuit boards, and other electronics. Given the steep expenses involved, the Ministry of Electronics and Information Technology (MeitY) has also tied up with three global suppliers, namely, Cadence, Synopsys, and Mentor, to make such tech available free of cost to eligible domestic chip design firms.

However, domestic chip design companies still need to show proof of concept of their designs, as well as undertake testing of their designs before they can identify buyers and sell in the market.

With the government now mulling additional measures to support such homegrown firms, the expectation is that it will be able to nurture at least 20 domestic companies involved in semiconductor chip design.

As it stands, three companies have been found eligible under the DLI scheme, namely, Vervesemi Microelectronics, DV2JS Innovation, and Fermonic Design.

However, BS reported that two more are expected to be announced at the end of July during the Semicon India event.

The domestic industry:

Domestic companies are defined as those in which a resident Indian citizen beneficially owns at least 50 per cent of the capital, and the homegrown semiconductor design sector, collectively, has a revenue of only $30 to $40 million at the moment.

In contrast, global semiconductor and fabless companies like Intel, Qualcomm, and Mediatek design as many as 2,000 chips annually in India, with 90 per cent of such firms using advanced chip design techniques.

However, most IPs of these global companies are located in their home countries, not in India.