Semicon 2.0 Opens New Funding Route for Chip Startups, Who Can Apply and How It Works

India’s Semicon 2.0 programme is opening a bigger funding route for chip startups, and this could be a meaningful step for founders working in semiconductor design, systems, IP cores and related deep-tech products.

The Union Cabinet approved Semicon 2.0 in July 2026 with a total outlay of Rs. 1,27,500 crore. The programme builds on Semicon 1.0, which had a Rs. 76,000 crore outlay and focused on bringing semiconductor manufacturing, packaging and chip design activity into India.

What Semicon 2.0 wants to achieve

Semicon 2.0 is not only about building large chip factories. The programme has six focus areas which are- chip design, machines and materials, fabs, ATMP and OSAT packaging, research and development, and talent development.

In simple words, the government wants India to build the full semiconductor chain. That means designing chips, making equipment and materials, manufacturing chips, packaging them, training engineers and supporting research.

This matters because chips are used in almost everything today such as in smartphones, cars, laptops, defence systems, EVs, medical devices, telecom networks, drones, smart meters and AI hardware.

Why this is important for startups

Chip startups often face a tough early journey. They need expensive design software, skilled engineers, prototype testing, access to fabrication facilities and patient investors.

Unlike a normal app startup, a chip company cannot launch quickly with a small team and basic tools. Even making a prototype can cost a lot. Semicon 2.0 is trying to reduce this burden by giving startups a more structured support path.

Under the design-linked support route, startups and MSMEs can get access to electronic design automation tools, multi-project wafer fabrication services and seed funding. Reports say commercial chip-design startups may receive milestone-linked seed funding of up to Rs. 15 crore, or 50% of project cost, whichever is lower.

Who can apply

The funding route is mainly meant for domestic semiconductor design companies, startups and MSMEs.

Eligible applicants should generally be incorporated and headquartered in India, with meaningful operations and manpower in the country. For design-linked incentives, companies are also expected to meet domestic ownership conditions, meaning more than 50% beneficial ownership should be with resident Indian citizens or Indian-owned companies.

Startups working on integrated circuits, chipsets, system-on-chips, systems, IP cores and semiconductor-linked designs can explore this route.

For example, a startup designing chips for drones, smart meters, telecom equipment, AI devices, LED drivers, IoT products or automotive electronics may fit the broad design support framework.

How startups can apply

Startups can apply through the Design Linked Incentive portal and relevant India Semiconductor Mission channels.

The basic process includes registration, submission of company and project details, a detailed project report, payment of the application fee and evaluation by the authorities. For some research and academic-linked proposals, founders may also look at the Chips to Startup programme, which supports academia, R&D organizations, startups and MSMEs.

Founders should prepare a clear project plan before applying. This should explain the chip idea, market use, technical stage, team strength, cost plan, timeline, expected IP ownership and how the product can be commercialized.

Government equity route

A key new idea under Semicon 2.0 is that the government may co-invest in chip startups along with venture capital investors. India Semiconductor Mission CEO Amitesh Kumar Sinha has said the government may take equity stakes but does not plan to control operations. The aim is to exit as companies mature.

This can help startups attract private investors, because government matching support reduces some early risk.

Conclusion – Key takeaways

Semicon 2.0 is a major policy push for India’s chip ecosystem. Its aim is to help India move from being mainly an electronics market to becoming a stronger semiconductor design and manufacturing hub.

For chip startups, the real benefit is access to funding, design tools, prototype support, fabrication access and possible VC-linked co-investment. Startups with serious semiconductor products, Indian ownership and a clear commercial plan should closely track the application windows.

Facts Input- PIB, India Semiconductor Mission, Design Linked Incentive portal, C2S programme guidelines, Moneycontrol