1 November 2026 • 5 min read
If you build chips, chip IP or modules in India, the first pillar of Semicon 2.0 is the part to read. Most of the headline money goes to fabs and packaging plants, but the design pillar is written for companies of your size. This page sets out what the India Semiconductor Mission (ISM) says each design category pays, who can apply, and what you give up in return.
Semicon 2.0 is the second phase of the Semicon India Programme. The ISM site says the Union Cabinet approved it with a fiscal outlay of ₹1,27,500 crore. The Cabinet decision was on 15 July 2026. The first phase had an outlay of ₹76,000 crore and covered fabs, display fabs, compound semiconductor and packaging units, and a Design Linked Incentive scheme.
Semicon 2.0 has six pillars: design of chips, machines and materials, more fabs, ATMP/OSAT (assembly, test and packaging), research and development, and talent. A PIB release of 6 August 2026 reports that under the first phase 12 manufacturing projects were approved with a committed investment of Rs. 1.64 lakh crore, and that 3 of them had started commercial production.
ISM published the notifications for all six pillars on 31 August 2026. The scheme is open for applications for an initial period of three years, through the ISM portal.
The design pillar has three categories. They are not alternatives for the same product; they cover different goals.
| Category | What it covers | Who it is for |
|---|---|---|
| 1. National importance | IPs, chips, SoCs and modules for strategic priorities | Indian-owned companies, alone or with partners |
| 2. Commercial sector | IPs, chips and SoCs for commercial electronics | Startups, MSMEs and larger Indian companies |
| 3. Deployment-linked incentive | Reimbursement on sales of chips already designed | Applicants eligible under Category 1 or 2 |
Category 1 projects can run for up to six years, decided project by project. The IP is co-owned by the applicant and C-DAC. C-DAC will not use it commercially unless the applicant fails its contractual obligations. The implementing company must also support and maintain what it builds over the long term.
Category 2 is the one most product teams will look at first. It has two kinds of support.
Design infrastructure support. Indian academic institutions and eligible startups and MSMEs get central access to a grid of EDA tools and to multi-project wafer (MPW) fabrication. All eligible applicants also get IP cores, a campus sub-system and post-silicon validation services. If your cash goes mostly to EDA licences and test shuttles, this is the saving to check first.
Product design linked incentive (P-DLI). For eligible startups and MSMEs the money comes in two steps:
Larger companies get royalty financing instead. They pay 5% of net revenues of the product until 1.5 times the support received has been paid back.
You can leave the scheme, but it costs money. A company that took seed funding or equity pays the higher of the seed amount plus the market value of the government's equity, or 1.5 times the total support. A company on royalty financing repays 1.5 times the support if it exits within four years of the last disbursement, and 2 times after that. Put these numbers into your cap table before you sign, not after.
Category 3 reimburses 9% of net sales for five years. It applies only to chips or IP launched for the first time after the scheme was announced, with no earlier sales by the applicant. The ceiling is ₹30 crore per application and ₹120 crore per company, counting group companies and all products.
A practical point: because the product must be new, a chip already in the market is outside this category. If you are close to launch, ask whether the date of your first sale affects eligibility before you ship volume.
For Category 2, the company must be incorporated and headquartered in India, with a significant operational and manpower presence here. It must be owned and controlled by Indian citizens or Overseas Citizens of India (OCIs). You can apply alone or in a consortium with global companies, research bodies or universities.
The conditions that founders should read twice:
If you plan to sell to a foreign acquirer within a few years, the foreign-acquisition and IP-in-India conditions matter more than the headline amount.
This page summarises ISM's public scheme page; it is not legal or financial advice, so check the final notification and your cap table with a professional before you apply.
ISM lists the Design Linked Incentive scheme under Semicon 1.0, with guidelines dated 30 December 2021. Semicon 2.0 now carries the design pillar, so apply under the new notification.
Category 2 requires ownership and control by Indian citizens or OCIs. Consortia with global companies are allowed, but the applicant itself must meet the ownership rule.
ISM says the tenure of fiscal support is six years, and the scheme opens for applications for three years at first.
Yes. ISM lists an application fee under the scheme and guidelines, inclusive of GST. The amount is not on the summary page.