This is a Mint Premium article gifted to you.Subscribe to enjoy similar stories. To help India’s chip design startups overcome a chronic shortage of patient capital, the government plans to co-invest alongside venture capital (VC) funds, at least in the early funding rounds, under its₹1.27 trillion Semicon 2.0 programme. Under the schemeunveiled on Wednesday, the government will match private investments in eligible startups in return for equity to reduce funding gaps in one of the country's most capital-intensive technology sectors. Amitesh Sinha, additional secretary at the ministry of electronics and information technology (Meity) and chief executive of India Semiconductor Mission, toldMintthat the equity-based co-investment plan is designed to fill up a lack of ample deep-tech funds available to semiconductor design startups in the country. “The Centre will offer grants under the current proposed incentivization structure, through which startups can create chip design prototypes," said Sinha. "These prototypes will be vital for them to raise funding from venture capital and private equity investors. For those that do, the government will offer to match the net private capital raised in a single funding round, for the same amount of equity.” In simple terms, if a chip design startup needs $10 million in early-stage capital, the government will offer to fund $5 million, with the startup having to raise the rest from a private investor. “This way, the burden of raising enough funds to take a chip from concept to production also reduces for startups. The government will also not go into this with an expiry date or a plan to exit the startup within a stipulated number of years," he said. "Once a semiconductor startup starts generating revenue, the Centre will offer it the option to buy its shares back from the government, if that’s what they desire.” Sinha, however, did not detail the quantum of funds that would be allocated to the “equity co-investment” plan that Semicon 2.0 has proposed for companies. Chip design is a fundamental stage in the semiconductor value chain as this is where the technology behind a chip is developed. These companies do not have manufacturing plants, but they own the designs, capture more value and have a greater control over the technology. At a roundtable on Wednesday, IT minister Ashwini Vaishnaw had said chip design companies will form a key part of Semicon 2.0, as India looks to generate intellectual properties (IPs) in the space. To boost sovereign capability in chip design, for the first time ever, the government is also expected to support larger corporations in the segment. “Large conglomerates that have already ventured into the space have the might of capital already with them to design, test and produce their own chips. The incentives from the Centre, based on the royalty that they earn from their chips, is in order to give private companies the confidence of investing in R&D, and subsequently take their pro
