Government Mulls Taking Equity Stake To Support Indian Chip Design Companies Under DLI 2.0: Report

The government is reportedly working on a proposal to support domestic semiconductor chip design companies by taking equity stake in these firms as part of the second phase of the design-linked incentive (DLI) scheme.

The first phase of the DLI scheme is currently underway.

While the specifics and timeline for the second phase of DLI scheme are yet to be determined, there is a general consensus on the broader vision of providing equity support to domestic semiconductor chip design companies that have achieved a certain level of maturity and have the potential for further expansion.

The objective is to establish a few Indian "fabless companies" and nurture a chip design ecosystem in the country.

An equity infusion from the State would help design companies overcome the pressure to sell a significant portion or even the entirety of their shares to global players in order to grow and establish themselves as strong "fabless players", Business Standard reported citing senior government sources involved in the discussion.

The combined revenue of domestic semiconductor design companies is currently only $30-40 million. Domestic companies are defined as those where a resident Indian citizen holds at least a 50 percent stake of the capital.

The DLI scheme, which is part of the government's broader semiconductor scheme announced in December 2021, has received a positive response.

Under this scheme, the government is offering to cover 50 percent of eligible expenditure, up to a maximum of Rs 15 crore per application.

The government is also providing a 4-6 per cent incentive on net sales turnover over five years, with a maximum limit of 30 crore, which is tied to the use of the chip designed by them in products.