India’s semiconductor narrative today is dominated by manufacturing ambition. Large fabs, multi-billion-dollar investments and job creation dominate official messaging under the India Semiconductor Mission (ISM). But semiconductor manufacturing is a long-cycle play, often taking years before becoming operational and commercially viable. Even as the government continues to push manufacturing through subsidy-led incentives and ecosystem building, the immediate opportunity may lie in semiconductor design, where India already commands one of the world’s largest pools of chip design talent but still lacks globally competitive fabless firms with meaningful intellectual property (IP) ownership. The Union Budget 2026–27 allocated Rs 1,000 crore toward India Semiconductor Mission (ISM) 2.0, while the government has already approved 10 ISM projects worth Rs 1.60 lakh crore across six states. India’s semiconductor market is also projected to reach $100–110 billion by 2030, underlining the scale of the opportunity ahead.
India’s Real Chip Advantage
What is often underplayed is that India is already one of the world’s largest semiconductor design talent hubs. Global chipmakers continue expanding engineering operations in the country, and Indian engineers contribute to some of the most advanced semiconductor products globally. Yet India still lacks globally competitive fabless semiconductor firms with meaningful ownership of IP. “India’s design talent has scaled strongly through global design services, but transitioning to IP ownership now needs deeper risk capital, stronger product management and better market access,” said Navin Bishnoi, AVP & India Country Manager at Marvell Technology.
Industry executives also argue that the global semiconductor conversation is often misunderstood in India. While fabs dominate headlines, much of the value creation globally comes from semiconductor products, architecture and IP ownership. Design and intellectual property contribute a significant share of a chip’s value, while fabless semiconductor firms continue to account for a meaningful portion of global semiconductor innovation and commercialisation. With India accounting for nearly 20 per cent of the world’s semiconductor design engineers, industry leaders believe the country holds a structural advantage in the very layer of the semiconductor value chain that drives long-term differentiation and competitiveness.
“The opportunity now is to ensure design gets proportionate and sustained attention, because a country with extraordinary design talent has every reason to aspire to be not just a contributor to the global semiconductor supply chain, but a creative force within it,” said Kamolika Gupta Peres, Vice President, India and SAARC, Autodesk. “Manufacturing matters, but it’s not where differentiation starts,” said Sandeep Kumar, CEO of L&T Semiconductor Technologies, during an interview with BW Businessworld recently. The rise of fabless semiconductor firms globally has reinforced this trend, with companies focused on specialised chip design increasingly driving industry growth and shareholder returns.
This gap is precisely what the government attempted to address through the Design Linked Incentive (DLI) scheme under ISM. The policy aimed to support fabless startups, encourage indigenous IP creation and reduce dependence on imported technologies. More recently, policy conversations around ISM 2.0 and recent budget announcements have increasingly shifted toward strengthening the design ecosystem alongside manufacturing. Government data shows the DLI scheme has already sanctioned 24 semiconductor design projects, leading to 16 tape-outs, six fabricated chips and the creation of over 140 IP cores.
Industry observers note that investor interest in India’s semiconductor ecosystem has strengthened in recent years, supported by policy interventions such as the India Semiconductor Mission and the Design Linked Incentive scheme, alongside growing geopolitical emphasis on semiconductor supply-chain diversification. Rather than competing directly in advanced fabrication, many Indian startups are increasingly focusing on fabless chip design, semiconductor IP, RF technologies, embedded systems and power electronics, areas where India can leverage its strong engineering talent base.
Funding in India’s semiconductor and chip-design startup ecosystem remained muted for much of the last decade before accelerating sharply after 2023, signalling rising investor interest in fabless and deep-tech semiconductor ventures. (2026 YTD till May 19). Source: Tracxn.
“The market has witnessed a visible inflection point in recent years, supported by stronger policy momentum, increasing strategic relevance of semiconductors and expanding investor interest in deep-tech innovation,” said Neha Singh, Co-Founder, Tracxn.
The Execution Gap
However, industry voices say policy execution remains inconsistent. Startups continue to point to delays in approvals, disbursement cycles, auditing requirements and procedural complexity. Semiconductor design startups operate in a capital-intensive and time-sensitive environment, where delays can directly affect product development timelines. “The intent behind the DLI scheme is directionally strong, but the next phase should focus on operational efficiency, faster disbursement cycles and simplified compliance,” said Nikul Shah, Founder & CEO of IndieSemiC.
There are also deeper structural gaps that policy alone cannot immediately solve. Semiconductor businesses require patient capital, long development cycles and sustained ecosystem support. Unlike software startups, semiconductor companies often take years before generating meaningful commercial returns. Industry executives point out that semiconductor development follows a fundamentally different commercial cycle compared to conventional technology businesses, with chip validation, integration and testing often taking several years before revenue visibility emerges. A single tape-out can cost millions of dollars, while the journey from initial design to a market-ready product can often take three to five years. India’s venture ecosystem has historically remained cautious around deep-tech investments, limiting the ability of startups to scale aggressively even when technical capability exists.
The Missing Demand Engine
Another challenge is that India’s large electronics demand does not automatically translate into success for Indian semiconductor firms. Semiconductor sourcing decisions remain deeply global, driven by performance, reliability, cost and long-term supply assurance rather than geography alone. Industry leaders say Indian semiconductor startups will need to compete on global benchmarks from the outset rather than relying on domestic demand alone to create sustainable market opportunities.
At the same time, executives argue that stronger domestic procurement support could play a critical role in helping Indian semiconductor firms scale commercially. A stronger domestic demand engine, where government bodies, defence, infrastructure players and large enterprises act as early anchor customers, could help startups secure first commercial wins, establish credibility and attract future investment. Industry leaders say such early adoption is often one of the strongest accelerants for deep-tech ecosystems globally.
At the same time, industry leaders argue that India’s manufacturing-first approach was not entirely misplaced. In a geopolitically sensitive industry shaped by supply chain disruptions and strategic dependencies, fabs became symbolic of seriousness and strategic intent. Executives say large-scale manufacturing announcements helped position India more credibly within the global semiconductor conversation, even if manufacturing itself remains a long-gestation play.
The broader consensus emerging across the industry is that India now needs to move from semiconductor ambition to semiconductor depth. That means faster policy execution, institutional continuity, patient capital and stronger commercial adoption of Indian-designed chips. Such commercial validation, executives argue, is critical for helping startups transition from outsourced design services to globally competitive product companies with state-of-the-art capabilities and meaningful IP ownership.
Manufacturing will remain important, but it is still a long-term game. In the near term, semiconductor design remains India’s clearest leverage point, and the success of ISM 2.0 may ultimately depend not only on how many fabs India builds, but whether India can create globally competitive semiconductor product companies with strong indigenous intellectual property.
