Policy Update
Varalika Raizada
Introduction
In this digital age, semiconductors are the building blocks of all key technologies, ranging from mobile phones to defense systems. In consideration of its strategic importance, India launched its Semiconductor Mission (ISM) in December 2021 within the broader Semicon India Programme. With a budget allocation of more than ₹76,000 crore, this mission seeks to build a sustainable semiconductor design ecosystem within the nation. One of the key pillars of this is the Design Linked Incentive scheme, which is intended to promote indigenous capabilities, reduce import dependencies and make India technologically self sufficient.
DLI Scheme intends to enhance India’s strength in the semiconductor design space by providing financial and infrastructural assistance to startups, MSMEs, and established companies involved in designing Integrated Circuits (ICs), chipsets, Systems on Chips (SoCs), and other semiconductor devices. The scheme comprises a strong incentive structure that includes funds, equipment access, and mentorship, this scheme encourages technological innovation.
Key Objectives
- Fostering local innovation: this scheme aims to inspire Indian firms and support the development of their expertise in innovative semiconductor designs and building domestic intellectual capital.
- Establishing an IP-focused ecosystem: Support the development of proprietary design IP for creation of a sustainable and scalable ecosystem
- Enabling startups and MSMEs: Offering financial resources, facilities and infrastructure to new businesses that usually encounter challenges in accessing tools and services essential to designing.
- Attracting Global collaborations and cooperation: the scheme aims to attract international support in semiconductor design investment and collaborative ventures.
Structure
The India Semiconductor Mission is a subsidiary under the Digital India corporation. The Ministry of Electronics and Information Technology (MeitY) is responsible for overseeing the DLI scheme. In order for startups, MSME’s and firms to attain funding, they have to submit applications through the Semicon India portal, after which proposals are appraised by the expert appraisal committee. Upon fulfillment of requirements, the beneficiaries are provided with infrastructure and financial support. Up until 2024, there were more than 32 startups and MSME’s who received the benefits from the DLI scheme, disbursing over ₹500 crore. This has led to innovations in fields such as automotive SoCs, 5G modems, and AI chipsets.
The Production Linked Incentive (PLI) program for Semiconductors, the Chips to Startup (C2S) Program, and the Electronics Manufacturing Clusters (EMC 2.0) program are some other policies that are supporting and complementing the DLI scheme to further India’s Semiconductor goals. In a broader span, larger national efforts like Startup India and Digital India also facilitate a sustainable ecosystem for tech- based entrepreneurship, investments in innovation and building digital infrastructure. Combined these initiatives support both DLI’s goals in advancement of India’s interests in the global semiconductor industry.
The DLI Scheme provides assistance via three major components:
- Design Infrastructure Assistance: this includes providing the necessary facilities to access Electronic Design Automation (EDA) software tools, IP libraries, foundry services, and hardware prototyping via a centralized facility run by C-DAC (Centre for Development of Advanced Computing).
- Product Design Linked Incentive: this component provides up to 50% reimbursement of qualifying cost for design development, limited to a certain amount.
- Deployment Linked Incentive: this component provides reimbursement of 4%–6% of the net sales turnover, over a period of five-years, to firms whose designs find successful deployment.
Accomplishments and Impact created
The DLI scheme has contributed greatly to shaping India’s flourishing semiconductor design industry. So far the scheme has been successful in directly supporting more than 30 companies involved in semiconductor designing, 5G communication, AI processors, and automotive-grade Systems on Chips (SoCs). This support has come in form of both funds and infrastructural facilities.
Another major accomplishment has been building the semiconductor design infrastructure in partnership with academic institutions and industrial collaborations. There has also been a rise in the creation of Intellectual Property (IP). A tendency towards development of more indigenous innovation and private technologies as seen by the increase of design intellectual property (IP) filings by Indian businesses and organizations. This indicates the effectiveness and efficiency of implementation of DLI scheme in providing the beneficiaries with necessary design tools and manufacturing infrastructure.
Increased collaboration from foreign partners is necessary to deepen India’s participation in the global semiconductor value chain. So far leading global companies like AMD, Micron and ARM India have made investments in the Indian semiconductor R&D space by establishing global design centres and expanding workforce through skill bootcamps. The government’s unwavering commitment and push for fostering domestic design capabilities, the initiative has inspired foreign semiconductor businesses to consider joint ventures, investments, and partnerships in India.
Challenges and Limitations
Despite it being a visionary policy the DLI scheme faces some major challenges :
- The persistent lack of qualified experts in the fields of semiconductor design and manufacturing is a grave problem. It is estimated that by 2027, the Indian semiconductor industry will require around 250,000 qualified semiconductor workers, particularly in specialized domains. Despite producing a massive number of engineering graduates annually, only a tiny proportion of them are able to acquire the essential hands-on training and industry exposure for employment in the industry.
- Without substantial institutional or governmental support, most startups and academic institutions will have to pay nearly ₹50 lakh to ₹1 crore yearly license fees for EDA tools, which are necessary for chip design. Although the DLI scheme offers financial support, there could be issues with scalability due to the huge investment requirements.
- Additionally, there is also a need to look out for International competition posed by well-established semiconductor design hubs, including the US, Taiwan, and South Korea. These countries have a significant budget offered for Research and Development, infrastructure development, and talent mobility. Thus, this disparity needs to be addressed, in order to develop a robust semiconductor ecosystem.
- Lastly, there have also been a few cases of regulatory blockages and bureaucratic challenges. These include a convoluted application process, a delayed disbursement of cash, and a lack of departmental cooperation, all of which may deter entrepreneurs from taking full advantage of the program.
Conclusion
The Design Linked Incentive Scheme is a forward looking and visionary step towards garnering international recognition for India’s Semiconductor industry by elevating it to the global standards. The scheme is intended to further India’s mission to attain self sufficiency and independence in domestic innovation and manufacturing. This scheme helps foster an environment encouraging tech innovation, entrepreneurship and domestic production, which is highly beneficial for making India globally competitive in the tech space. However the scheme faces some challenges including lack of qualified experts, inconsistent investment support and regulatory blockages. To address the hindrances, the scheme needs to be supported through appropriate R&D investments, industry and market facilitation and talent development in order to reach the maximum potential. The successful and efficient implementation of the DLI scheme could reorient India’s position in the global technological value chain and might serve as a model for innovation and entrepreneurship driven industrial policy.
References
- Ministry of Electronics and Information Technology. (2021). Chips to Startup (C2S) Programme. Government of India. Retrieved from https://www.meity.gov.in/content/chips-startup-programme
- Ministry of Electronics and Information Technology. (2021). Design Linked Incentive (DLI) Scheme. Retrieved from https://www.meity.gov.in/esdm/design-linked-incentive-scheme
- Ministry of Electronics & Information Technology. (2024). Annual report 2023–2024. Government of India. Retrieved from https://www.meity.gov.in
- Ministry of Electronics & IT. (2024, September). MeitY approves incentives for 12 startups under DLI scheme. Indian Web2. Retrieved June 13, 2025, from https://www.indianweb2.com/2024/09/meity-approves-incentives-for-12.html
- India Electronics and Semiconductor Association (IESA). (2023). India Semiconductor Talent Demand Forecast 2023–2027.
- Press Information Bureau. (2024, January 24). PLI Scheme for Large Scale Electronics Manufacturing achieves significant success. Government of India. Retrieved from https://pib.gov.in
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- Ministry of Electronics and Information Technology. (2020). Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. Retrieved from https://www.meity.gov.in/esdm/emc2.0
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About the contributor– Varalika Raizada is a research intern at IMPRI.
Acknowledgement– The author extends her sincere gratitude to Aasthaba Jadeja and fellow interns, who provided guidance throughout the process.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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