DLI Scheme 2.0: Centre Plans To Pick Up Equity Stake In Local Chip Design Firms, Says Report

The existing DLI plan is part of the Centre’s comprehensive semiconductor plan announced in December 2021, which has received a good response

The central government is planning to pick up equity stake in local domestic semiconductor design firms, as a main element of the second phase of the design-linked incentive (DLI) scheme, a report by Business Standard said on Monday. The first phase of the scheme is currently on. According to the data, the framework and timeline for the second phase are yet to be decided.

At present, the idea is to support and take stake in home-grown semiconductor chip design companies that have reached a certain stage of maturity and are ready to move to the next phase of expansion, according to the news report. The move is aimed at creating few Indian “fabless companies” in the country and setting up a chip design ecosystem.

Domestic firms are those in which at least 50 per cent of the total capital is held by an Indian citizen. The existing DLI plan is part of the Centre’s comprehensive semiconductor plan announced in December 2021, which has received a good response. Under this scheme, the Centre is providing 50 per cent of the eligible expenditure, or a maximum of Rs 15 crore per application. Plus, it is giving 4-6 per cent incentive will on the net sales turnover over 5 years, which will be up to a maximum of Rs 30 crore. But this incentive will be available only when the chip made by them will be used in the products.

Citing government sources privy to the development told the business newspaper, after getting the government’s equity investment, these design firms will not have to sell their majority stake or the entire company to global giants in an attempt to scale up. The total revenue of domestic semiconductor design companies is just $30-40 million, the report mentioned.

Global semiconductor and fabless companies design 2,000 chips in India every year. Nearly 90 per cent of these companies design advanced chips and employ about 20,000 engineers. The government aims to build 20 home-grown fabless companies using the DLI Scheme. It is giving expensive design tools free of cost, and is tying up with three global players for this.