Quick Take
- MeitY notified the Semicon 2.0 scheme on August 31, 2026, opening a Rs 1,27,500 crore chip programme.
- Chip-design startups and MSMEs can claim seed funding of up to Rs 15 crore, or 50% of project cost, whichever is lower.
- The scheme stays open for applications for three years, with the India Semiconductor Mission as nodal agency.
The Ministry of Electronics and Information Technology notified the Semicon 2.0 scheme on August 31, 2026. It opens a funding route worth up to Rs 15 crore for Indian chip-design startups.
The rules were notified by MeitY on Monday. Eligible startups and MSMEs can receive seed funding of 50% of project cost or Rs 15 crore, whichever is lower. The support is milestone-linked, so money is released against agreed targets.
This is the detail founders were waiting for. The Union Cabinet approved the Rs 1,27,500 crore outlay on July 15, 2026. Monday’s notification is what actually opens the door to apply.
The India Semiconductor Mission will act as the nodal agency. It will assess applications on technical and financial parameters, including process technology, project capability and off-take, according to the notification. The scheme will stay open for three years.
What is the Semicon 2.0 scheme?
Semicon 2.0 is the second phase of the India Semiconductor Mission, with an outlay of Rs 1,27,500 crore. It widens government support beyond building chip factories to cover the full value chain.
The first phase, launched in 2022, carried an outlay of Rs 76,000 crore. That phase focused on capital subsidy for fabrication plants. Semicon 2.0 is a near-doubling of committed funding.
MeitY has split the scheme into six pillars and 10 categories. The six pillars are chip design, machines and materials, fabs, assembly and packaging, research and development, and talent development. Each pillar carries its own eligibility bar.
The shift matters for small companies. Semicon 1.0 mainly rewarded large fab investors. Semicon 2.0 explicitly brings in chip-design startups, MSMEs, materials firms, research bodies and training institutions.
Who can claim the Rs 15 crore?
The Rs 15 crore route is for commercial chip design. Companies must be incorporated and headquartered in India and have a real operational and manpower presence here.
Ownership is the key filter. The company must be owned and controlled by Indian citizens or Overseas Citizens of India. Startups and MSMEs in this category are eligible for the seed funding and equity co-investment support.
There is a separate route for startups already backed by investors. Companies that have raised venture capital or private equity can take equity co-investment instead. The terms mirror those offered by their existing investors.
Larger firms are treated differently. For big eligible companies, the government offers royalty financing or equity co-investment rather than a seed grant. A second design track, called strategic design, requires full Indian ownership and co-owns the intellectual property with C-DAC.
What are the exit terms?
The money is not a free grant. The scheme sets repayment terms for companies that take seed funding or equity co-investment.
Those firms must repay one of two amounts, whichever is higher. The first is the total seed funding plus the market value of the government’s equity holding. The second is 1.5 times the total support given.
The royalty route works on net revenue. A company pays 5% of net revenue from the funded product until the government recovers 1.5 times its support. Royalty firms can exit by repaying 1.5 times the support within four years, or twice the support after four years.
Read the fine print before applying. The government is taking a repayable stake, not writing a cheque. Founders should model the exit cost into their plan.
How do the numbers compare across the scheme?
The Rs 15 crore cap is the headline for startups. The wider scheme sets much larger bars for fabs and packaging units. The table below shows the main thresholds from the notification.
| Segment | Support offered | Minimum capex |
|---|---|---|
| Chip-design startups and MSMEs | Up to Rs 15 crore seed, or 50% of cost | Not set |
| Silicon wafer fabs | 40% of eligible capex | Rs 20,000 crore |
| Advanced packaging (ATMP/OSAT) | 35% of capex | Rs 1,000 crore |
| Conventional packaging | 25% of capex | Rs 1,000 crore |
| Semiconductor equipment | Capex support plus PLI | Rs 300 crore |
| Raw-material projects | Capex support | Rs 50 crore |
The fab bar is steep. A wafer fab applicant needs a 300-mm facility, at least 40,000 wafer starts a month, and revenue of Rs 7,500 crore in one of the past three years. That is out of reach for a startup.
The design route is where founders fit. It asks for capability and Indian ownership, not thousands of crores in capex. That is the deliberate gap Semicon 2.0 opens for young companies.
What does this mean for founders in 2026?
India already has a base of design startups. Under Semicon 1.0, 24 startups and MSMEs received design support, and 105 firms gained access to industry-standard EDA tools, according to government figures. Semicon 2.0 builds on that group.
The talent pipeline is also growing. Around 68,000 students have been trained on chip design across more than 315 universities. The scheme now targets one lakh more chip engineers.
The plan prioritises roughly 100 chips across compute, memory, RF, power, networking and sensor categories. A startup with a design that fills one of these gaps has a clearer funding case. The application window is three years.
StartupFeed Insight
The Rs 15 crore number will grab headlines, but the real signal is the repayable structure. The government is behaving like an equity investor, not a grant body, with exits pegged at 1.5 times its support. That filters out founders chasing free money and rewards those with a real product path. Watch the fabless design category closely. India already has 24 funded design startups and 105 on EDA tools, so the base exists. Expect the first fresh Semicon 2.0 design approvals to be announced around Semicon India 2026 in September, when the government will want visible wins.
— Harshvardhan Kothari, Technology and Policy Correspondent
What this means for you: If you run an Indian-owned chip-design startup, read the notification now and map your project cost against the 50% or Rs 15 crore cap before the three-year window narrows.
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