India Semiconductor Mission 2.0: Government to Co-Invest in Chip Startups to Help Them Scale Globally

As per news reports, the Centre is set to take a more active role in supporting India's semiconductor ecosystem under the upcoming India Semiconductor Mission (ISM) 2.0. In a significant policy shift, the government plans to co-invest alongside venture capital (VC) firms in semiconductor design startups, with the aim of helping promising Indian companies grow independently instead of being acquired by global technology giants at an early stage.

The move comes after the Union Cabinet approved ISM 2.0 with an expanded outlay of around ₹1.27 lakh crore, broadening the scope of the mission beyond semiconductor fabrication to include chip design, equipment, materials, skill development and the wider semiconductor value chain.

Government to Match VC Investments in Chip Startups

One of the biggest changes under ISM 2.0 is the proposed co-investment model, where the government will match investments made by venture capital firms in eligible semiconductor design startups.

Electronics and IT Secretary S. Krishnan said semiconductor businesses require significant long-term funding before they become commercially viable, making grants alone insufficient.

The new framework aims to attract larger pools of private capital while leveraging the expertise of venture capital firms in identifying startups with strong commercial potential. Rather than acting as a majority shareholder, the government will play the role of a strategic co-investor.

Focus on Building Global Indian Semiconductor Companies

According to the government, several Indian semiconductor startups possess valuable intellectual property but struggle to raise growth capital. As a result, many are acquired by multinational companies before they can scale into globally competitive businesses.

The co-investment strategy seeks to address this funding gap by providing startups with access to patient capital, allowing them to expand operations and commercialise their technologies without seeking early exits.

India already has a strong semiconductor design talent pool, with engineers contributing to global companies such as Qualcomm, Nvidia, AMD, Intel and Texas Instruments. The next objective is to build homegrown semiconductor companies that can leverage this expertise.

ISM 2.0 Expands Beyond Chip Manufacturing

Unlike the first phase, which largely focused on attracting semiconductor fabrication plants, ISM 2.0 is expected to support the broader semiconductor ecosystem.

The mission will place greater emphasis on fabless chip startups, semiconductor design tools, specialty materials, manufacturing equipment and other ancillary industries, helping strengthen India's domestic semiconductor capabilities across the value chain.

Read more: Ethanol May Soon Replace LPG in Some Indian Kitchens; Govt Eyes New Policy by September.

Conclusion

With a ₹1.27 lakh crore allocation and a new co-investment framework, ISM 2.0 represents a major evolution in India's semiconductor strategy. By partnering with venture capital firms and supporting chip startups through long-term capital, the government aims to create globally competitive Indian semiconductor companies, reduce dependence on foreign players and strengthen the country's position in the global electronics supply chain.

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