What’s Keeping VCs From Backing India’s Homegrown Semiconductor Ambitions? |
On this day a decade ago, Prime Minister Narendra Modi launched the Startup India initiative to nurture innovation, promote entrepreneurship, and enable investment-driven growth in the country. The day, January 16, later came to be recognised as the National Startup Day. In 2026, we are marking the fifth National Startup Day, with a big focus on homegrown AI and semiconductors.
In the last 10 years, the country has grown to over 2 Lakh DPIIT-recognised startups. New sectors have risen to prominence, capital has cycled through multiple waves, and policy priorities have shifted. This shift is also evident in the growing focus on semiconductors, a sector that has long been considered challenging for India to develop.
However, in the four years since the launch of the India Semiconductor Mission (ISM) in 2021, the government has taken steps to advance India’s semiconductor ambitions through policy incentives and project approvals.
The government announced an INR 76,000 Cr incentive package, largely under the Production Linked Incentive (PLI) framework, of which nearly INR 65,000 Cr has already been committed.
The Centre also cleared four new semiconductor projects over the past year alone, involving investments of INR 4,584 Cr, underscoring its intent to anchor chip manufacturing and allied capabilities within India.
This policy push is beginning to find echoes in the startup ecosystem. Indian semiconductor startups note a gradual uptick in investor interest, particularly in chip design, testing, and specialised components.
In 2025, semiconductor startups raised roughly $50 Mn, according to Inc42’s annual funding report. In 2024, this amount was $28 Mn and a mere $5 Mn in 2023.
Yet, despite the growth, funding levels remain low when stacked........