India Semiconductor Mission Phase II: Govt to Take Equity Stakes in Chip Startups

Phase II of India Semiconductor Mission: A New Approach

The central government is moving to a more hands-on role in India's chip-making ambitions. Under Phase II of the India Semiconductor Mission, New Delhi will take direct equity stakes in semiconductor startups. This marks a shift from the earlier model of providing subsidies and incentives alone.

Officials familiar with the plan say the government will now sit on the cap table of select chip design and fabrication ventures. The aim is to ensure long-term commitment and alignment of interests between the state and private players. Startups focusing on specialised chip design, packaging, and advanced materials are expected to be the first beneficiaries.

The exact quantum of the equity participation has not been disclosed. However, sources indicate that the government will hold minority stakes, typically between 10% and 26%, in these ventures. The move is seen as a way to de-risk early-stage investments and attract more private capital into the semiconductor ecosystem.

Mobile Phone Manufacturing Scheme: Boosting Homegrown Brands

Alongside the semiconductor push, the government has unveiled the Mobile Phone Manufacturing Scheme (MPMS). The scheme is designed to incentivise the production of smartphones by Indian brands, reducing dependence on imported devices and components.

Under MPMS, eligible manufacturers will receive production-linked incentives (PLI) for making handsets domestically. The scheme covers everything from assembly of printed circuit boards to final packaging. It also offers additional sops for using locally sourced components, encouraging a deeper supply chain within the country.

Industry estimates suggest the scheme could help Indian brands capture a larger share of the domestic market, which is currently dominated by Chinese and Korean players. The government expects the MPMS to create over two lakh direct jobs in the electronics manufacturing sector over the next five years.

Minister Kishan: Semicon 2.0 and MPMS Will Benefit State's Youth

Union Minister for Electronics and Information Technology, Kishan, has welcomed both initiatives. Speaking at a press conference, he said, 'Semicon 2.0 and MPMS will prove beneficial for the state's youth. These schemes will generate employment and skill development opportunities in high-tech manufacturing.'

The minister highlighted that the combination of chip design incentives and mobile phone manufacturing will create a virtuous cycle. 'When you make phones here, you need chips. When you make chips here, you need phone makers to buy them. That synergy is what we are building,' Kishan added.

He also confirmed that the government is in talks with at least three global semiconductor companies to set up fabrication units in India under the new equity model. 'Talks are progressing well. We expect some announcements in the coming months,' he said.

What This Means for India's Tech Ambitions

The twin moves signal a maturing of India's industrial policy for electronics. The first phase of the Semiconductor Mission, launched in 2021, focused on attracting large fabs with huge subsidies. While that attracted some interest, actual ground-level progress has been slower than anticipated.

Phase II attempts to fix that by getting the government more involved at the startup and design level, where the risk is higher but so is the potential for innovation. The MPMS, meanwhile, addresses the downstream end — ensuring that the chips made in India have a ready market in the form of locally manufactured phones.

Together, the two schemes aim to create a self-reinforcing ecosystem. However, execution will be key. The success of the equity model will depend on how well the government picks winners and manages its investments.

Industry observers are watching closely. The next few months will see detailed guidelines for both schemes being released. The government is expected to open applications for Semicon 2.0 and MPMS by the end of this quarter.