The Indian government will invest directly in semiconductor startups under the newly approved Semicon 2.0 programme. The move marks a major policy shift as the Centre looks to strengthen India's domestic chip industry.
Instead of offering only financial incentives, the government will now buy equity in startups alongside private investors. However, it plans to exit its investment once the companies become financially stable, allowing founders to retain long-term ownership and control. The announcement came a day after the Union Cabinet approved Semicon 2.0 with a total outlay of Rs 1.27 lakh crore.
Government to Match Private Investments
The new funding model aims to solve one of the biggest challenges faced by Indian semiconductor startups—raising growth capital. India Semiconductor Mission (ISM) CEO Amitesh Kumar Sinha said the government will match investments made by venture capital (VC) firms at every stage of funding.
The support will cover seed funding as well as Series A, Series B and Series C investment rounds. “Government will also match the amount brought in by investors,” Sinha said. He added that the government will invest on the same commercial terms as private investors and will hold the same class of equity.
Centre Will Not Control Company Operations
Despite becoming a shareholder, the government said it will not interfere in the daily operations of startups. Sinha clarified that the Centre will act only as a financial investor and will not seek operational control.
“We don’t want to interfere in their day-to-day working,” Sinha said when asked whether the government would seek representation on company boards. He added that detailed operational guidelines for the programme will be released separately.
Founders Will Keep Control of Their Companies
The new equity model aims to help startups raise more capital without losing control of their businesses. According to Sinha, the government's stake in most companies will remain below 50 per cent. This approach will allow founders to continue making key business decisions while benefiting from government-backed funding.
Startups Can Buy Back Government Stake
The government also plans to exit its investment after startups begin generating revenue. Sinha said companies will have the option to buy back the government's equity once they become financially strong.
“The moment the company starts earning revenue, they will be comfortable and happy to buy the government’s share,” Sinha said. This exit strategy will help entrepreneurs regain full ownership while allowing the government to recycle its investment into new startups.
No Restrictions on Future Acquisitions
The government also clarified that startups will remain free to pursue mergers or acquisitions. If a company is acquired before buying back the government's stake, the Centre will simply sell its shares based on the company's market valuation. “We are not binding any company,” Sinha said. The policy gives startups the flexibility to attract buyers or strategic investors without government restrictions.
Semicon 2.0 Aims to Strengthen India's Chip Ecosystem
The new investment model reflects the government's broader plan to build a strong semiconductor ecosystem in India. By sharing investment risks with private venture capital firms, the Centre hopes to encourage more funding for Indian chip startups and reduce the country's dependence on imported semiconductor technology.
Officials believe the programme will accelerate innovation, strengthen domestic manufacturing and support India's long-term ambition of becoming a global semiconductor hub.