India’s Design-Linked Scheme for the Semiconductor Sector: How Businesses Can Maximize Benefits

India’s Design Linked Incentive (DLI) Scheme helps semiconductor startups and MSMEs recover design costs, scale commercialization, and build IP-driven growth, positioning India as a global hub for chip innovation and self-reliance.

India is accelerating its push toward semiconductor self-reliance as global supply chain realignments reshape the electronics industry. At the center of this effort is the Design Linked Incentive (DLI) Scheme, a part of India’s INR 760 billion (US$8.57 billion) Semiconductor Mission launched in December 2021. The DLI program targets a full-stack design ecosystem that can support domestic innovation, reduce import dependence, and anchor India in high-value segments of the global value chain.

The DLI Scheme aims to develop 100 semiconductor design companies and help at least 20 firms scale to revenues above INR 15 billion (US$169 million) within five years. It combines fiscal support and shared infrastructure to make chip design commercially viable for startups, micro, small and medium enterprises (MSMEs), and larger domestic players.

As of July 31, 2025, 23 chip design projects have received approval and 72 companies now have access to industry-grade Electronic Design Automation (EDA) tools through the national grid operated by Centre for Development of Advanced Computing (C-DAC). The C-DAC serves as the nodal agency, responsible for application appraisal, monitoring, and disbursement of incentives.

The DLI scheme, launched in January 2022, remains open for three years with scope for extension based on performance reviews.

Also Read: India’s Semiconductor Sector: Tracking Government Support and Investment Trends

Structure and incentive framework of the DLI scheme

The DLI Scheme outlines three complementary support mechanisms that guide companies from concept to commercialization.

Design Infrastructure Support offers startups and MSMEs access to the national EDA tool grid and IP core repository managed by C-DAC. Each approved applicant can receive up to INR 3 million (US$33,845.88) for multi-project wafer (MPW) fabrication and post-silicon validation. This infrastructure lowers entry barriers for startups and MSMEs by providing access to advanced tools and prototyping resources.

The Product Design Linked Incentive (P-DLI) reimburses up to 50 percent of eligible expenditure, capped at INR 150 million (US$1.6 million) per project. This component supports the design, testing, and demonstration of semiconductor goods ready for volume production. It covers expenses such as manpower, specialized software licenses, IP registration, and prototype validation- key cost drivers in chip design.

The Deployment Linked Incentive (DLI) rewards successful commercialization. Approved companies can claim 4 to 6 percent of net sales of designed semiconductor goods over five years, with a ceiling of INR 300 million (US$3.38 million) per applicant. Annual thresholds apply INR 10 million (US$112,819.6) for startups and MSMEs and INR 50 million (US$564,098) for larger domestic firm, encouraging consistent market performance.

ROI considerations for businesses

In terms of return on investment (ROI), for semiconductor startups and design-focused MSMEs, the DLI Scheme allows design-driven companies to recover up to 50 percent of research and development (R&D) costs through the P-DLI incentive. The DLI complements this by generating recurring cash inflows tied to actual sales performance, supporting firms as they scale production and expand into export markets.

In the short term, access to subsidized infrastructure and design tools reduces upfront capital requirements by an estimated 20 to 40 percent. This makes chip development financially viable for smaller players that might otherwise be priced out of the market. Reduced entry costs open opportunities in fast-growing segments, such as IoT, automotive, and defense electronics.

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Over the medium to long term, DLI-backed firms gain the opportunity to build proprietary intellectual property, improving their valuation and attractiveness to investors and strategic partners. IP ownership also enables recurring licensing revenues: an asset-light growth path that strengthens balance sheets and enhances India’s share of global semiconductor IP exports.

However, companies must factor in compliance requirements when evaluating ROI. Approved applicants must maintain domestic ownership status for at least three years after receiving incentives and submit quarterly progress and sales reports to C-DAC. Meeting annual sales thresholds is essential for continued eligibility under the DLI component. Firms that plan ahead for these governance and documentation obligations can maximize returns while maintaining operational agility.

Case studies: Measuring impact and ROI

Under the DLI Scheme, several approved companies show that targeted fiscal support can quickly translate into market-ready, self-reliant designs.

Vervesemi Microelectronics

The company is among the first batch of applicants approved under both the DLI and Chips-to-Startup (C2S) programs and is developing application specific integrated circuit (ASIC) for electric vehicles (EV), smart energy meters, and aerospace systems. Set to begin volume production by 2026-27, Vervesemi Microelectronics is already one of the few Indian exporters of semiconductor IP. Its machine learning enabled analog IPs and high-precision controllers highlight how DLI support helps domestic startups move up the global design value chain.

InCore Semiconductors

Founded by the creators of India’s open-source SHAKTI processors, InCore Semiconductor has launched a RISC-V-based System-on-Chip (SoC) Generator Platform that automates chip design, from concept to silicon, in a fraction of the traditional time. By reducing front-end design cycles from months to minutes, the company exemplifies how DLI-backed projects can deliver strong ROI through design automation, IP reuse, and accelerated product rollout.

MosChip Technologies

The firm is building Vidyut, a fully indigenous smart energy meter chip that integrates power management, sensing, and display control units. The project, supported by the DLI Scheme, plans local fabrication by 2026 and aims to replace imported components in India’s growing energy metering market.

These projects show that DLI-backed designs can reach commercialization within three to five years, setting a model for capital-efficient innovation in India’s fabless ecosystem. Beyond product outcomes, the program has already generated multiplier effects such as increasing patent filings, attracting venture capital, and expanding employment in chip design and verification.

Strategic pathways to maximize returns

Maximizing returns under the DLI Scheme requires businesses to approach incentives strategically, treating them as enablers of scale and competitiveness rather than as one-time financial relief.

1. Align project design with high-value segments: Companies that focus on fast-growing markets, such as 5G communications, Internet of Things (IoT), electric vehicles, defense electronics, and medical devices, can capture stronger demand visibility and investor confidence. These sectors not only offer higher margins but also align with India’s industrial priorities under the broader Semiconductor Mission.
2. Leverage DLI–C2S synergies: Combining fiscal incentives from DLI with technical and academic support from the Chips-to-Startup (C2S) program can accelerate prototype development and reduce R&D risks. Partnering with research institutions and incubators also enhances access to skilled design talent and advanced validation infrastructure.
3. Utilize shared design infrastructure: The national EDA tool grid and IP core repository operated by C-DAC enable startups and MSMEs to avoid redundant licensing costs and shorten design timelines. Firms that actively integrate these shared resources into their workflows can achieve faster time-to-market and higher design throughput per engineer.
4. Plan for export readiness and IP commercialization: Filing patents early and pursuing licensing opportunities can extend financial returns well beyond the incentive period. Companies that secure proprietary IPs strengthen their balance sheets, attract foreign partnerships, and position themselves to participate in global semiconductor supply chains.
5. Maintain financial discipline and documentation: Accurate reporting of eligible expenditure, threshold sales, and milestone achievements ensures smooth disbursement and compliance continuity. Establishing internal audit mechanisms and digital record systems from the start reduces administrative delays and safeguards incentive claims.

Firms that integrate these strategies can turn DLI participation into lasting competitive advantage, strengthening their IP portfolios and positioning India as a design-driven innovation hub.

Outlook: From incentives to self-sustaining ecosystem

The DLI Scheme has matured from fiscal support into a powerful innovation platform, nurturing a new generation of fabless companies ready to compete globally in high-performance computing, connectivity, and smart device markets.

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Private venture capital is increasingly complementing public investment, signaling growing confidence in India’s chip design capabilities. As DLI-backed startups mature, their integration with other policy frameworks such as Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and Production Linked Incentive (PLI) for electronics manufacturing is strengthening the downstream value chain. These linkages extend the scheme’s ROI beyond corporate profits to broader national goals of import reduction, IP sovereignty, and technology exports.

By 2030, India could emerge as a global design hub, anchored by a self-sustaining ecosystem of semiconductor startups, incubators, and design-led enterprises. The country’s expanding pool of design engineers, combined with policy stability and rising investor participation, positions the DLI framework as a cornerstone of India’s ambition to design chips for the world, while capturing more value at home.

Also Read: India’s PLI Schemes Clears 806 Projects, Drives US$20 Billion in Investment

(US$1 = INR 88.63)

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