Can startups alone build India’s semiconductor ecosystem

*This article is adapted from *Entrepreneur.com

India's semiconductor push is gaining physical scale, but much of the technology risk is still being carried by startups.That reliance comes as private funding remains relatively concentrated and corporate participation in semiconductor innovation is still developing.

At Semicon India 2026 this month, the government showcased a sector that is beginning to acquire factories, equipment suppliers, materials companies, and a growing cohort of chip-design startups.

"India has a massive semiconductor ecosystem in terms of industry veterans, a pipeline for young talent, and several semiconductor startups," said Bragadeesh Suresh Babu, founder and CEO of Tattvam AI, a deeptech startup that automates semiconductor chip design.

But he also pointed to a structural imbalance. Private-market capital for deeptech projects in India remains limited compared with the US and China, Babu said, attributing part of that gap to startup and technology culture, arguing that a major success in the sector could create a wider investment and innovation wave.

"It is true that startups are pulling their weight in terms of building the semiconductor ecosystem in the country. At the same time, it is important to note that most semiconductor startups are playing in the fabless design space, where they own the design IP and the resulting products," Hareesh Chandrasekar, CEO and co-founder of AGNIT Semiconductors, told ETEntrepreneur.

Larger industrial companies are starting to take responsibility for fabs, packaging and other capital-intensive infrastructure. Tata's silicon fab and OSAT projects involving Tata, CG Power and Kaynes are examples of that division, he highlighted.

Corporate participation and demand certainty

Government policies and commitments put greater emphasis on the next stage of the ecosystem, helping startups move from validated designs towards deployment and volume production.

"What remains a concern is the lack of investment in innovation by large conglomerates. They should redirect some of the capital from capacity to innovation, enabling these startups to use this compression as a springboard with high-end talent, tools, and technology in India," said Souma Sekhar Gangopadhyay, associate director at PwC.

Gangopadhyay said conglomerates could also establish innovation incubators around semiconductor equipment, utilities, water management, materials and chemicals, alongside chip design.

"We certainly need larger companies to partner with startups and lend them their distribution and marketing muscle, deep customer relationships, service capabilities, and the trust and brand that they can bring to a cutting-edge product or technology that a startup originates and develops," Chandrasekar added.

He stressed that larger companies should bring startups "distribution and marketing muscle, deep customer relationships, service capabilities, and the trust and brand" needed to take indigenous semiconductor products to market. He also suggested the government could act as an early customer for critical domestic chips and use procurement to drive adoption.

That could mean more than corporate venture capital. Large manufacturers and electronics companies can provide something venture investors cannot easily offer, a route to market.

The same issue is visible in the domestic demand equation. Ben Mathias, managing partner at Vertex Ventures (Southeast Asia & India), said, "The key issue is how many domestic customers are willing to take a bet on indigenous IP versus foreign IP. There may need to be regulatory and economic incentives to encourage that."

Gangopadhyay also argued for greater demand certainty, with the government acting as a first buyer through scalable use cases, alongside shared R&D infrastructure and international platforms for Indian startups.

"Don't start with the mission-critical use cases but start with scale use cases through targeted indigenisation. Shared R&D infrastructure is a major constraint for semiconductor startups. This needs to be enabled either under a user-fee or partnership model," he added.

Additionally, Mathias said the next step for startups is to work with large local OEMs and Indian original design manufacturers, or ODMs, so products can be built around domestic chips. He also pointed to less visible parts of the ecosystem, including imports, customs, and quality assurance, that still need to mature.

Chandrasekar also believes private-sector investment in semiconductor R&D needs to increase so companies can take on more "capital-intensive and higher-risk products with correspondingly larger pay-offs".

Bridging the funding gap

India's public commitment is now significant.

The original Semicon India Programme had an outlay of ₹76,000 crore. By September 2026, the government had approved 12 semiconductor projects with investment commitments exceeding ₹1.64 lakh crore, according to the Press Information Bureau.

In July, the Cabinet approved Semicon 2.0 with a further ₹1.275 lakh crore outlay. At Semicon India 2026, Electronics and IT Minister Ashwini Vaishnaw said the government was seeing investment proposals worth $11-12 billion under Semicon 2.0.

"There is funding available across the different stages," Mathias said.

This year, India has already seen some larger rounds from the private sector. C2i Semiconductors raised $15 million in series A funding in February 2026, while Vervesemi raised $10 million around the same period.

A 2026 report by Speciale Invest and Startup Policy Forum found that Indian semiconductor startups had raised about $206 million across 51 rounds since 2022, with $61.9 million raised in the first half of 2026.

Government data shows progress on the technology side. MeitY said DLI-supported companies had cumulatively raised more than $100 million in venture capital and completed 35 chip-design tape-outs by August 2026. Aheesa Digital Innovations, for instance, achieved first-pass silicon success with its VIHAAN broadband chip and is now targeting production tape-out in 2027.

Other countries built ecosystems around institutions

Taiwan's advantage is not simply TSMC. It is the network around TSMC i.e., research institutions, equipment companies, materials suppliers, universities, design houses, and specialised infrastructure that have developed over decades.

The country is continuing to reinforce that model. In September, Taiwan announced plans to invest about $9.5 billion through 2033 in semiconductor facilities and chip-design software. The programme includes upgrades to research infrastructure, advanced process validation environments, pilot production lines, equipment sharing, support for startups and next-generation EDA development.

China, meanwhile, has used enormous pools of state-directed capital to build domestic semiconductor capabilities. Its third phase of the national semiconductor Big Fund, launched in 2024, had registered capital of 344 billion yuan, or about $47.5 billion, which is larger than the first two phases combined, Reuters reported.

The US has taken a different route but with the same principle of ecosystem-scale investment. The CHIPS and Science Act appropriated $52.7 billion, including $39 billion for manufacturing incentives and $11 billion for semiconductor R&D. The US programme also includes workforce development and infrastructure intended to support both large manufacturers and smaller companies.

While other countries have had decades to build the institutional frameworks supporting their semiconductor industries, Gangopadhyay said India is attempting to build in one decade what Taiwan, the US and China developed over three to four decades. That compression, he said, puts greater runway pressure on startups, making access to shared infrastructure, technology and capital increasingly important as they move towards commercialisation.

"Most startups are still nascent, and they need to evolve to commercialise their products with large local OEMs. The next step is really to develop the supply chain and services around these fabless startups," Mathias added.

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