Design linked incentive scheme for Semiconductors

Design linked incentive scheme for Semiconductors

Context: The article is based on the news “The need to overhaul a semiconductor scheme” which was recently published in The Hindu.

What is the Design linked incentive scheme(DLI)?
• Design Linked Incentive Scheme offers financial incentives, design infrastructure support across various stages of development and deployment of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design.
• Its primary aim is to cultivate semiconductor design capabilities in India, with the understanding that home-grown IP will organically evolve as local talent fosters the creation of indigenous companies over time.
• The Centre for Development of Advanced Computing, a scientific society operating under MeitY is the nodal agency.

What are the issues with the scheme?
• The Design Linked Incentive Scheme mandates that beneficiary start-ups maintain their domestic status for at least three years after receiving incentives, and for this they cannot raise more than 50% of their requisite capital via foreign direct investment.
• The funding landscape for chip start-ups in India continues to be challenging despite promising IP and business potential.
• The Design Linked Incentive Scheme has witnessed poor results and fewer participation.
• The relatively modest incentives under the Design Linked Incentive Scheme (capped at ₹15 Crore for Product DLI and ₹30 Crore for Deployment Linked Incentive, per application) would not make for a worthwhile trade-off for start-ups standing to lose out on access to crucial long-term funding.

Way Forward
• Any noticeable shortfall in investment for Design Linked Incentive Scheme beneficiary start-ups could be bridged by equity financing bringing in foreign funds.
• The scheme needs to be revised to focus on the broader objective of facilitating design capabilities for a wide array of chips within the country, so long as the entity engaging in the design development process is registered in India.
• Delinking of ownership from the development of semiconductor design and adopting more start-upfriendly investment guidelines is required. It is likely to boost their financial stability and assure them of global exposure.