India's upcoming semiconductor incentive scheme, DLI 2.0, is generating apprehension among local startups. There are fears that allowing multinational corporations (MNCs) to participate, even with minority stakes, could undermine domestic firms.
While the government aims to promote self-reliance in chip design, the framework for DLI 2.0 remains undisclosed. Officials have suggested that foreign ownership could be capped at 49%, a significant shift from the first phase, which exclusively supported local companies.
Potential Impact on Domestic Firms
Vijay Muktamath, CEO of Sensesemi Technologies, voiced concerns that even a 49:51 ownership structure might allow larger foreign entities to dominate the market due to their financial strength and influence. He emphasized the need for the government to prioritize Indian startups as the country develops its semiconductor ecosystem.
Muktamath warned that MNCs could leverage partnerships to promote globally developed chipsets under India's incentive framework, potentially sidelining smaller domestic firms.
Government's Position on Foreign Participation
Officials involved in discussions about DLI 2.0 indicated that while the scheme would maintain Indian control requirements, it would also welcome broader participation from global investors. This could extend eligibility to larger Indian firms, with government support potentially matching external funding.
Recognizing the capital-intensive nature of semiconductor design, officials argued that controlled foreign participation is essential. They stressed the importance of retaining intellectual property within India to ensure sovereignty over technology.
Concerns About Ownership Structures
Some industry leaders expressed skepticism about whether a 51:49 ownership structure would be sufficient to safeguard long-term domestic control. They raised questions about how the government would ensure that technologies developed through foreign partnerships remain under Indian control.
While some executives acknowledged that partnerships could facilitate capital raising and acquisition opportunities for startups, they cautioned against the disproportionate influence that foreign investors might exert, even without majority ownership.
Looking Ahead
Shashwath TR, CEO of Mindgrove Technologies, highlighted the importance of linking government support to market validation and domestic IP ownership. He noted that DLI 1.0 had successfully proven the viability of supported projects, which are now nearing market readiness.
As the DLI 1.0 initiative has already seen 24 supported chip design projects targeting various strategic sectors, the anticipation for DLI 2.0 continues to grow. The government’s commitment to enhancing the semiconductor landscape could lead to more ambitious projects, benefiting the entire ecosystem.
