Semiconductors: Investing in India’s DeepTech Decade
Global semiconductor revenue is on course to nearly double in 2026. The World Semiconductor Trade Statistics (WSTS) Spring 2026 forecast places industry revenue at approximately US$1.51 trillion in 2026, 89.9% above 2025, and approximately US$1.9 trillion in 2027. Reported results have tracked that outlook: revenue reached US$702 billion in the first half of 2026, more than double the prior-year period, and a further US$517.7 billion in the third quarter alone, an increase of 146.8% year on year.
By Natasha Kumar
1. Why this sector
### **The industry has entered a new cycle**
AI infrastructure is the principal driver of this growth, and its largest near-term gains are accruing to memory and logic, segments led by a small number of incumbents operating at very large scale.
The opportunity for new companies lies across the rest of the stack. Every AI system, vehicle, base station, satellite and defence platform depends on specialised chips for power management, sensing, connectivity, control and interfacing, and on the design IP behind them. These markets, spanning analog, power, sensors and application-specific silicon, reward focused teams that can build defensible positions with venture-scale capital.
### **India is a large and import-reliant market**
* India's semiconductor imports rose from US\$5.7 billion in FY17 to US\$30.3 billion in FY25, a compound annual growth rate of 23%, with cumulative imports of about US\$150 billion over that period.
* The Government of India projects domestic semiconductor demand of about US\$110 billion by FY2030 and more than US\$200 billion by FY2035.
* India's electronics imports crossed US\$100 billion for the first time in FY2025–26, reaching US\$116.2 billion against exports of US\$48.0 billion.
### **Design concentrates value, and is where India's capability is deepest**
Design is the most value-intensive stage of the semiconductor supply chain, accounting for the majority of industry R\&D and value added while requiring relatively little physical capital compared with fabrication or assembly. The fabless segment generates 30–35% of global semiconductor sales. India employs nearly 20% of the global semiconductor chip design workforce and hosts about 7% of the world's semiconductor global capability centres.
Much of this capability, however, has historically been deployed on behalf of multinational companies, with the resulting intellectual property owned elsewhere. The central opportunity of the coming decade is the conversion of India's design depth into Indian-owned IP and products.
2. Why now
### **Domestic manufacturing has entered production**
India's manufacturing programme has progressed from approval to operation. Under Semicon 1.0, approved in December 2021 with an outlay of ₹76,000 crore, the Government of India has sanctioned twelve manufacturing projects across six states, representing cumulative investment of more than ₹1.64 lakh crore. The portfolio comprises one silicon fab, one silicon carbide fab, one integrated GaN micro-LED display fab and nine assembly, test and packaging (ATMP/OSAT) units.
A number of these facilities are now operational. Micron's assembly and test facility at Sanand was inaugurated in February 2026 and Kaynes Semicon's Sanand unit in March 2026, while CG Semi commenced commercial production at Sanand in July 2026\. The government reports that five units had commenced commercial production by October 2026\.
Tata Electronics' fab at Dholera, developed in partnership with Taiwan's PSMC, is scheduled for commissioning in 2028 and will address the 28–110 nm nodes used in automotive, industrial, power-management and communications applications. For Indian design companies, domestic packaging capacity today and domestic mature-node fabrication from 2028 are expected to shorten prototyping cycles and strengthen the case for trusted supply in defence and critical infrastructure.
### **Policy support extends across the value chain**
Public support now spans every stage of the value chain, from design incentives through fabrication and packaging to long-term research financing.
| Instrument | What it provides | Status |
| ----- | ----- | ----- |
| Semicon 1.0 | ₹76,000 crore for fabs, display fabs, ATMP/OSAT and chip design | Approved December 2021; twelve manufacturing projects approved |
| Semicon 2.0 | ₹1,27,500 crore across six pillars: chip design, machines and materials, fabs, ATMP/OSAT, R\&D, and talent | Cabinet approval 15 July 2026; applications opened 6 November 2026 for machines and materials, fabs, and ATMP/OSAT |
| Design Linked Incentive (DLI) | Reimbursement of up to 50% of eligible design expenditure (capped at ₹15 crore per application); 6% to 4% of net sales over five years on deployment (capped at ₹30 crore per application); access to EDA tools | 24 design projects approved, worth about ₹900 crore; 105 startups and MSMEs given EDA tool access |
| Electronics Component Manufacturing Scheme | Incentives for domestic component manufacturing | Outlay raised to ₹40,000 crore in Union Budget 2026–27 |
| Research, Development and Innovation (RDI) Scheme | ₹1 lakh crore over six years in long-term, low- or zero-interest financing for private R\&D, with provision for a Deep-Tech Fund of Funds | Approved 1 July 2025 |
### **Domestic design companies are progressing to silicon**
Companies supported under the Design Linked Incentive scheme had collectively completed more than 30 chip tape-outs and raised over US\$100 million in venture capital as of August 2026, according to government statements. The Ministry of Electronics and IT reports that 15 startups supported under its design programme have secured venture investment. Semicon 2.0 is designed to build on this progress, with the stated objective of establishing India as a key country for chip design IP.
### **Early-stage capital remains limited**
Private investment is rising from a low base. Indian semiconductor startups raised US\$92 million across 12 deals in the first five months of 2026, nearly four times the total raised in 2025\. While this growth is encouraging, the absolute sum remains modest relative to the scale of public commitment, the depth of available talent and the size of the import gap. With design companies typically requiring 18 to 36 months to progress from concept to first silicon, the segment calls for patient, sector-specialist capital at the seed and Series A stages.
3. Where we play
SilverX invests in **asset-light companies built on deep intellectual property**. As public and strategic capital finances India's fabs and high-volume packaging capacity, we direct our capital toward the design, materials, and process know-how that will determine how much value is created on top of that infrastructure, and toward businesses whose path to revenue remains within the reach of venture funding.
### **Our thesis**
In our assessment, a semiconductor technology is venture-backable when it can reach a meaningful commercial milestone on venture-scale capital, when its defensibility rests on intellectual property, and when it serves a market where domestic demand is growing, and supply remains largely imported. The areas that meet this standard are set out below, organized by their centrality to our portfolio.
#### **Core focus**
**Application-specific silicon.** Chips engineered for clearly defined end markets represent the area in which India's domestic demand and design talent align most closely. Our interest spans AI and edge-inference silicon for defence, electric mobility and 5G, as well as controllers for vehicles and industrial systems.
**Analog and mixed-signal design.** This segment encompasses data conversion, power and battery management, interfaces, and RF front ends. Because success depends on scarce design expertise rather than access to leading-edge process nodes, it is particularly well suited to India's engineering base and to the mature-node foundry capacity available to Indian companies.
**Power semiconductors.** Silicon carbide and gallium nitride devices, together with the conversion and delivery architectures that carry power from the grid to the processor, are central to electric mobility, renewable energy and AI data centers, and offer a natural focus for specialized design companies.
**Advanced packaging.** As system performance increasingly depends on how dies are integrated, value is migrating toward advanced ATMP, chiplet architectures, heterogeneous integration, and specialty substrates and interconnects. We seek companies that own packaging technology and process IP, complementing the high-volume capacity now being established under the India Semiconductor Mission.
#### **Long-horizon conviction**
The following areas take longer to mature and therefore warrant patient capital over a five- to eight-year horizon.
**Specialty materials and process chemistry.** Compound semiconductors, including SiC, GaN and other III-V materials, together with single-crystal growth, engineered substrates, and the chemicals and gases on which fabrication depends, remain largely imported into India. Their strategic importance is reflected in Semicon 2.0, which designates machines and materials as one of its six pillars.
**Electronic design automation.** Analog and mixed-signal design still relies heavily on manual effort, which constrains productivity across the industry. AI-native design and verification tools that shorten design cycles and reduce the cost of reaching first silicon would strengthen every other area of our thesis.
**Test and characterization.** Tools and services that improve yields and shorten qualification timelines serve domestic and global production alike, and their importance will grow as India's manufacturing base expands.
#### **Emerging frontiers**
**Sensing, imaging and electro-optics.** Radar, thermal and infrared imaging, and electro-optic systems enable vehicles, defence platforms and industrial equipment to perceive and respond to their surroundings. The adoption of driver-assistance systems and the modernization of India's defence capabilities are generating sustained domestic demand for these technologies.
**Photonics.** As data rates within AI clusters continue to rise, transmitting data with light is becoming indispensable, both between systems and, increasingly, within them. Optical interconnects, silicon photonics, and photonic sensing, including LiDAR, allow companies to build defensible products based on their design and integration expertise, without owning fabrication capacity.
**Critical equipment sub-systems.** Components and sub-systems for semiconductor manufacturing equipment form a further emerging opportunity and fall within the machines and materials pillar of Semicon 2.0.
#### **Selective engagement**
We engage selectively in LED and display drivers, IoT microcontrollers and MEMS sensors. Commodity memory (DRAM and NAND), legacy logic and conventional OSAT capacity lie outside our focus; while these segments are important to the national ecosystem, their capital intensity and competitive dynamics are better suited to strategic and public capital.
### **Where our thesis meets demand**
Our conviction is anchored in markets where Indian demand is accelerating and supply remains largely imported, namely automotive and ADAS, electric mobility and energy storage, AI data centres, defence and aerospace, telecommunications and satellite communications, and industrial automation.
4. What we look for
We assess every semiconductor opportunity against six criteria. Strength across all six is what moves a company to a term sheet.
**1\. A real system-level problem.** The company addresses a bottleneck in power, perception, compute or design that a named customer or programme needs solved, such as an OEM design engagement, a defence requirement or a data-centre or utility deployment. A market-size estimate alone is not sufficient.
**2\. Defensible IP.** Proprietary architectures, circuits, materials or process know-how that would be difficult and time-consuming to replicate, often reinforced by firmware and software that make the silicon easier to adopt.
**3\. An asset-light model.** A fabless or partner-manufactured approach that draws on established foundries and OSATs and, as it comes online, India's domestic capacity, so that capital is invested in IP and product rather than in heavy capital expenditure.
**4\. A credible path to silicon and qualification.** Node-appropriate foundry access, typically at mature nodes of 28 nm and above, and a realistic plan for the qualification its market demands, such as automotive, defence or industrial standards.
**5\. Team depth.** At least one founder with direct experience across tape-out, characterisation and bring-up, within a team that understands its end market as well as its silicon.
**6\. Capital efficiency.** A path to first revenue within 36 months, with total capital to revenue of under US$15 million for design companies and under US$50 million for materials and packaging-related companies.
5. How we support founders
We work as an active partner to the companies we back, typically from a board seat or as a board observer. Our support concentrates on four areas where an engaged investor can most change a company's trajectory:
* **Senior leadership hiring:** identifying and securing the commercial and growth leaders, such as heads of sales and growth, that a company needs as it moves from product to scale
* **Strategy:** shaping pricing and marketing strategy, constituting advisory boards, and supporting engagement with public-sector customers
* **Go-to-market:** opening relationships with enterprise, OEM and institutional customers and partners, and building the roadmap to convert them
* **Capital:** preparing each fundraise through investor outreach, valuation positioning and investor materials; readying the cap table for institutional rounds; supporting follow-on financing; and, at maturity, advising on IPO readiness, including introductions to investment banks
6. Founders, we would like to hear from you
If you are building semiconductor IP, design tools or chip-enabled systems in India, we would welcome a conversation. A short deck, a summary of your core IP, your tape-out status and the customer conversations you are pursuing are sufficient to begin.
Write to us at **info@silverx.vc** or visit silverx.vc.
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### **Sources**
* WSTS, Spring 2026 Semiconductor Market Forecast (2 June 2026\) and Q2 2026 release (August 2026\)
* Press Information Bureau, *Cabinet approves Semicon 2.0* (15 July 2026\)
* Press Information Bureau, *India Building Semiconductor Future* (17 September 2026\)
* Press Information Bureau, *Design Linked Incentive Scheme* backgrounder (4 January 2026\)
* Ministry of Electronics and IT, Semicon 2.0 portal launch, as reported by PTI (6 November 2026\)
* EY–IESA, India semiconductor market report (September 2026\)
* Ministry of Commerce and Industry, electronics trade data for FY2025–26 (April 2026\)
* Cabinet decision on the Research, Development and Innovation Scheme (1 July 2025\)
* SilverX, *India Semiconductor Investment Playbook*
* [Indian Infrastructure, *Indian semiconductor startups raise \$92 million in first five months of 2026* (2 June 2026\)](https://indianinfrastructure.com/2026/06/02/indian-semiconductor-startups-raise-92-million-in-first-five-months-of-2026/)
* Government statement on DLI scheme outcomes, as reported by IANS (15 August 2026\)
* Boston Consulting Group and Semiconductor Industry Association, *Strengthening the Global Semiconductor Supply Chain in an Uncertain Era* (April 2021\)
* European Semiconductor Industry Association, Q3 2026 semiconductor sales, based on WSTS data (November 2026\)
* Semiconductor Industry Association, testimony to the US Senate Committee on Finance (14 May 2025\)