Domestic manufacturing of semiconductor has now entered the second phase, where the focus needs to be on design and innovation. Ajai Chowdhry, co-founder of HCL and member, advisory committee, India Semiconductor Mission, speaks to Krishna Barot about why chip design should receive significantly more funding, how India can build an end-to-end semiconductor ecosystem, and the importance of addressing talent needs and long-term planning. Excerpts:

What is the most urgent requirement for India’s semiconductor sector right now?

We must prioritise semiconductor design in Phase 2 of the mission. India has shown it can set up manufacturing and fabrication units, but our real strength lies in design. That’s where we can differentiate ourselves globally. To support this, we need to ensure financial backing. I believe anything between Rs 10,000 crore and Rs 15,000 crore is necessary to enable startups, MSMEs (micro, small and medium enterprises), and design-focused firms to scale up. The government is upgrading institutions like the Semiconductor Laboratory in Mohali with Rs 10,000 crore, which is a good step. But smaller firms don’t have the support they need to take their designs forward. If we don’t address this gap now, we will lose momentum.

What are the challenges that chip design firms are facing today?

Funding is the main issue. The design-linked incentive scheme is in place, but its cap of Rs 15 crore per company is not practical. Even a basic consumer electronics chip can cost up to Rs 50 crore to develop. If the government could increase this cap to at least Rs 50 crore, it would make a real difference. Design work requires time and consistent funding, you can’t expect results in a year. It needs a long-term vision and commitment of at least 10-15 years for a full-fledged domestic value chain. Private funding is limited for deeptech sectors like this. Many companies find it hard to get past the early design stage because there’s not enough capital to sustain the long cycles needed for design, testing and refinement. That’s why we are saying the government must step in meaningfully at this stage.

What should the government and industry focus on to build this design ecosystem?

The first thing is to recognise that design is not an area where profits show up quickly. The returns will come, but they will take 3-5 years, especially for high-end chips used in computing or communications. So the funding must be structured with a longer runway in mind. At the same time, we should continue encouraging global semiconductor majors to set up shop here. The Tata-PSMC project in Dholera (Gujarat) is an example. These joint ventures not only help in building physical capacity but also bring design knowledge and expertise.

How do we build competitiveness in a global market we have entered much later than others?

We must begin by addressing domestic demand. India’s semiconductor consumption will reach around $100-110 billion by 2030. That demand should be met internally to whatever extent possible. If we can do that, the scale and experience gained will eventually allow us to compete globally. We also have to deal with the shortage of skilled professionals in this field. The chips to startup programme is a good initiative. Training 85,000 students in areas like VLSI (very-large-scale integration) and embedded design over the next five years will help, but it’s just a starting point. We need thousands more, and they need to be trained not just academically but in practical, industry-ready ways.

How optimistic are you about India’s semiconductor trajectory?

We are in a good place. Phase 1 proved that India can deliver on large-scale manufacturing. Now, Phase 2 must prove that India can lead in design. That’s where long-term value is created. We just need to make sure that policy and funding keep pace with our ambitions. If we do that, India will become a major player in the global semiconductor ecosystem.