Indian semiconductor startups are entering their biggest test yet: turning engineering milestones into paying customers.
Over the past one year, several Indian semiconductor startups have completed tape-outs—the stage where chip designs are sent to foundries for manufacturing. But industry executives and investors say the real challenge begins when startups have to test the chips and send samples to potential customers.
India has been promoting sovereign chip capabilities through initiatives like the Design Linked Incentive (DLI) scheme, the newer Research, Development and Innovation (RDI) fund, and the broader India Semiconductor Mission. The government is betting that a domestic design ecosystem will reduce reliance on imported components across defence, telecom and computing.
“A functional product and a tape-out are definitely milestones. But it means nothing,” said Sateesh Andra, managing partner at Endiya Partners, an early-stage VC fund. “There's a lot more stuff that you need to do. Celebrate it. But then get into revenue mode.”
After a tape-out, startups test the chips, benchmark their performance and send samples to potential customers to test them out on their hardware. This is how semiconductor companies start proof-of-concept (PoC) projects, which can then turn into full-fledged contracts.
From tape-out to full-scale production depends on the complexity of the chip, and whether companies have worked with potential customers on the design. On average, post a tape-out, it can take 6-12 months for a company to get a chip ready for production at scale.
Companies that have taped out include C2i Semiconductors, AGNIT Semiconductors, Sophrosyne Technologies, Aheesa, Netrasemi, and Mindgrove Technologies.
Finding moats
According to Mordor Intelligence, India's semiconductor market size is estimated to stand at $12.4 billion in 2026 and projected to grow to $17.4 billion by 2031.
Many semiconductor startups in India are targeting niche areas where their technology and designs can be adopted locally, which they say gives them an edge over existing suppliers.
AGNIT works with defence and telecom original equipment manufacturers, while Sophrosyne creates chips for medical devices such as diabetes patches and ECG patches, and eventually plans to move into health-tracking devices like smart rings. C2i Semiconductors will focus on selling chips that improve heat efficiency for data centres to the companies that build them.
AGNIT develops gallium nitride (GaN) chips used in radar and telecom systems. These are smaller and more energy-efficient than conventional silicon chips, but are significantly harder to manufacture at scale. The technology is also subject to export restrictions in several countries.
Its co-founder and chief executive Hareesh Chandrashekhar said because of export controls, the company is well-placed to take advantage of indigenisation in the long run. “If you don't have a component ecosystem feeding into these systems, how are you going to build your systems in the long term? That's the question we've started to answer.”
The company currently has five paid PoC projects running and expects at least two of those to convert into long-term contracts in the next 9-12 months.
Sophrosyne Technologies said their feature set is what will stand out. “When we talk to any customer, price is the last thing we discuss. First thing we want to discuss with them is the features of our chip which don't exist across the globe right now,” said Manish Srivastava, founder and chief executive of the company.
Sophrosyne expects to receive its fabricated chips from the foundry within the next month and plans to begin PoCs in the first quarter of 2027 with one Indian and one UK-based customer.
The Bengaluru and UK-headquartered company, which has so far raised $2 million in seed money, plans to raise funds towards the end of the year to accelerate its go-to-market efforts. Srivastava said the company would require $6-8 million in funding over the next two years.
Missing anchors
Even as these startups move to the revenue stage, experts warn that India's ecosystem lacks anchor customers. “Unlike matured ecosystems like the US and China, India is missing anchor customers who come in early in a company's lifecycle so that they can control their destiny a little bit,” said Endiya Partners' Andra.
Other factors include getting priority foundry access and matching refresh cycles. Every industry—from consumer electronics to data centres—has a hardware refresh cycle that can range from two to seven years.
Foundries back-calculate whether a company's design will sell millions of chips. "It's why they'll do it for a startup in the first place, in the hope that they get their business,” said Chinnu Senthilkumar, managing partner at deeptech-focused Exfinity Ventures. “It's why it's important to hire locals in places like Taiwan who have those relationships and know the right people there. Getting priority isn't easy.”
According to Tracxn, 213 semiconductor companies in the country have raised funds in 2025. The sector raised a total of $361 million across 44 rounds. So far this year, it has raised $200 million across 27 deals.