India’s semicon landscape has evolved since the mid-60s. Although India’s semicon journey started almost during the same period when countries like the US, EU, Japan, China, etc., it lacked the required infrastructure and policy support to make its mark in the global supply chain. Today, despite consuming ~$52B worth of semiconductors, <5% of these are manufactured domestically – indicating a massive opportunity for corporates and startups that are working towards localizing the supply chain.

For years, India mainly served as an outsourced design services provider for global semicon players such as Texas Instruments, Intel, Qualcomm, AMD, NVIDIA, NXP, among others. This built a strong base, with India now holding ~20% of the world’s design talent pool, laying the foundational framework for localization of design. Government schemes under the Indian Semiconductor Mission (ISM), including incentives such as PLI, DLI, are complementing efforts for the localization move. As a result, domestic corporate giants such as Tata, HCL, Adani, Vedanta, Kaynes, among others, have announced their respective plans to setup chip manufacturing and packaging units – as on date, the cumulative value of such approved and proposed projects is ~$37B.

Since these are large-scale projects that require high-capex, and long lead times to commercialize, Indian startups have started to parallelly work on other verticals of the value chain. Broadly, the semicon value chain is broken into –

• R&D & Design (Fabless) – consisting of IP licensors, electronic design automation, and chip designing.
  
  • These are typically IP-heavy, R&D-focused business models with low-capex and mid-to-high margin capabilities
  • VC funding has been very high in this segment
• Materials & Equipment – consisting of providers of materials (silicon, deposition gases, and other related materials), equipment (lithography, deposition, metrology) for semicon manufacturing
  
  • These are highly specialized, R&D-driven business models with the ability to generate mid margins
  • VC funding is relatively low in this segment, but is seen as an emerging area for investment
• Manufacturing (Fabs) – consisting of foundries, integrated design & manufacturing
  
  • These are highly process-driven and volume-based business models with high-capex and low-to-mid margin capabilities
  • VC funding is low in this segment
• Outsourced Semiconductor Assembly and Testing / Assembly, Testing, Marking & Packaging (OSAT / ATMP) – consisting of assembling, testing and packaging of the chips
  
  • These are also process-driven, volume-based business models with high-capex (lower than fabs) and low-to-mid margin capabilities
  • VC funding is low in this segment
• Downstream – non-core segment of the value chain, consisting of distribution, end integrators, recycling & end-of-life management
  
  • These are process-driven, and are largely corporate-driven business models with the ability to generate low-to-mid margins
  • Recycling & end-of-life management is considered an emerging segment for VC funding

According to Tracxn, during 2025, Indian semicon startups received VC funding of ~$44M (vs. ~$28M during 2024), and most of this has been concentrated on the R&D & Design segment of the value chain. We expect that this trend would continue to grow in the coming years given the massive opportunity indicated earlier. For instance, one whitespace opportunity is to design and develop timing / power management chips for automobiles / high-performance computing use cases (which are still largely imported). Another immediate whitespace is the lack of EDA tools that could potentially replace the dominance of Cadence / Synopsys for chip design.

Although many such whitespace opportunities exist across the value chain, we at Capital-A are witnessing an emergence of niche adjacency themes that have the capability to develop sub-ecosystems around the ‘core semiconductor value chain’. Since these are emerging themes, they require extremely patient capital and so gestation periods are typically long for VCs. However, Capital-A stands out in its ability to identify and underwrite such niche themes in the past, having led investments in startups such as Tan90, Manastu Space, among others.

We strongly believe that similar adjacency stories in semiconductors are emerging and we are excited to explore them.