New Delhi, Provisions under Semicon 2.0 to provide incentives to Indian chip-making firms against equity are expected to drive largescale investment required for the development of advanced chips for technology such as artificial intelligence, a senior government official has said.

Under Semicon 2.0, which has a budget of Rs 1.27 lakh crore, the central government has prioritised chip design by Indian companies.

In an interview to PTI on Saturday, Ministry of Electronics and IT Secretary S Krishnan said advance chip design may need thousands of crores of investments.

"We intend to provide more funding. Otherwise, under design-linked incentive scheme, you get only about Rs 15 crore. Now, to design high-end chips you need Rs 1,000 crore or more.

"At the same time, the government can't give everything. This is why you have this combination saying that you get investment from a venture capitalist or somebody who believes that you will be able to bring out this chip, and we will co-invest," he said.

The government on July 15 approved Rs 1.27 lakh crore (around USD 14 billion) Semicon 2.0 programme to accelerate semiconductor design and manufacturing capabilities. The initiative will be in effect for six years starting FY27.

The government has not announced a cap for investment in advance chip design by Indian firms. It will provide incentive to Indian chip companies in the form of grant and equity or link it to royalty base payment.

"The idea of co-investment is two-fold. One, that we increase the overall funding, which is available. Two, the government doesn't do the selection because it doesn't have that capacity. When whitelisted venture capitalist funds invest, we will co-invest," Krishnan said.

The government under Indian Semicon Mission has identified 105 startups that are already developing chips.

The focus of Semicon is on deepening the design ecosystem.

"During Semicon 2.0, we should be capable of designing our own advance chips. Whether we will be able to manufacture it in the country, we don't know. I don't think we will get there yet. We are not looking at that market yet," Krishnan said.

The manufacturing of advance chips might take time but the design of these will happen in the coming years, Krishnan said.

Currently, advance chips are considered semiconductor that contain 7 nano meter and smaller nodes.

India's first chip manufacturing unit will start with production old technology node of 28 nanometer, which is generally used for power electronics.

The government approved Semicon 2.0 with an aim to develop IPs, designs of chips and systems.

The work under Semicon 2.0 is expected to place India as a key semiconductor chip-design IP country.