“Many Startups Selected Under DLI Are Part Of SFAL’s Portfolio”

With a vision to enable companies to develop semiconductor IPs in India, the Semiconductor Fabless Accelerator Labs (SFAL) has incubated five fabless design startups selected for DLI, three of which have secured funding. Sridhar Kaip from SFAL reveals its secret to becoming safal in a nascent semiconductor ecosystem to EFY’s Yashasvini Razdan…

Q. What are the challenges faced by fabless startups in India?

A. Most startups face common challenges in the pre-idea and early stages. However, for fabless startups, the primary challenge is investment. Most investors are interested in quick returns, but the gestation period for return on investment (ROI) in the semiconductor industry is longer. This makes funding a huge challenge because tape out of even a simple test chip costs between ₹5 million and ₹10 million. 

This expenditure often comes after 18 months of development—for a simple industrial application chip, not a complex one. 

Q. How does SFAL resolve these challenges?

A. SFAL educates investors on the timeline and ROI expectations in the semiconductor domain. We explain that success cannot be measured within six months; it takes time, and investors must be patient. Second, we ensure proper connections are made and supported by qualitative analysis. From the selection process to ongoing evaluation, we provide a detailed technical report to help investors make informed decisions.

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This approach addresses the primary challenges and ensures we position the ecosystem for long-term success.

Q. What specific services and infrastructure do fabless startups incubated under SFAL get?

A. We provide support across four different verticals — basic requirements, such as administrative support, evaluation support, access to expensive electronic design automation (EDA) tools and investment support.  Basic requirements include soft support, such as providing space, legal assistance, help with establishing the company, such as ROC-related (Registrar of Companies) requirements, and connecting with partners. We have around 50 mentors who are C-suite executives who evaluate new ideas and the startup’s potential to generate business. EDA tools are a critical resource, and their cost has been a significant barrier for many startups. SFAL provides access to front-end tools, tape-out tools, support for verification, validation, and connections with partners for pre- and post-sale requirements.

SFAL also connects startups with government-backed funding ventures, such as the Karnataka government’s initiatives, private ventures and individual investors. Our ecosystem ensures startups can connect with these investment actors to meet their financial needs.

Q. Could you explain SFAL’s business model?

A. SFAL is independently governed by its governing council members. Support is essential due to the high costs involved in the tools and other activities. Most of the activities executed by the startups are structured either through an equity model, where we take a stake in the startups, or via a pay-and-use model for tools. When startups mature and scale up to the next levels, they exit from our equity holdings, which provides us with returns. When we support startups in their investment activities, the approach varies depending on their maturity stage and specific strategies. In such cases, we may take a portion of the returns, similar to any investment model.

While this revenue sustains SFAL’s operations, the necessary environmental support for fabless activities requires significant backing from the government. We also receive funding from the government of Karnataka. 

Q. What role do mentors and contributors play in the ecosystem?

A. Mentors play a crucial role by dedicating their time and expertise to assist startups. Many of these mentors, often from renowned organisations, engage deeply with startups, contributing without financial incentives. Their involvement stems from a genuine desire to give back to society and advance the field of science.

Q. What are the criteria for selecting a startup for the SFAL programme? 

A. Our independent evaluators include venture capital leaders, business leaders, and technology experts specific to the presented proposal. They assess the idea from a technology, business, and financial stability perspective and submit the review to the governing council of SFAL, which then onboards the startups if they meet the qualifications.

The evaluators check the feasibility, level of expertise within the team, backgrounds, and potential to deliver on the technological front. From a business perspective, they analyse the proposed positioning as a product, the target customers they have identified, the competitive landscape they are navigating, market potential and revenue generation plans, and decide on areas where support is required. 

SFAL does not outright reject any idea; instead, we provide guidance and support in areas where they fall short.

Q. How do ecosystem partners contribute to offsetting costs for startups?

A. The support from our ecosystem partners is invaluable in offsetting costs for startups. EDA tools and related resources can be prohibitively expensive for individual companies, even with certain considerations. However, procuring these resources through the SFAL significantly reduces costs, making them more accessible.

Our partners including companies like Synopsys, Siemens,ARM, Marvell, and TESSOLVE, offer resources at considerably lower prices than market rates. For example, Intel has provided a lab for FPGA (Field Programmable Gate Array)- related projects, free of cost for all startups. Mentor Siemens has supplied an FPGA emulation platform at a heavily discounted rate. These contributions are critical in enabling startups to innovate and thrive.

Q. Are there plans to expand partnerships or develop new initiatives?

A. Yes, we are actively looking to expand our network of partners strategically to support our goals, particularly in developing critical intellectual properties (IPs). One initiative under consideration is IPen, which has many IPs ready for execution. This aligns closely with SFAL’s vision, and we are exploring ways to integrate it into our plans.

Additionally, SFAL’s reputation has attracted interest from new potential partners, many of whom are reaching out to collaborate and contribute to the ecosystem. These partnerships, along with strategic initiatives, will help us reach the next level of growth. We aim to roll out concrete plans starting January next year.

Q. What is the difference between SFAL and other fabless accelerator programs? 

A. From what we have seen, there is no equivalent to an industry-driven accelerator like SFAL anywhere. While universities drive some initiatives, these are typically focused at the university level. Many university-driven programs have restrictions on using the EDA tools for commercial deployment. In contrast, the tools provided by SFAL are geared towards commercial purposes to support startups in achieving commercial milestones, such as tape-out and, ultimately, full commercialisation.

While university programs focus on research, SFAL evaluates and assesses immediate product requirements and supports commercial activities to connect startups to necessary business networks and opportunities.

SFAL also handles proposals from external entities and those within the Government of Karnataka or India to connect them with the right resources and stakeholders.

Q. How do you measure the success of SFAL? 

A. We consider it a success for SFAL when a startup can be selected for a more extensive programme like the Design-Linked Incentive (DLI) Scheme, which invests almost ₹150 million—approximately $2 million—a decent level of investment, which signifies success. Chips to Startup (C2S) Programme also comes close to this level, involving university relations outside the SFAL ecosystem. 

The second parameter of success is when a startup secures a business order that is considerable enough to drive the whole business execution. 

The third parameter is when the startup secures substantial external funding to match its requirements for the next level of growth or even exit from SFAL, as SFAL holds equity in some of these companies.

Q. Could you give us some metrics for the parameters you just mentioned?

A. So far, close to five companies have been selected for DLI, three including Morphing Machines have secured funding, and two have exited from SFAL and are performing very well. For example, Lightspeed AI, one of our companies, relocated to Singapore and is excelling in photonics and optoelectronics.

Q. With your experience working with fabless startups, how do you evaluate India’s current position in the global semiconductor ecosystem?

A. A useful way to understand India’s position is through a pyramid model. At the top are mature markets such as the US, Europe, and Japan, supporting approximately 2000 companies in the fabless semiconductor space. Below them are ecosystems such as Israel and Taiwan, with around 1000 companies. India, however, currently has fewer than 150 startups in this domain.

Over the past five to six years, India’s semiconductor ecosystem has shown promising progress, but it is still in its nascent stage. Karnataka, especially Bengaluru, holds a unique advantage due to its concentration of captive centres, multinational companies, and abundant semiconductor talent. However, in terms of homegrown products and IP, we remain at an early stage.

Q. What steps are needed to reach the next level of growth in this domain?

A. To achieve the next level, we must build critical IPs. This is a key focus area for SFAL. Some initiatives will involve leveraging existing resources, while others will require strategic development and expansion of core competencies.

The Government of India has already announced initiatives to support this effort, and several startups are stepping forward to contribute. Inspiration can be drawn from Belgium’s journey 40 years ago. Belgium, with no significant presence in electronics or semiconductors, initiated government-backed programs to support the ecosystem. Today, it generates approximately $2 billion in revenues from a self-sustaining semiconductor ecosystem.

Q. What role does the government play in shaping this growth?

A. The MeitY and Karnataka governments have engaged in early-stage discussions and incorporating learnings from initiatives like SFAL into the Design Linked Incentive (DLI) and Chips to Startup (C2S) programmes. These efforts are pivotal in creating a foundation for the ecosystem’s development.

India can become a global hub for fabless semiconductor innovation by aligning talent, strategic initiatives, and governmental support. We are at the starting line of this journey, and with sustained effort, we have the potential to achieve remarkable growth, transforming India into a significant player in the global semiconductor ecosystem.

Q. How has SFAL contributed to programmes like DLI and C2S?

A. SFAL has provided inputs to initiatives like the DLI programme. Many startups selected under DLI are part of our portfolio. Our contributions and inputs from industry partners and organisations like the India Electronics and Semiconductor Association (IESA) have been instrumental in their success.

The C2S programme goes beyond tool provisioning. While the Centre for Development of Advanced Computing (C-DAC) manages tools, financial reimbursements undergo rigorous processes handled separately. SFAL remains focused on enabling the ecosystem and supporting startups, ensuring resources are used effectively.

Q. With SFAL so greatly entrenched in the fabless semiconductor ecosystem, why is C-DAC the implementation partner for the DLI scheme? Would a public-private partnership model have been more efficient?

A. C-DAC serves as the implementation partner, a role they are well-suited for due to their expertise in computing and related domains. We focus on business-oriented objectives, leaving the technical implementation to capable partners.

While occasional challenges arise, CDAC is fully capable of handling implementation efficiently. The governing council makes decisions on critical matters like tool selection, with significant input from SFAL. However, we deliberately refrain from getting involved in implementation to maintain focus on our primary goals—assisting the government in ensuring overall success for startups.

Q. While you are currently located in Bengaluru, are there any plans to expand to new regions to expand and support the semiconductor ecosystem across the country?

A. SFAL is working with state governments to replicate successful models across various regions. Regional focus allows us to utilise specific strengths, and establishing zonal centres of excellence focused on the following domains is vital for a mature ecosystem: 

• Automotive: Prioritised in states like Uttar Pradesh and Karnataka
• Radio frequency (RF) and power electronics: Suitable for Odisha
• Cutting-edge communication and processing: Areas of interest in Gujarat and Andhra Pradesh

Bengaluru has made significant progress, but other regions are still nascent, requiring substantial development to achieve their potential.

Q. What areas need more government or industry intervention to strengthen India’s fabless ecosystem?

A. Currently, I think the government has been very supportive. However, one piece of feedback regarding the DLI is that the reimbursement process poses a challenge. For a startup, it would be better if the funding in this scheme were structured as a grant or through a different mechanism. This feedback has already been communicated, and I am confident they are working on it.

We are now moving into the IP-level stage, aiming to involve the local industry actively. This would include using and developing IP locally to support these start-ups, focusing on IP-driven activities.