New Delhi, Aug. 4 -- 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 relian...