A significant industrial invention, semiconductors are conceived as the harbinger of modern technology. And in the post-pandemic era, the global shortage in terms of semiconductors has only increased.
“The semiconductor consumption in India is growing at the rate of 15 per cent at the back of the country’s burgeoning electronics manufacturing industry. We are right now seeing 100 per cent imports vis-à-vis the country’s semiconductors needs. In 2020, India spent $15 billion in electronics imports, with 37 per cent of these being imported from China. The demand, however, is only set to increase with the introduction of 5G and growing consumption and production of electronics,” says Neeraj Bansal, Partner - Risk Advisory and COO – India Global, KPMG in India.
That being said, India is aiming to become self-reliant, and the government has come up with a Rs 76,000 crore package for semiconductor and display manufacturing, which is likely to reduce the country's dependence on imports in the future. The scheme for setting up of semiconductor fabs and display fabs in India will extend fiscal support of up to 50% of project cost on the pari-passu basis to applicants who are found eligible and have the technology as well as capacity to execute such highly capital intensive and resource incentive projects.
The government of India will work closely with the state governments to establish High-Tech Clusters with requisite infrastructure in terms of land, semiconductor grade water, high-quality power, logistics and research ecosystem to approve applications for setting up at least two greenfield Semiconductor Fabs and two Display Fabs in the country.
Bansal told Business Today, “A deciding factor for the location of semiconductor manufacturing facilities is proximity to companies that are the end-users of semiconductor components. For instance, semiconductor manufacturing facilities are likely to be located close to manufacturing hubs for global devices and OEMs and contract manufacturers involved in the production of consumer electronics, smartphones and PCs. In India, for instance, Gujarat, Maharashtra, Tamil Nadu, and Uttar Pradesh are leading manufacturing hubs for automobile, mobile phones and industrial parts and setting up semiconductor manufacturing facilities adjacent to these end consumers would be advantageous to both.”
India has an ambitious mission of $300 billion of electronics (manufacturing) by 2025, which includes not just manufacturing electronics but components as well.
“India’s increasing digitisation and unabated smartphone penetration make the country an attractive bet for semiconductor companies wanting to set up manufacturing bases. In terms of developing an ecosystem, India has been attempting to attract chip manufacturers, but large capital investment requirements, lack of infrastructure and insufficient prior experience in the business serve as deterrents. The government can look at acquiring existing foundries, which could jumpstart semiconductor manufacturing and lay the foundation for subsequent fab facilities in the country,” adds Bansal. The semiconductor industry is highly technical, with substantial time and capital required to build and run facilities.
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