As India is aiming to become self-reliant, the government has announced industry-friendly measures for the development of semiconductors and display manufacturing ecosystem in the country. The Union Cabinet has approved a financial outlay of Rs 76,000 crore for the semiconductor manufacturing ecosystem in India, announcing incentives for every part of the supply chain including electronic components, sub-assemblies, and finished goods.
Under the scheme for holistic development of semiconductor and display manufacturing system, the policy will support silicon semiconductor fabs, display labs, compound semiconductors/ silicon photonics/ sensors fabs, semiconductor packaging, semiconductor design, and modernisation and commercialisation of the Semiconductor Laboratory (SCL) at Mohali.
The scheme for setting up of semiconductor fabs and display fabs in India shall extend fiscal support of up to 50 per cent 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. In addition, the scheme for setting up of compound semiconductors / silicon photonics / sensors (including MEMS) fabs and semiconductor ATMP / OSAT facilities in India shall extend fiscal support of 30 per cent of capital expenditure to approved units. At least 15 such units of compound semiconductors and semiconductor packaging are expected to be established with government support under this scheme. The Union Cabinet has also approved that the Ministry of Electronics and Information Technology will take requisite steps for the modernisation and commercialisation of semiconductors.
“The biggest advantage that India has is the entire design ecosystem. We have around 24,000 design engineers working in India. So, that's a huge ecosystem. That means the talent is there, how to apply the talent, that application process is there. So, that is what gives us a very big advantage. Almost all the major economies are today giving close to 50 per cent capital incentive on setting up a semiconductor fab or a display fab. We will be giving practically similar incentives. But what we are offering in advance is a very clear 20-year roadmap where the focus is on generating that talent, nurturing that talent and making sure that as the industry grows. There are a sufficient number of very well trained engineers available for taking that journey forward. So, that is what will give us a bigger advantage,” said Ashwini Vaishnaw, Minister for Railways, Communications, Electronics & Information Technology.
In addition, to promote the fabless ecosystem in India, the government has announced design linked incentive as well and will offer up to 50 per cent of eligible expenditure and product deployment linked incentive of 6-4 per cent on net sales for five years. Support will be provided to 100 domestic companies of semiconductor design for integrated circuits (ICs), chipsets, system on chips (SoCs), systems & IP cores and semiconductor linked to design and facilitating the growth of not less than 20 such companies which can achieve turnover of more than Rs 1,500 crore in the coming five years. The government has also announced a C2S – chips to startup – program that will train 85,000 engineers to work in the semiconductor ecosystem.
Rajeev Chandrasekhar, Union Minister of State for Electronics and Information Technology and Union Minister of State for Skill Development and Entrepreneurship had told BusinessToday.In, “In 1990s, it was believed India is a good place for financial software, but not a great place for semiconductors. But come 2021, India is one of the hottest destinations for semiconductor design. Over 2000 ICs and chips have been designed in India in the last few years. I believe, given the success of our electronics vision, given the success that more and more companies are coming here, I think the general perception amongst these major semiconductor (majors) - that India is not ready, India is not capable, India can't do it, India will not do it, India will back out, India does not have the money – all that is gone.”
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,” Neeraj Bansal, Partner - Risk Advisory and COO – India Global, KPMG in India had told BusinessToday.In.
The new scheme announced by the government will contribute to $1 trillion digital economy as a part of $5 trillion DP by 2025-26. It has a production target worth Rs 9.57 lakh crore over the next 20 years and exports are expected to touch Rs 5.15 lakh crore over the next 20 years.
“While this initiative may ameliorate the situation in the medium term, this is even better in the long term as this would spur the semiconductor manufacturing segment. That would provide opportunities both for import substitution and export propulsion. Additionally, this initiative could also herald an end to end presence from fab to box for India in the electronics value chain. In the long run, we could also have large domestic corporations actively participate in this segment. To conclude, if the government could ease macro factors such as ease of doing business, enhancing the seamless import-export ecosystem for this segment, etc., this is a very real opportunity,” said PN Sudarshan, Partner and TMT Industry Leader, Deloitte India
In all, incentive support of Rs 55,392 crore have been approved under PLI for Largest Scale Electronics Manufacturing, PLI for IT Hardware, SPECS Scheme and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. In addition, PLI incentives to the quantum of Rs 98,000 crore are approved for allied sectors comprising ACC battery, auto components, telecom and networking products, solar PV modules and white goods. In total, the Government of India has committed support of Rs 2,30,000 crore to position India as a global hub for electronics manufacturing with semiconductors as the foundational building block.
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