India launches $10 billion scheme to attract semiconductor companies

Image by Remus Rigo | Bigstockphoto

India has approved a production-linked incentive (PLI) scheme with an outlay of $10 billion to develop a sustainable semiconductor ecosystem.

The Indian government is aiming to woo semiconductor companies like TSMC and Intel along with display manufacturers with the new scheme. Taiwanese manufacturers Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC) are reportedly exploring investments for chip manufacturing in India through possible partnerships.

The new flagship scheme is a part of India’s aim to develop the country into a global electronics production hub. It also arrives at a time when auto manufacturers and tech companies worldwide are facing a chipset supply shortage amid supply chain disruptions.

Under the scheme for semiconductor fabs and display fabs, the Indian government will extend fiscal support of up to 50% of project cost on a pari-passu basis to applicants who are found eligible and have both the technology and capacity to execute such highly capital-intensive and resource-intensive projects.

India said that it 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 ecosystems) and approve applications for setting up at least two greenfield semiconductor fabs and two display fabs in the country.

The Union Cabinet chaired by Prime Minister Narendra Modi launched incentives for every part of the supply chain including electronic components, sub-assemblies, and finished goods.

The government said that incentive support worth $7.5 billion has also been approved under PLI for “Large 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 $13 billion have been approved for allied sectors such as ACC battery, auto components, telecom & networking products, solar PV modules and white goods.

“In total, the Government of India has committed support of ~Rs 2,30,000 crore ($30 billion) to position India as global hub for electronics manufacturing with semiconductors as the foundational building block,” said an official statement by the Press Information Bureau.

“The program will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design. This shall pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance,” the Union Ministry of Electronics and Information Technology (MeitY) said.

MeitY said that the newly announced program will give an impetus to semiconductor and display manufacturing by facilitating capital support and technological collaborations. The program aims to provide “attractive incentive” support to companies or consortia that are engaged in silicon semiconductor fabs, display fabs, compound semiconductors / silicon photonics / sensors (including MEMS) fabs, semiconductor packaging (ATMP / OSAT) and semiconductor design. Under the scheme for setting these up, the Indian government will provide fiscal support of 30% of capital expenditure to approved units.

“Semiconductors and displays are the foundation of modern electronics driving the next phase of digital transformation under Industry 4.0. Semiconductors and display manufacturing is a very complex and technology-intensive sector involving huge capital investments, high risk, long gestation and payback periods, and rapid changes in technology, which require significant and sustained investment,” MeitY added.

India’s Union Cabinet has also approved MeitY to take requisite steps for modernization and commercialization of Semi-conductor Laboratory (SCL). The ministry will explore the possibility for the joint venture of SCL with a commercial fab partner to modernize the brownfield fab facility.

India is also inviting semiconductor design companies with the help of its “Design Linked Incentive (DLI) Scheme” which will offer product design linked incentive of up to 50% of eligible expenditure and product deployment linked incentive of 6% – 4% on net sales for 5 years.

“Support will be provided to 100 domestic companies of semiconductor design for integrated circuits (ICs), chipsets, system on chips (SoCs), systems and IP cores, and semiconductor linked design and facilitating the growth of not less than 20 such companies which can achieve turnover of more than Rs 1500 crore ($202.7 million) in the coming five years,” MeitY said.

To drive long-term strategies for developing a sustainable semiconductors and display ecosystem, India is also setting up a specialized and independent “India Semiconductor Mission (ISM)”, which will be led by global experts in the semiconductor and display industries.

“Development of the semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain. The program will promote higher domestic value addition in electronics manufacturing and will contribute significantly to achieving a $1 trillion digital economy and a $5 trillion GDP by 2025,” the PIB statement read.

Pankaj Mohindroo, Chairman of the Indian Cellular and Electronics Association (ICEA) said, “Building blocks of the electronic ecosystem – i.e. Cells (PLI for ACC has already been launched), display and the semiconductor ecosystem – are critical for long-term sustenance. We will surely not lose our sight on the $300 billion output target by 2025-26, which will be the engine of the growth to support non only these three building blocks but also unleash multiple investments in the electronic supply chain.”

ICEA represents smartphone makers like Apple, Xiaomi, Oppo, Vivo and Lava along with contract manufacturers like Foxconn, Flex and Wistron.

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