Government introduces $10 billion red carpet for chip makers

After the cabinet meeting on Wednesday, the government said that production linked incentives (PLIs) will be given to companies in six years. It hopes to attract worth investment 1.70 trillion for more than 20 units.

Under the plan, two chip makers and two display makers are expected to set up units in the next four years, a government official said. 30,000-50,000 crores. In addition, 20 companies, including chip packaging firms and compound semiconductor companies, which manufacture chips for the automotive sector, power tools, etc., are expected to be commissioned in three years, with an investment limit. 3,000-5,000 crore.

India is looking to reshape supply chains to cut its dependence on China amid global chip shortages that have hit production of goods ranging from cars to computers. The government has already asked local car makers to cut electronics imports from China.

“In the current geopolitical scenario, reliable sources of semiconductors and displays hold strategic importance and are critical to safeguard critical information infrastructure,” the Ministry of Electronics and Information Technology said in a statement on Wednesday.

The government hopes that the incentive scheme will facilitate the production of critical components used in automobiles and mobile phones at the local level. In addition, the incentives provided under the scheme will help in designing, manufacturing, packing and testing semiconductor chips and develop an entire ecosystem.

“The demand-supply gap was widening day by day, disrupting the supply chain and increasing the overall manufacturing cost. The red carpet prepared by the cabinet can make India not only self-reliant but also a global supplier of chips.”

Under this scheme, the government will provide financial assistance of up to 50% of the project cost to selected firms to set up semiconductor and display fabs in India. It will work closely with states to set up high-tech clusters with necessary infrastructure such as land, semiconductor-grade water, high-quality power, logistics and research ecosystem to house the fabs.

“Any country that does not learn to make wafers (semiconductors) will be left behind in the days to come. Underlining the importance of the incentive scheme, Communications and Information Technology Minister Ashwini Vaishnav told reporters, “Any economy that does not have control over semiconductors, quality and design and does not focus on talent development, will not grow.”

Vaishnav said the scheme would generate 35,000 direct and 100,000 indirect jobs, keeping in mind the employment generation potential.

The government will also provide assistance of up to 30% of the capital expenditure for setting up compound semiconductors and semiconductor packaging facilities. It expects at least 15 such units to be set up with its support.

Under a separate Design Linked Incentive (DLI) scheme, the government will extend product design linked incentives to 50% of eligible expenditure and product deployment linked incentives of 6%-4% on net sales for five years.

Support will also be provided to 100 local companies engaged in semiconductor design for integrated circuits, chipsets, systems on chips (SoCs), systems and IP cores and semiconductor-linked design. The government said that the scheme will enable the growth of at least 20 such companies that can achieve turnover of more than Rs. 1,500 crore in the coming five years.

In addition, an Indian Semiconductor Mission will be established, led by global experts in the semiconductor and display industry, as a nodal agency for efficient and smooth implementation of plans and long-term strategies for the development of sustainable semiconductors and display ecosystems. will work.

The cabinet also approved a proposal for modernization and commercialization of semiconductor laboratories, including exploring a joint venture with a commercial fab partner.

“We expect an investment of approx. 1.70 trillion over the next four years. Its proposals are already in the pipeline. We expect projects for compound semiconductors to start in the next 3-4 months. In the medium term of two to four years, four large semiconductor fabrication plants will be set up,” Vaishnav said.

He said that India’s electronics manufacturing ecosystem, which was once negligible, has reached May cross 5.33 trillion more in FY21 22 trillion in four-five years.

Large-scale digitization after the outbreak of the pandemic has pushed up the demand for chips and led to supply chain imbalances, the minister said, adding that the industry expects things to return to normal in six to eight months.

The industry welcomed the announcement as semiconductor shortages have severely affected production of automobiles and electronic goods, slashing demand at a time when India’s economic recovery was gaining momentum.

In a statement, industry body NASSCOM said, “We appreciate the effort of the government to understand and recognize the demands of the industry and envision a time-bound incentive-led vision that will help the industry in every aspect – design and manufacturing. From packing and testing.”

Pankaj Mohindroo, Chairman, Indian Cellular said, “While India must collect everything possible in the world and export it to the entire world, the building blocks of the electronic ecosystem, which is the display and semiconductor ecosystem, need to survive for a long time. are important.” and Electronics Association.

The government has announced PLI schemes for large scale electronics manufacturing, hardware, batteries, auto components, telecommunications, networking products, solar PV modules and white goods including total air conditioners. 2.3 trillion, or $30 billion, to establish India as a global hub for electronics manufacturing with semiconductors as the baseline building block.

“It will be imperative that necessary permissions for setting up industries are given with the same speed. There is current and potential demand, and hence India should not miss the boat,” said Sandeep Shah, managing partner, NA Shah Associates LLP.