Cabinet nod to mega plan for chip makers

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New Delhi: The government on Wednesday announced a 76,000 crore incentive package to create domestic ecosystem for semiconductors and display manufacturing, adding to the 154,000 it has previously announced for other allied areas, addressing a key area in its larger aim to make India a global electronics manufacturing hub.

Wednesday’s Cabinet decision, announced by electronics and information technology minister Ashwini Vaishnaw, and Information & Broadcasting minister Anurag Thakur is in line with the government’s ambition to create a $300 billion electronics industry in next six years.

The move comes at a time when electronics supply chains around the world have been affected by a shortage of semiconductors (or chips), highlighting the need for domestic manufacturing — a point that Vaishnaw reiterated on Wednesday. Apart from encouraging local companies and domestic start-ups, the policy also aims to attract global semiconductor and display manufacturers. The government said in a statement that it will extent fiscal support of up to 50% of a project’s cost to eligible display and chip makers . Reuters cited an unnamed person and reported that Israel’s Tower Semiconductor, Taiwan’s Foxconn, and a Singapore-based consortium have expressed interest in setting up chip factories in the country.

It also comes at a time companies are beginning to look outside China for electronics manufacturing — an opportunity that India has been trying to use to its advantage. According to the government, the scheme could dreate 35,000 direct jobs and attract 1.67 lakh crore (trillion) of investment.

Elaborating the six-year plan to build a domestic ecosystem for design, fabrication, packaging and testing of semiconductors with an investment of 76,000 crore, the IT minister said it has two “new” components — chip-to-startups (C2S), and design-linked incentive (DLI).

The C2S programme aims to create 85,000 “high quality, highly qualified, well trained engineers,” with a 20-year vision for the sector. “Indian engineers dominate the global semiconductor industry and about 20% of global semiconductor engineers are from India,” Vaishnaw said.

Explaing the DLI scheme, he said it is to encourage entrepreneurship as world’s best designers in the field of semiconductors are from India. “Such designers should get chance to set up their own start-ups, which is also conceptualised in this ecosystem.”

Under the DLI scheme the government will bear 50% of the costs incurred by such startups in software tools, computing power, raw materials, validation, testing, cost of intellectual property right, and its actual fabrication, he said.

“Under the scheme, when the product [of the startup] will be deployed in the industry, it will be eligible for a share in sales starting with 6% and taper down to 4% of sales value in five years,” Vaishnaw added.

He said this scheme will be of “strategic strength” for the country and the government’s target is to set up a minimum of 20 units in the next two years.

Already, India’s incentive package of 154,000 crore has attracted several leading electronics manufacturers to the country, which is already the second largest smartphone maker in the world after China.

The minister said the current disruption in the supply of semiconductors is expected to ease soon. According to the industry, the problem is likely to persist for sometime as automobile manufacturers are having deliveries pending for six to eight months.

Commenting on the Cabinet’s decision, Society of Indian Automobile Manufacturers (SIAM) director general Rajesh Menon said: “It is encouraging to note the announcement of a PLI scheme of 76,000 crore for semi-conductor manufacturing over 6 years. We hope that the supplies to the Auto Industry commences in the medium & long term through local manufacturing.”

In a tweet, Prime Minister Narendra Modi said: “Today’s Cabinet decision on semi-conductors will encourage research and innovation in the sector. It will also boost manufacturing and thus strengthen the dream of an Aatmanirbhar Bharat [Self-reliant India].”

“We appreciate the government’s effort to understand and recognise industry’s demands and envisioning a time-bound incentive-led vision that will help the industry with every aspect – from design and fabrication to packing and testing,” a representative for the National Association of Software and Services Companies (Nasscom) said.

Over the next six years, this programme will form the foundation of a new era in electronics manufacturing and will form a vital pillar of the government’s Atmanirbhar Bharat vision, in addition to driving growth and innovation, increasing prospects of job creation, and contributing to addressing the global supply chain crisis, the government added in its statement.

Speaking about the progress of electronics sector in India, Vaishnaw said. “We have created a $75 billion electronic manufacturing capacity in seven years, and the way we are progressing, in the next six years we may make it a $300 billion industry, which is about 20 lakh crore.”

The government has been focusing on creating domestic capacity in electronics through its production-linked incentive (PLI) schemes. “With the approval of the programme for development of semiconductors and display manufacturing ecosystem in India with an outlay of 76,000 crore (over $10 billion), Government of India has announced incentives for every part of supply chain including electronic components, sub-assemblies, and finished goods,” an official statement said.

The government has already approved PLI support worth 55,392 crore ($7.5 billion) for large scale electronics manufacturing, IT hardware, SPECS Scheme and modified electronics manufacturing clusters (EMC 2.0) scheme. In addition, PLI incentives worth 98,000 crore ($13 billion) have been approved for allied sectors comprising of battery, auto components, telecom and networking products, solar PV modules and white goods. “In total, Government of India has committed support of 2,30,000 crore ($30 billion) to position India as global hub for electronics manufacturing with semiconductors as the foundational building block,” the statement said.

Reuters contributed to this story

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