Govt’s Rs 76,000 Crore Push For Semiconductor Manufacturing: Incentives Under Make In India

It is expected to attract investment of Rs 1.67 lakh crore.

The Union Cabinet has approved the production-linked incentive scheme (PLI) for semiconductors which would incentivise those manufacturing in India.

Overview

Semiconductors are a key component in all types of electronic devices, ranging from smartphones to automobiles.

Under the scheme, the government will provide incentives worth Rs 76,000 crore for semiconductor production over the next six years.

The incentives would apply for every part of the supply chain including electronic components, sub-assemblies, and finished goods.

The Incentives

Provisions part of the scheme include 25 percent incentives on capital expenditure for establishing a unit of Compound Semiconductor Wafer Fabrication (Fab), assembly, testing, and packaging facility.

It will also offer fiscal support of up to 50 per cent of project cost on the pari-passu basis to eligible applicants who possess the technology and capacity to execute the project.

One benefit is that the scheme is expected to generate around 1.35 lakh jobs over the next four years.

It is also expected to attract investment of Rs 1.67 lakh crore and lead to production worth Rs 9.50 lakh crore. 

India’s Edge

Ashwini Vaishnaw, Minister for Railways, Communications, Electronics & Information Technology, said that India’s main advantage is that it has the “entire design ecosystem”.

There are around 24,000 design engineers which means that there is no dearth of talent.

India will follow the steps taken by major economies which offer 50 per cent capital incentive on setting up a semiconductor fab or a display fab.

What sets it apart, however, is that it is also offering ” a very clear 20-year roadmap” in advance with focus on “generating that talent, nurturing that talent and making sure that as the industry grows”.

Reduce Reliance On Imports

The move comes amidst an ongoing shortage of microchips due to the pandemic with the intention to make the country an electronics hub.

The government is also looking to reduce India’s dependence on China, for which it introduced a scheme last year.

100% of India’s semiconductors needs are fulfilled by imports.

37 per cent of the $15 billion spent in electronics imports were from China.

Making India A Global Player

The PLI scheme announced in March 2020 would give companies incentives on incremental sales from products manufactured in domestic units.

The government believes that the scheme will “make Indian manufacturers globally competitive, attract investment in the areas of core competency and cutting-edge technology, ensure efficiencies, create economies of scale, enhance exports, and make India an integral part of the global supply chain.”

It is in talks with top global companies such as Taiwan Semiconductor Manufacturing Co, Intel, AMD, United Microelectronics Corp, and Fujitsu.

Indian companies such as Tata Group and Anil Agarwal’s Vedanta have also expressed interest in locally manufacturing semiconductors.

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