Government finalising plans to attract investment for semiconductor manufacturing in India: Report

The Central government is in the process of finalizing a plan for multibillion-dollar capital assistance and output-linked incentives to encourage semiconductor manufacturing in the country, at a time when companies across the board are facing major production cuts owing to global chip shortages, according to a report.

This comes at a time when even after having a robust consumer demand electronics and automobile manufacturers are being forced to crunch or delay their production. Semiconductors, often known as chips, are critical components for cars and electronic devices such as smartphones, televisions, laptops and computers. However, a global shortage of semiconductors is causing a problem for businesses.

As the government ramps up efforts to bring in much-needed semiconductor capital, senior officers are in active negotiation with some of the leading semiconductor producers, including Taiwan Semiconductor Manufacturing Co. (TSMC), Intel, AMD, Fujitsu, and United Microelectronics Corp, The Times of India reported quoting officials involved in the process.

This will bring relief to supply of products using chips and will also lessen the burden of all the sectors that use semiconductors for their benefits.

As per the report, the Prime Minister’s Office (PMO) is coordinating and monitoring the ambitious plan, and multiple ministries have been entrusted with the effort as the government works to expedite the process to woo semiconductor companies. The report quoted a source as saying that the administration is open to discussing capital assistance.

The government recently held a high-level meeting on matter, attended by telecom and IT minister Ashwini Vaishnaw, principal scientific adviser K VijayRaghavan, top scientist and Niti Aayog member VK Saraswat, Minister of State for IT Rajeev Chandrasekhar, representatives from the electronics, IT, and telecom ministries, the Defense Research and Development Organization (DRDO), the surface transport and space departments and academia, the report added.

Financial assistance for capital expenditures, tariff reductions on specific components, and advantages through programmes like the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) and production-linked incentives might all be on the table (PLI).

Leader in chip designing but India depends on imports

India now imports practically all semiconductors to meet demand, which is expected to reach $100 billion by 2025, up from $24 billion now. Previous attempts to persuade firms to engage in the semiconductor industry have failed, owing to the advanced production processes, high capital requirements, as well as the necessity for a constant supply of clean water and energy.

While India is regarded as a leader in chip design, it has been unable to attract the much-vaunted fab manufacturing industry, which requires expenditures of between $5 billion and $10 billion. However, the outbreak of the corona pandemic in early 2020, as well as the strategy of many global firms to look at a ‘China plus 1′ procurement policy, is expected to assist India to attract investments.

Apart from needs in other industries such as defence, car manufacturing, space and new-age technologies like 5G and internet of things (IoT), the government is convinced that a huge and rapidly rising electronics market will encourage firms to invest in India.