Government announces Rs 76,000 crore policy to woo chipmakers, display fabs

The Indian government has announced a cumulative incentive package amounting to Rs 76,000 crore, as it bids to woo chipmakers to set up manufacturing facilities in the country. The overall package includes semiconductor manufacturing, display manufacturing as well as semiconductor design, as India looks to reduce its dependence on import of core components of technical products.

What's in India's semiconductor policy

Part of the Rs 76,000 crore initiative includes fiscal support of up to 50 percent of project cost for companies that will be setting up semiconductor and display fabs in India. A statement on the matter says that the central government will also work with states to set up ‘High Tech Clusters’ -- which will serve as specialised areas with adequate land, water, power and logistics networks.

This primary objective is geared to set up at least two semiconductor fabs and two display fabs in India, from scratch.

The government will also offer fiscal support of up to 30 percent of capital expenditure to applicants that are approved to build facilities to manufacture compound semiconductors, silicon photonics, micro electro-mechanical systems (MEMS) and sensors, as well as semiconductor assembly, testing, marking and packing (ATMP), and outsourced assembly and testing (OSAT) facilities. A total of 15 such facilities are targeted to be built with incentive support.

The overall incentive plan also includes semiconductor design, with the introduction of a Design-Linked Incentive (DLI) scheme. The latter will offer incentives of up to 50 percent of eligible expenses, as well as 4-6 percent of product deployment-based net sales over five years. Up to 100 domestic companies, including at least 20 companies with a target to achieve Rs 1,500 crore (each) in turnover per year, will be incentivised under this bracket.

The semiconductor policy also includes a mandate to modernise India’s Semiconductor Laboratory (SCL) in a potential joint venture with a commercial semiconductor manufacturing company. The modernisation and commercialisation of SCL is to be undertaken by the Ministry of Electronics and Information Technology (MeitY).

The package will also set up an independent ‘India Semiconductor Mission (ISM)’, which will act as the nodal agency for applicants of the above-mentioned incentive schemes, and the government.

How the industry has reacted

Early reactions to India’s new semiconductor policy have been largely bullish. In a joint statement, Ajai Chowdhry, co-founder of HCL and Satya Gupta, advisor of the Indian Electronics and Semiconductor Association (IESA) said, “This is the first time the government is providing significant incentives for DLI, giving incentives for product development and deployment to create Indian chip-level products. We are looking forward to an effective and timely implementation of the policies, with the help of a professional, experienced management and serious involvement of eminent domestic and global semiconductor leaders.”

Pankaj Mohindroo, chairman of India Cellular and Electronics Association (ICEA), called today’s semiconductor and display incentives, as well as the previously announced PLI for manufacturing of advanced chemistry cell (ACC) batteries in India as “critical for long-term sustenance.”

Sanjay Gupta, managing director of NXP India, also said, “It (the schemes) is a big step to bring India on the world map of the semiconductors industry, as it will pave the path for the industry to broaden the horizon of research, manufacturing and export. In the long term, issues like sudden surge in demand for semiconductors will also be addressed.”

The erstwhile Indian government of 2007 was the first to attempt to set up semiconductor fabs in the country. The first semiconductor policy of India had offered incentives of up to 20 percent, and chipmaker AMD was said to be in consideration to set up a plant in India. A 2011 rehashing of the plan also failed to have any major impact, with chipmakers such as Intel reportedly stating that the incentives were not lucrative enough when compared with what neighbouring nations such as China and Vietnam offered.

For a full lowdown on what has happened around India’s semiconductor policy before, click here.