Cabinet gives nod to changes in semiconductor and display fab incentives scheme

The Union Cabinet on Wednesday approved modifications in the production-linked incentive (PLI) scheme for manufacturing of semiconductor and display manufacturing ecosystem. 

The government approved uniform fiscal support of 50% of project cost for semiconductor fabs across technology nodes and display manufacturing, and also raised fiscal support for compound semiconductors, packaging and other semiconductor facilities to 50% from 30%, modifying the incentives of over Rs 76,000 crore, or about $10 billion, that the government announced in December 2021. 

“Under modified programme, a uniform fiscal support of 50% of project cost shall be provided across all technology nodes for setting up of semiconductor fabs,” the Union Cabinet said in a statement. 

“Given the niche technology and nature of compound semiconductors and advanced packaging, the modified programme shall also provide fiscal support of 50% of capital expenditure in pari-passu mode for setting up of compound semiconductors / silicon photonics / sensors / discrete semiconductors fabs and ATMP/OSAT,” it added. 

Under the modified scheme, fiscal support of 50% of project cost for all technology nodes for setting up of semiconductor fabs in India will be provided by the government. Fiscal support of 50% of project cost will be provided for setting up of display fabs as well. 

Fiscal support of 50% of capital expenditure will be given for setting up of compound semiconductors / silicon photonics / sensors fab and semiconductor ATMP or Assembly, Testing, Marking, and Packing facilities or OSAT, or outsourced assembly and testing facilities, in the country. 

Additionally, target technologies under the scheme will include discrete semiconductor fabs, it said. Discrete semiconductors are used for devices performing basic electronic functions. 

As per an official statement the advisory committee comprising global experts from industry and academia which was constituted to advise India Semiconductor Mission, the nodal agency for the programme for development of semiconductors and display manufacturing ecosystem in India, had recommended uniform support for all technology nodes of silicon semiconductor fabs, which has been accepted by the government. 

The technology nodes of 45nm and above have high demand which is driven by automotive, power and telecom applications, which constitute around 50% of the total semiconductor market, the government added. 

Last year, the government had announced the massive incentive plan to establish chip and display industries in India with the intent of becoming an electronics manufacturing hub and cut reliance on supplies from China. The incentives are planned to be offered to companies over six years and expected to attract investments worth ₹1.77 trillion. 

Two chipmakers and two display manufacturers are expected to set up units in the next four years under the plan, where each is expected to invest ₹30,000-50,000 crore. Further, 20 companies, including chip packaging firms and compound semiconductors companies that make chips for the automotive sector, power equipment, etc., are expected to be operational in three years with investments in the range of ₹3,000-5,000 crore, the government had said back in December. 

“The programme has attracted many global semiconductor players for setting up fabs in India,” the government said. It has since seen a $20 billion investment from Vedanta-Foxconn joint venture for setting up a semiconductor fab unit, display unit and other projects in Gujarat, while Israel-based ISMC Analog Fab Private Limited will set up a semiconductor fab unit with an investment of $3 billion. 

“The modified programme, will expedite investments in semiconductor and display manufacturing in India. On the basis of discussion with potential investors, it is expected that work on setting up of the first semiconductor facility will commence soon,” the government added.