India is allocating US$10 billion to boost its semiconductor sector. Here's what we know so far

India is allocating US$10 billion to boost its semiconductor sector. Here’s what we know so far. (Photo by Nicolas ASFOURI / AFP) / TO GO WITH China-US-SKorea-telecommunication-wireless-Oppo, FOCUS by Julien GIRAULT

India to allocate US$10b to boost semiconductor sector

  • Scheme is expected to boost the development of a complete semiconductor ecosystem in India, ranging from design, fabrication, packaging, and testing.
  • So far the scheme is approved for a period of six years but can be extended based on the approval of the country’s electronics and IT minister.
  • Intel might just be the first foreign company to jump on board following the scheme announcement.

India has always been the country with state-of-the-art research and development centres focusing on chip design–but never one that produces chips locally. The government however plans to change this with a US$10 billion incentive scheme intended to boost the country’s semiconductor and display manufacturing. So far, the announcement has managed to lure American chipset giant Intel Corp to set up its first semiconductor manufacturing unit in India.

Currently, India relies on overseas manufactures for almost all of its semiconductor requirements. Since the world is fighting a severe chip shortage, Prime Minister Narendra Modi’s government is even offering about US$30 billion in incentives to woo some of the world’s largest electronics manufacturers to set up shop in India and give the domestic industry a fillip.

Overall, India is looking to push electronics manufacturing to be worth US$300 billion in the next six years from the current US$75 billion now. The bigger dream though, is to turn India into a global electronics production hub.

What does the plan entail?

Technology Minister Ashwini Vaishnaw told a news briefing the plan would help develop “the complete semiconductor ecosystem – from the design of semiconductor chips to their fabrication, packing and testing in the country”. 

Additionally, as the government statement reads, the program will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design.”

Currently, under the plan, the government will extend fiscal support of up to 50% of a project’s cost to eligible display and semiconductor fabricators, the government’s statement shows. The country’s administration expects the scheme to create about 35,000 high-quality positions, 100,000 indirect jobs and attract investment worth 1.67 trillion rupees (US$8.8 billion).

According to Ashwini, the government is looking at least two greenfield semiconductor fabs and two display fabs in the country, while at least 15 units of Compound Semiconductors and Semiconductor Packaging are expected to be established with government support under this scheme.

Under the Design Linked Incentive (DLI) scheme, support will be provided to 100 domestic companies of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design. It is under the DLI scheme that an incentive of up to 50% will be offered to eligible expenditure. Besides that, product deployment linked incentives of four to six percent will be provided on net sales for five years.

An independent ‘India Semiconductor Mission (ISM)’ will also be set up to drive the long-term strategies for developing a sustainable semiconductors and display ecosystem in the country. According to reports, it will be led by global experts in the semiconductor and display industry, and will act as the nodal agency for efficient and smooth implementation of the scheme.

So far, as per reports by local media, guidelines will be issued in early January 2022 on modalities of applying for semiconductor incentives, and that players will be given about 45-90 days to respond.

Intel joins the semiconductor league in India

Just days after the government announced the scheme promoting semiconductor manufacturing in India, Ashwini welcomed Intel to India in a response tweet to Intel’s India SVP and the president of Intel Foundry Services.

Intel, however, told Business Today that it has no new plans to announce at this time. “Intel India is Intel’s largest design centre outside of the US and we have been investing towards accelerating innovation and design engineering in India over the last two decades. However, we have no new plans to announce at this time,” a company spokesperson said.