Union Cabinet announces Rs 76,000 crore incentives for semiconductors

The Union Cabinet has cleared a production-linked incentive scheme (PLI) worth over Rs 76,000 crore for semiconductor production over the next six years. 

• The PLI scheme incentives up to 25 percent of capital invested by producers
• Foxconn, Tata and Tower semiconductor are a few firms who have shown interest 
• This comes in response to global semiconductor crunch

The timing's right?

The development, though expected, comes at a time when the country's auto sector – like its global peers – is witnessing a severe crunch of semiconductors. This has prompted many OEMs to cut down production, thereby failing to meet the impending demand, especially in the passenger vehicle segment. 

The scheme outlines incentives of up to 25 percent on capital investments made by the producers in setting up of compound semiconductor wafer fabrication, assembly, testing and packaging facilities. Telecom and IT minister Ashwini Vaishnaw informed during a news briefing that the scheme is expected to encourage over 100 local companies in the fields of semiconductor design circuit and chipsets, apart from training over 85,000 semiconductor engineers to make it a complete ecosystem. Further, the scheme also envisages design-linked incentive (DLI), for which the government will bear about half of the cost.

Some of the leading global and Indian companies including Foxconn, Tower Semiconductor and Tata Group, amongst others, have evinced strong interest in setting up semiconductor plants in India.

According to an RTI reply received by Autocar Professional earlier this year, an Executive Committee of Department of Electronics & Information Technology (MeitY) has recommended 13 out of the 34 applications received towards manufacturing of electronic components and semiconductors. PICL, Hical Technologies, IFB Industries, Tata Electronics, Salcomp Technologies, Continental Device, Panacea Medical Technologies, Deki Electronics and Tibrewala Electronic are amongst some of the leading domestic and global companies that find their name in the recommendation. 

Future of the Indian electronics market

India’s electronics system market is expected to grow 2.3 times its current size and reach $160 billion by 2025, according to a report prepared by Indian Electronic and Semiconductor Association (IESA).

“The approval of Rs 76,000 crore PLI scheme for semiconductors under which Rs 2.3 lakh crore incentives will be given, is a welcome move,” Sanjay Gupta, MD, NXP India, said. “This will enable India to become an electronics hub and encourage corporates to start manufacturing in India. It 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. This move will also make Indian manufacturers globally competitive to attract investment in the areas of core competency and cutting-edge technology.”

Baba Kalyani, chairman and MD, Bharat Forge, said, “I congratulate the Prime Minister and the government of India for today’s landmark decision to extend $10 billion support to develop semiconductors and display manufacturing in India. This strategic and pathbreaking move shall lay foundations to a much-needed indigenous and integrated electronic design and manufacturing ecosystem – bedrock of any developed economy in the digital and Industry 4.0 era. I am confident that this will now set in motion a longer-term process to transform India into an innovation driven economy with focus on high-end capability, skills and value-creation in the country!”

With the semiconductor crisis hitting automakers hard, the timing of this scheme couldn’t have been better. Let us know what you think in the comments below.

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