Highlights:
- Modi-led Cabinet gives nod to manufacture of semiconductor chips in India in a project that envisages Rs 76,000 crores.
- Companies like Israel’s Tower Semiconductor, Foxconn, Apple’s contract manufacturer, and a Singapore-based consortium have shown interest in setting up fabrication units in India.
- The Vedanta Group have also shown keen interest in constructing a display fabrication unit
The Production Linked Incentive Scheme (PLI) approved by the Union Cabinet on Wednesday envisages a 76,000 crore investment aimed at semiconductor and display board production in India over the next 5-6 years. Ashwini Vaishnaw, Union Telecom and IT Minister, communicated that India will look after the entire ecosystem of designing and manufacturing semiconductor chips.
The name of this ambitious project is Programme for Development of Semiconductors and Display Manufacturing Ecosystem.
The government issued a statement stating that the project will have a multiplied impact covering varied sectors and aid in stronger integration to the value chain at a global level. This would make a significant contribution towards achieving a GDP (Gross Domestic Product) worth $5 trillion by 2025. An article by Reuters quoted that a few companies who have shown interest in constructing semiconductor fabrication units in India are Israel’s Tower Semiconductor, Foxconn, Apple’s contract manufacturer, and a consortium based out of Singapore. The Vedanta Group has also shown an inclination towards setting up a display fabrication plant.
The incentives are likely to be processed by the Prime Minister Narendra Modi-led cabinet in three ways. The scheme will comprise provision for a 25 per cent capital expenditure incentive, for setting up of the compound unit of semiconductor wafer fabrication, assembly, testing along with packaging facility.
It would also incentivise startups the development of design for semiconductors. The proposed scheme intends an investment of Rs 1.7 lakh crores from the industry. The Government also aims to set up 20 units for semiconductor design, components manufacturing and display fabrication (fab). Post the Cabinet approval, now the Ministry of Electronics and Information Technology will work on the details.
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Top semiconductor manufacturers such as Mediatek, Intel, Qualcomm, Samsung, and Texas are being targeted with this mega incentive. The move is quite significant in the present situation when the shortage of global chips have massively impacted the production in industries across several sectors.
The major components utilised in manufacturing various types of electronic devices viz. smartphones, laptops, additional appliances and vehicles are semiconductors. A global shortage of semiconductors has had an adverse impact on numerous industries for over a year now, including smartphones, game consoles, automobiles, personal computers and medical devices.
Global vehicle production in 2021 has also been impacted by the same incurring huge losses to the automobile industry. Acute shortage of semiconductor chips has led to a 6.3-7.1 million drop in vehicle production this year.
A report released by HIS Markit reveals that the chip crisis would continue till the second quarter of the next year. Owing to the chip crisis, global car manufacturers like Toyota Motor Corp and Ford Motor Corp have lashed production sharply. The domestic auto industry has been witnessing production delays for quite some time now.
