Indian Economy News

Cabinet approves Rs 76,000-cr PLI scheme for semiconductor manufacturing

  • IBEF
  • December 16, 2021

According to I&B Minister Mr. Anurag Thakur, the Union Cabinet approved a production linked incentive (PLI) plan for semiconductor and display board production in India.

Over the next 5-6 years, the scheme will invest Rs 76,000 crore (US$ 9.95 billion) in semiconductor production, he said.

The initiative intends to give beneficial incentive support to firms and consortia involved in silicon semiconductor fabs, display fabs, compound semiconductors / silicon photonics / sensors (including MEMS) fabs, semiconductor packaging (ATMP / OSAT), and semiconductor design.

According to the government, the programme will bring in a new era in electronics manufacturing by providing a globally competitive incentive package to companies involved in semiconductors and display manufacturing, as well as design. Semiconductors and displays are the foundation of modern electronics, driving the next phase of digital transformation under Industry 4.0, according to the government.

The move, according to Telecom and IT Minister Mr. Ashwini Vaishnaw, will aid in the design, production, packing, and testing of microchips, and will help develop a full ecosystem.

Reuters reported that according to a government source, companies such as Israel's Tower Semiconductor, Apple's contract manufacturer Foxconn, and a Singapore-based consortium have expressed interest in setting up semiconductor fabrication units in India, while the Vedanta Group is interested in setting up a display fabrication plant in India.

The following broad incentives for the development of India's semiconductor and display manufacturing ecosystem have been approved:

  • Semiconductor Fabs and Display Fabs: The scheme for setting-up semiconductor fabs and display fabs in India will provide pari-passu fiscal support of up to 50% of project cost to applicants who are found eligible and have the technology and capacity to carry out such highly capital intensive and resource incentive projects. To approve applications for setting up at least two greenfield semiconductor fabs and two display fabs in India, the Government of India will work closely with state governments to establish high-tech clusters with the necessary infrastructure in terms of land, semiconductor grade water, high-quality power, logistics, and research ecosystem.
  • Semi – conductor Laboratory (SCL): The Union Cabinet has also agreed that the Ministry of Electronics and Information Technology will take the required efforts to modernise and commercialise the semiconductor laboratory (SCL). MeitY will look into the prospect of a joint-venture between a SCL and a commercial fab partner to modernise the brownfield fab plant.
  •  Compound semiconductors / silicon photonics / sensors (including MEMS) fabs and semiconductor ATMP / OSAT units: The Scheme for establishing compound semiconductors / silicon photonics / sensors (including MEMS) fabs and semiconductor ATMP / OSAT facilities in India will provide approved units with financial assistance of 30% of capital expenditure. Under this strategy, at least 15 such compound semiconductors and semiconductor packaging units are expected to be created with government assistance.
  • Semiconductor design companies: The Design Linked Incentive (DLI) Scheme will extend a product design linked incentive of up to 50% of eligible expenditure and a product deployment linked incentive of 4% to 6% on net sales for 5 years. Support will be offered to 100 domestic companies of semiconductor design for integrated circuits (ICs), chipsets, System on Chips (SoCs), systems & IP cores, and semiconductor linked design, with the goal of assisting the growth of at least 20 of these companies to a turnover of more than Rs 1,500 crores (US$ 196 million) in the next five years.
  •  India Semiconductor Mission (ISM): A specialised and independent "India Semiconductor Mission (ISM)" would be established in order to promote long-term plans for establishing a sustainable semiconductors and display ecosystem. Global specialists in the semiconductor and display industries will lead the India Semiconductor Mission. It will serve as a focal point for the efficient and smooth deployment of the semiconductor and display ecosystem strategies.
  • Semiconductors and electronics will receive comprehensive fiscal assistance: The government of India has announced incentives for every step of the supply chain, including electronic components, sub-assemblies, and completed items. This will be achieved with the approval of a Rs 76,000 crore (US$ 9.95 billion) program for the growth of India's semiconductor and display manufacturing ecosystem. Under the PLI for Large-Scale Electronics Manufacturing, PLI for IT Hardware, SPECS Scheme, and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme, Rs 55,392 crore (US$ 7.25 billion) in incentive support has been granted. PLI incentives of Rs 98,000 crore (US$ 12.83 billion) have also been approved for allied industries such as ACC batteries, auto components, telecom & networking equipment, solar PV modules, and white goods. "The Government of India has committed Rs 2,30,000 crore (US$ 30.11 billion) in overall support to establish India as a worldwide powerhouse for electronics manufacturing, with semiconductors serving as the fundamental building block," the government stated.

"In today's geopolitical environment, reliable sources of semiconductors and displays are crucial to the security of critical information infrastructure." To ensure India's digital sovereignty, the approved program would spur innovation and strengthen domestic capabilities. It will also provide highly skilled job opportunities in order to capitalise on the country's demographic diversity.

"Development of semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain. The program will promote higher domestic value addition in electronics manufacturing and will contribute significantly to achieving a US$ 1 trillion digital economy and a US$ 5 trillion GDP by 2025," said the government in a statement.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.