India to Boost Semicon Manufacturing Amid Global Chip Shortage

At a time when automakers and tech companies across the world are grappling with a global chip shortage, India is geared up to have an answer to this crisis, at least partly, with its approval of a $10 billion incentive plan to attract semiconductor and display manufacturers.

In order to establish the country as a global electronics production hub, the government will extend fiscal support of up to 50% of a project’s cost to eligible display and semiconductor fabricators, the government said in a statement.

According to Reuters report, Israel’s Tower Semiconductor, Taiwan’s Foxconn and a consortium from Singapore have shown interest in setting up chip factories in India while Vedanta Group was keen to set up a display plant.

“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,” the report said.

The drive comes as some companies look to diversify their manufacturing bases beyond China due to the ongoing trade war between Washington and Beijing and is a sign India is trying to move up the electronics value chain.

Prime Minister Narendra Modi’s government has offered about $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. The push has already helped make India the world’s second-biggest smartphone maker behind China and also helped India win investment commitments from Foxconn, Wistron and Pegatron – all of Apple’s top contract manufacturers.

India is already home to the largest semiconductor designers, with offices of Intel, AMD, Nvidia, Samsung and others spread across the country.

The government has also approved an incentive plan to support 100 local firms working on integrated circuit and chipset designs and also said it expected the scheme to create about 35,000 high-quality positions, 100,000 indirect jobs and attract investment worth $8.8 billion.

The plan as informed by IT minister Ashwani Vaishnav would help develop “the complete semiconductor ecosystem – from the design of semiconductor chips to their fabrication, packing and testing in the country”.

Tata Group, one of India’s biggest conglomerates, is venturing into the semiconductor business and is in talks with three states to invest up to $300 million to set up a chip assembly and test unit.

“The focus on Silicon Logic Fab, Display Fab, Compound Semiconductors Fab, packaging, Semiconductor-products-design and Research will help in creating a vibrant and sustainable ecosystem in India leveraging the already existing semiconductor design capabilities,” said Ajai Chowdhry, Founder HCL and Satya Gupta, Advisor-India Electronics & Semiconductor Association

According to him, this is first time government is providing significant incentives for Semiconductor product Design called Design Linked Incentives (DLI) giving incentives for product development and product deployment to create Indian chips level products.

Chowdhry lauds the year-long effort by the MeitY team in consultation with Invest India, other ministries, Domestic and Global industry and Academia has resulted in a policy covering all aspects of the industry and has the required depth of understanding of the global ecosystem.

He added that the current policy is most comprehensive effort with deep understanding of the requirements of the industry and is the right way forward to create long-term atma-nirbharta in the field of Semiconductor and Electronics.

“India needed such an audacious goal and an integrated approach to kickstart its semiconductor industry. The current semiconductor shortage has made economies realize the strategic role of these chips in development. India, early on in the game, acknowledged the need to create a semiconductor ecosystem of its own. This Rs 76,000 crore investment for a production linked incentive (PLI) scheme towards semiconductor and display board production is a positive move towards uplifting the industry and economy,” Srinivas Satya, Country President, Applied Materials India, said.

He believes that this policy announcement is significant that it conceives an India Semiconductor Mission and integrates design-to-semiconductor device – in its overall ESDM enablement program.

Chief Analyst of 5Jewels Research Sumant Parimal believes this large financial incentive for semiconductor is going to help India in building its artificial intelligence (AI) supremacy in long run.

“Given the fact that future AI development is largely dependent on availability of modern computing and communication infrastructures, which runs on high performance semiconductor chips and devices, building in-house large-scale manufacturing capacities through such a large financial incentives and dedicated ISM programs in India is going to propel growth of technology and innovation led Indian economy. However, time has also come to incentivize large scale Quantum Computing Technology development to manufacturing in India for leading beyond silicon race in High-Speed Computing,” he added.

The global chip shortage has affected many industries for more than a year now impacting everything from smartphones, PCs, game consoles, automobiles, and medical devices. From that perspective, India’s plans to incentivize semiconductor manufacturing is not only expected to boost domestic manufacturing but is also likely to partly address the global semiconductor chip shortage issue.