Government proposed a 76,000 crore strategy to increase semiconductor production

With a Rs 76,000-crore incentive package, India finally took a giant step toward bringing semiconductor and display fab manufacturing into the country, at a time when supply shortages of the critical component have hampered industrial production across automobiles, electronics, and other technology-led sectors.

Previous efforts to entice firms to invest in India had not generated much success, but the government believes that the presence of a robust domestic market, as well as appropriate incentives and enablers, will attract companies at this time. After a Cabinet meeting headed by Prime Minister Narendra Modi, Communications and Information Technology Minister Ashwini Vaishnaw announced the decision, which wants to place India in the global league of top electronics manufacturing nations such as China, Taiwan, South Korea, and Malaysia.

With no domestic production, India satisfies its semiconductor needs through imports, which are expected to increase to over $100 billion by 2025 from roughly $24 billion presently.

With the rising acceptance of digital items such as smartphones, laptops, electronic gadgets, and IoT devices, as well as new-age cars and trucks, foreign exchange outflows have reached alarming proportions.

The greatest impact of the lack of local production was felt during the Covid-19 lockdown, when a global rise in demand for electronics resulted in a worldwide shortage of chips, affecting nations like India the hardest. This spurred the government to immediately put together a comprehensive incentive package aimed at creating an ecosystem, with the Prime Minister’s Office overseeing the entire process.

Taiwan Semiconductor Manufacturing Co., Intel, AMD, United Microelectronics Corp., and Fujitsu, among others, are in talks with the government. Tata Group and Anil Agarwal’s Vedanta have also expressed interest in semiconductors in India.

Incentives have been planned for companies involved in silicon semiconductor fabs, display fabs, compound semiconductors, silicon photonics, sensor fabs, semiconductor packaging, and semiconductor design, according to Vaishnaw.

“Today’s historic decision will accelerate the development of the entire semiconductor ecosystem, including design, fabrication, packaging, and testing,” said Vaishnaw.

The administration anticipates that the move will produce approximately 1.35 lakh jobs over the next four years.

According to Vaishnaw, while the country’s electronics industry currently stands at roughly $75 billion, it is likely to expand to as high as $250 billion over the next five years. “Consider how much we will benefit if this spike is met by local chip manufacturing. According to the industry, we can reach $300 billion in electronics manufacturing with local sourcing.”

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