India is ambitiously and rightly making significant strides on the global stage with the goal of becoming the world’s third-largest economy by the next decade and a developed nation by 2045. One sector that India is eager to scale is the Electronics System Design and Manufacturing (ESDM) industry under the National Policy on Electronics 2019. The Narendra Modi-led government has made a focused attempt to position India as a global hub for ESDM and drive capabilities in developing core components such as semiconductors and display modules.
India’s target of achieving $300 billion in electronics manufacturing by 2025-26 is backed by various government initiatives and incentives. The Production Linked Incentive (PLI) scheme for large-scale electronics manufacturing, for IT Hardware, and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) are among the policies introduced to boost the sector. Additionally, the Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme and the Program for Development of Semiconductors and Display Manufacturing Ecosystem provide comprehensive support for the development of the semiconductor and display manufacturing ecosystem, including fiscal assistance for setting up facilities. The government’s Design Linked Incetive (DLI) scheme is a great opportunity for start-ups, domestic companies and MSMEs working on semiconductor designs.
India’s entry into the critical electronics supply chain, currently dominated by the US, China and Taiwan will give the world an alternative, neutral supply-chain source, considering the tensions between Washington and Beijing around Taiwan. Several other countries are also ramping up their semiconductor fab with substantial subsidies and India needs to be constantly on her toes to woo this sector.
While the Indian government’s efforts are commendable, there are areas that need continued attention since the country will be building a semiconductor manufacturing ecosystem from scratch. There needs to be a full-fledged Centre-State collaboration to ensure every hurdle in establishing the ecosystem and supply chain is addressed jointly and swiftly.
The good news is that there are promising signs from even domestic Indian companies and conglomerates. Apart from this, post PM Modi’s US visit, American memory chip-maker Micron has announced setting up an assembly, testing, marking, and packaging facility (ATMP) here. Microchip Technology and Applied Materials has announced expansion of R&D facilities in India, while Lam Research is investing in skilling. These announcements are encouraging, but the game-changer for India would still be a full-fledged semiconductor fab. The Micron and Vedanta-Foxconn projects have shown interest in investing in Gujarat, reflecting a strong Centre-state collaboration and forward-looking policies at the state’s end.
The revised $10-billion incentive programme is a bold attempt by India to woo the elusive semiconductor tribe. Given this is an entirely greenfield project, industry estimates indicate the cost of putting up a semiconductor fab in India could range from $8-10 billion for mainstream technology nodes to upwards of $20 billion for cutting edge chips. The government has already indicated that this programme can be expanded. For perspective, the US’s CHIPS Act offers $52 billion in subsidies and $280 billion in incentives for semiconductor makers.
Coming back to India, Intel’s acquisition of Israeli chipmaker Tower Semiconductor, announced last year, is yet to be cleared by the Chinese regulator, which has made ISMC’s India plans uncertain. Singapore-based IGSS Ventures, another interested party that wanted to set up in Tamil Nadu, reportedly had its source of technology unclear. To truly establish a high-tech manufacturing ecosystem, a social social infrastructure is a necessity. There also needs to be domestic demand and an attractive export base for global companies seeking diversified supply chains. A key aspect of the social infrastructure would be the availability of global standards of living, transportation, education, healthcare, etc, in areas designated for special investment, such as the Dholera Smart City project. Swift allocation of subsidies is needed to enable viable applicants to embark on serious work.
India’s pursuit of ESDM leadership is bold and quick decision-making—key from both the government and industry perspectives. It will help India position itself as a trusted player in the global electronics value chain and become a high-tech manufacturing powerhouse.
https://www.financialexpress.com/opinion/indias-big-bet-on-chips/3159697/
