Union Cabinet on Wednesday is likely to approve a multi-billion-dollar capital support and production-linked incentive to push the manufacturing of semiconductors in the country, sources told News18.com. Prime minister Narendra Modi-led Cabinet is all set to roll out a mega incentive worth Rs 76,000-crore for semiconductor manufacturing. The incentives are likely to be processed in three ways. The scheme will include provision for 25 per cent incentives on capital expenditure for establishing unit of compound semiconductor wafer fabrication (Fab), assembly, testing, and packaging facility, sources added. It would also include incentives for startups towards the design development of semiconductors. The proposed scheme envisioned investments of Rs. 1.7 lakh crore by the industry, sources mentioned. The government also plans to set up over 20 semiconductor design, components manufacturing, and display fabrication (fab) units in India over the six years, according to sources.
Once the Cabinet approves the scheme, the Ministry of Electronics and Information Technology (MeitY) will work out the details. With this mega incentive, the government is planning to attract the top semiconductor manufacturers such as Mediatek, Intel, Qualcom, Samsung and Texas Instruments. This move came at a time when a global chip shortage has massively affected the production in the industries across several sectors.
The Centre also had plans to set up two fab units for semiconductor displays, and 10 units each for designing and manufacturing components. This much-needed incentive by the central government can help India to become an electronics hub, especially amid ongoing global semiconductor shortage crisis.
The government will also provide financial support on capital expenditure, tariff reductions on certain components, and benefits through programmes, according to reports.
This move will broaden the scope of manufacturing and export from Indian as well as deepen India’s manufacturing base. Last month, ministry of electronics and information technology (MeitY) has released Volume-I of Vision Document on ‘Increasing India’s Electronics Exports and Share in GVCs’. The aim was to increase exports and India’s share in global supply chains “Local Goes Global”, a government release said. The vision document focused on the opportunities and key inputs to increase India’s share in the global value chain and build large-scale manufacturing capabilities to achieve a substantial share in global electronics export. It also recommended short-term (1-4 years) and long-term (5-10 years) strategies to increase electronics exports from India, shift of electronics manufacturing ecosystem investments, and expand exports by increasing competitiveness and scale. The vision document also emphasised on the strategies to build Domestic Champions and the need for linking their products with Lead Firms and GVCs, the release claimed.
Semiconductors are the main components used in manufacturing various kinds of electronic devices including smartphones, laptops, cars and other appliances and vehicles. The global semiconductor shortage has affected many industries for more than a year now. The shortage has affected smartphones, personal computers, game consoles, automobiles, and medical devices. It has also impacted global vehicle production in 2021 and the following year, leading to huge losses for the auto industry. The global auto industry may produce 6.3-7.1 million fewer vehicles this year due to the acute shortage of semiconductor chips.
In a report, IHS Markit said the chip crisis will not be over before the second quarter of next year. Global car manufacturers like Toyota Motor Corp and Ford Motor Corp have decided to slash production sharply in the wake of the chip crisis. Production delays have become frequent in the domestic auto industry.
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