Semiconductor industry to be included in Design linked scheme(DLI)
- India has invited applications from 100 domestic companies, startups and small and medium enterprises to become a part of the design-linked incentive (DLI) scheme.
- Along with it the IT ministry has sought proposals from academia, start-ups and MSMEs to train 85,000 qualified engineers on semiconductor design and manufacturing.
About Design-linked incentive (DLI) scheme:
- Aim: to provide financial and infrastructural support to companies setting up fabs or semiconductor making plants in India.
- Provisions: It will offer fiscal support of up to 50% of the total cost to eligible participants who can set up these fabs in the country.
- It will also offer fiscal support of 30% of the capital expenditure to participants for building compound semiconductors, silicon photonics and sensor fabrication plants in India.
- An incentive of 4% to 6% on net sales will be provided for five years to companies of semiconductor design for integrated circuits, chipsets, system on chips, systems and IP cores.
Importance of Semiconductor manufacturing:
- The sudden surge in demand of chips and semiconductor components has underpinned the need to establish a robust semiconductor ecosystem in India.
- Several sectors, including auto, telecom, and medical technology suffered due to the unexpected surge leading to the scarcity of chips manufactured by only a few countries.
Importance of such a scheme:
- Economic progress: It is expected to facilitate the growth of at least 20 such companies which can achieve a turnover of more than ₹1500 crore in the coming five years, according to MeitY.
- Reduce dependencies on a few countries or companies.
- Help in Meeting demand & supply gap: The inception of new companies will help in meeting the demand and supply and encourage innovation in India, NXP, a Dutch semiconductor multinational.
- Attracting existing and global players: as it will support their expenditures related to design software, IP rights, development, testing and deployment.
- Boost domestic manufacturing capacities: It will boost the domestic companies, start-ups, and MSMEs to develop and deploy the semiconductor design.
- It will also help global investors to choose India as their preferred investment destination.
Similar steps taken by other countries:
- Currently, semiconductor manufacturing is dominated by companies in the U.S ,Japan, South Korea, Taiwan, Israel and the Netherlands.
- They are also making efforts in solving the chip shortage problem.
- U.S President Joe Biden wants to bring manufacturing back to America and reduce the country’s reliance on a small number of chipmakers based largely in Taiwan and South Korea.
- These chipmakers produce up to 70% of the world’s semiconductors, according to estimates by NXP semiconductors.
- The European Commission has also announced a public-private semiconductor alliance with the goal of increasing Europe’s chip production share to 20% by 2030.
- South Korea has offered various incentives to attract $450 billion in investments by 2030.
The Present scenario In India
- More than 90% of global companies already have their R&D and design centres for semiconductors but never established their fabrication units.
- Although India has semiconductor fabs in Mohali and Bangalore, they are purely strategic for defence and space applications only.
Challenges in making semiconductors in India:
- Capital intensive: Setting up fabs is capital intensive and needs investment in the range of $5 billion to $10 billion.
- Lack of investments and supportive government policies.
- Government clearance: New fabs use sub 5 nanometer technology that requires clearance from both the technology provider and the Government.
- Geopolitical situations come into play to build new fabs.
- Infrastructure needs like connectivity to airports, seaports and availability of gallons of pure water as challenges to set up fabs in India.
Potential in India:
- Back-end supply chains: several gases and minerals which are a part of the global semiconductor supply chain are produced in India.
- Human resources: We also have excellent colleges which can produce highly skilled engineers for semiconductor manufacturing.
- Pace of growth: The semiconductor industry is growing fast and can reach $1 trillion dollars in this decade. India can grow fast and reach $64 billion by 2026 from $27 billion today.
- Domestic manufacturing has picked up already: Mobiles, wearables, IT and industrial components are the leading segments in the Indian semiconductor industry contributing around 80% of the revenues in 2021.
- The Design Linked Incentive (DLI) scheme along with the recent Production-Linked Incentive (PLI) scheme can contribute in shaping India as an efficient, equitable, and resilient design and manufacturing hub.