Nearly two years after the government first rolled out the Rs 76,000-crore incentive scheme for developing a domestic ecosystem for semiconductor manufacturing, the results are visible. As communications and IT minister Ashwini Vaishnaw told this newspaper, with the approval of four projects totalling Rs 1.49 trillion, the entire chip value chain—design, packaging, and fabrication—has made its presence felt in the country.
While the first chip project that got approved in June 2023 was of US-based Micron Technology for assembly, testing, marking, and packaging (ATMP), it’s noteworthy that the first proposal to get approved for domestic fabrication is from a domestic firm—Tata Group—in partnership with Taiwan’s Power Semiconductor Manufacturing Corp. Another of Tata Group’s projects is for packaging. From a point where no domestic firm was present in the chip manufacturing chain two years ago, the country will now have a domestic firm having a presence in fabrication as well as packaging. If one looks at Tata Group’s earlier acquisition of Taiwan’s Wistron to manufacture iPhones in the country, it can be safely concluded that domestic manufacturing in the electronics space has yielded fruitful results.
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The semiconductor incentive scheme was formulated to fill a gap which existed in the ecosystem. India always had talent, expertise and orders for semiconductor design but these then flowed outside the country for fabrication, so the manufacturing link was missing. Since semiconductors are today used in all manufacturing units—from mobile phones, electronics products, automobiles—it’s essential that the manufacturing base is spread across geographical locations than be concentrated in some areas. The Russia-Ukraine war brought this to the fore very clearly.
Also Read Win the battle, lose the war Partnership pays: Many Chinese firms are forming joint ventures with Indian players—that’s the way to go The evolution of AIF regulation Purchasing power (dis)parity: Household consumption lagging GDP, needs course correction The initial hiccups in the policy taking off the ground could have been due to the skewed incentive structure which was corrected in September, 2022, by making the fiscal support of 50% of project cost uniform across all technology nodes for setting up semiconductor units. Initially, the government had provided for financial support of up to 50% of project cost for at least two semiconductor and two display fabs for a minimum of six years. For others, like compound semiconductors, sensor fabs etc, fiscal support of 30% was offered.
There were initial doubts regarding the viability of domestic units as chances of them getting global orders seemed challenging. This got dispelled, perhaps, with Micron’s decision to set up a packaging unit in the country. It manufactures wafers, which is the raw form, at its Japan and China units. These would be brought to the India unit, where they would be processed into chips, packaged and then transported globally to industries which use semiconductor in their products. This model seems to have clicked with global majors because India also offers comparatively cheap, trained labour.
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With three more projects getting approved and several in the evaluation stage, an ecosystem for manufacturing as well as ancillary industry seems to be developing in the semiconductor value chain much like the automobile sector. The cabinet’s approval for the projects is a major fillip to India’s semiconductor ambitions. The next step is to demonstrate that the units being set up in the country are viable and do not suffer from any policy or regulatory glitches. Since domestic manufacturing of smartphones and now semiconductors have taken concrete shape, the timing is right for the government to focus on an incentive-linked component manufacturing scheme to shore up domestic value addition and check trade deficit.
Nearly two years after the government first rolled out the Rs 76,000-crore incentive scheme for developing a domestic ecosystem for semiconductor manufacturing, the results are visible. As communications and IT minister Ashwini Vaishnaw told this newspaper, with the approval of four projects totalling Rs 1.49 trillion, the entire chip value chain—design, packaging, and fabrication—has made its presence felt in the country.
While the first chip project that got approved in June 2023 was of US-based Micron Technology for assembly, testing, marking, and packaging (ATMP), it’s noteworthy that the first proposal to get approved for domestic fabrication is from a domestic firm—Tata Group—in partnership with Taiwan’s Power Semiconductor Manufacturing Corp. Another of Tata Group’s projects is for packaging. From a point where no domestic firm was present in the chip manufacturing chain two years ago, the country will now have a domestic firm having a presence in fabrication as well as packaging. If one looks at Tata Group’s earlier acquisition of Taiwan’s Wistron to manufacture iPhones in the country, it can be safely concluded that domestic manufacturing in the electronics space has yielded fruitful results.
The semiconductor incentive scheme was formulated to fill a gap which existed in the ecosystem. India always had talent, expertise and orders for semiconductor design but these then flowed outside the country for fabrication, so the manufacturing link was missing. Since semiconductors are today used in all manufacturing units—from mobile phones, electronics products, automobiles—it’s essential that the manufacturing base is spread across geographical locations than be concentrated in some areas. The Russia-Ukraine war brought this to the fore very clearly.
The initial hiccups in the policy taking off the ground could have been due to the skewed incentive structure which was corrected in September, 2022, by making the fiscal support of 50% of project cost uniform across all technology nodes for setting up semiconductor units. Initially, the government had provided for financial support of up to 50% of project cost for at least two semiconductor and two display fabs for a minimum of six years. For others, like compound semiconductors, sensor fabs etc, fiscal support of 30% was offered.
There were initial doubts regarding the viability of domestic units as chances of them getting global orders seemed challenging. This got dispelled, perhaps, with Micron’s decision to set up a packaging unit in the country. It manufactures wafers, which is the raw form, at its Japan and China units. These would be brought to the India unit, where they would be processed into chips, packaged and then transported globally to industries which use semiconductor in their products. This model seems to have clicked with global majors because India also offers comparatively cheap, trained labour.
With three more projects getting approved and several in the evaluation stage, an ecosystem for manufacturing as well as ancillary industry seems to be developing in the semiconductor value chain much like the automobile sector. The cabinet’s approval for the projects is a major fillip to India’s semiconductor ambitions. The next step is to demonstrate that the units being set up in the country are viable and do not suffer from any policy or regulatory glitches. Since domestic manufacturing of smartphones and now semiconductors have taken concrete shape, the timing is right for the government to focus on an incentive-linked component manufacturing scheme to shore up domestic value addition and check trade deficit.
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Leap for chip mission: The approval to a domestic fabrication unit among many others is a big fillip to India’s semiconductor ambition
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02.03.2024
Nearly two years after the government first rolled out the Rs 76,000-crore incentive scheme for developing a domestic ecosystem for semiconductor manufacturing, the results are visible. As communications and IT minister Ashwini Vaishnaw told this newspaper, with the approval of four projects totalling Rs 1.49 trillion, the entire chip value chain—design, packaging, and fabrication—has made its presence felt in the country.
While the first chip project that got approved in June 2023 was of US-based Micron Technology for assembly, testing, marking, and packaging (ATMP), it’s noteworthy that the first proposal to get approved for domestic fabrication is from a domestic firm—Tata Group—in partnership with Taiwan’s Power Semiconductor Manufacturing Corp. Another of Tata Group’s projects is for packaging. From a point where no domestic firm was present in the chip manufacturing chain two years ago, the country will now have a domestic firm having a presence in fabrication as well as packaging. If one looks at Tata Group’s earlier acquisition of Taiwan’s Wistron to manufacture iPhones in the country, it can be safely concluded that domestic manufacturing in the electronics space has yielded fruitful results.
Also ReadPleasant surprise: But the weak consumption numbers cast a shadow over the headline GDP data in Q3
The semiconductor incentive scheme was formulated to fill a gap which existed in the ecosystem. India always had talent, expertise and orders for semiconductor design but these then flowed outside the country for fabrication, so the manufacturing link was missing. Since semiconductors are today used in all manufacturing units—from mobile phones, electronics products, automobiles—it’s essential that the manufacturing base is spread across geographical locations than be concentrated in some areas. The Russia-Ukraine war brought this to the fore very clearly.
Also Read Win the battle, lose the war........
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