Push for Semiconductor Industry

In News

• The government recently modified the production-linked incentive (PLI) scheme for the development of a semiconductor and display manufacturing ecosystem in India.
  • The scheme aims to make India’s $10 billion chip-making initiative more attractive to investors.

More about the Modified Scheme

• About:
  • The new scheme seeks to harmonise government incentives for all technology nodes of semiconductors.
  • It was brought to encourage all areas of chip-making & to create an integrated ecosystem in India, rather than manufacturing here and having to package and test chips elsewhere. 
• Fiscal support:
  • The modified scheme:
    • It provides uniform 50% fiscal support for all nodes. 
    • Besides, it will provide 50% of capital expenditure for other steps of the process as well [chip design and ATMP (assembly, testing, marking and packaging)].
  • Original scheme:
    • In the previous version of the scheme, the Centre was offering to fund 
      • 30% of the project cost for 45nm to 65nm chip production, 
      • 40% for 28nm to 45nm, and 
      • 50% or half of the funding for chips 28nm or below. 
• Production Focus:
  • The modified scheme also emphasised the production of the 45nm chip, which is fairly less time-consuming and economical in terms of production. 

Challenges

• Chip production is a resource-intensive and expensive process: 
  • While the new scheme provides equal funding for all steps of the process, the outlay of the scheme remains $10 billion. 
  • Notably, just the setting up of one semiconductor fab requires an investment of anywhere between $3 and $7 billion. 
• Area of focus:
  • Analysts, while positive, are concerned that not much of the current scheme outlay could be allocated to supporting other elements including display fabs, packaging and testing facilities, and chip design centres. 
  • They also argue that the initial funding should focus on areas like design and R&D, for which India already has an established talent pool.

• Lagging-edge vs cutting-edge technology:
  • India focuses on “lagging-edge” technology nodes in the start to supply to the automotive and appliance sector. 
  • Creating global demand may be difficult as giants like Taiwan offer viable cutting-edge chip-tech worldwide. 
• Water intensive:
  • Chip-making also requires gallons of ultrapure water in a single day. 
  • This requirement could be a task for the government to provide to factories, compounded also by the drought conditions which often prevail in large parts of the country. 
• Power supply:
  • Besides, an uninterrupted supply of power is central to the process, with just seconds of fluctuations or spikes causing millions in losses.

Initiatives taken by India 

• Semicon India programme:
  • It provides $10 bn fiscal support and other non-fiscal measures 
  • The Semicon India Program aims to provide attractive incentive support to companies/consortia that are engaged in Silicon Semiconductor Fabs, Display Fabs, Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs, Semiconductor Packaging (ATMP / OSAT) and Semiconductor Design.
• India Semiconductor Mission:
  • It has been set up as an Independent Business Division within Digital India Corporation having administrative and financial autonomy to formulate and drive India’s long-term strategies for developing semiconductors and display manufacturing facilities and semiconductor design ecosystem. 
• Production Linked Incentive scheme:
  • The government also recently announced the PLI and DLI schemes as major steps towards building a semiconductor ecosystem in the country.
• The Cabinet approval:
  • The recent Cabinet approval with an outlay of 76,000 crore spread over a period of six years for the development of semiconductors and display manufacturing ecosystem is expected to be a shot in the arm. 
  • This move claims to attract 1.7 lakh crore private investment in India.

Way Ahead

• India must seize the opportunity and become an attractive alternative destination for semiconductor manufacturing.
  • Attracting global players to set up here would be beneficial as they come with their customer base.
• Government policies should also focus on assuring and securing access to foreign technology suppliers through trade and foreign policy to ensure a global level of collaboration.

Source: TH