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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.
- In the previous version of the scheme, the Centre was offering to fund
- The modified scheme:
- 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.
More about the Semiconductor industry
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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.
Production Linked Incentive (PLI) Scheme
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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
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