India tries to woo global companies by changing Rs 76,000 crore semiconductor, display manufacturing scheme

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India tries to woo global companies by changing Rs 76,000 crore semiconductor, display manufacturing scheme

The government has amended the Rs 76,000 crore incentive scheme for semiconductor and display manufacturing units, offering to give 50% of the project cost across all categories of factories as it seeks to seduce global players such as Intel to set up a production base in India to help reduce import dependency.

The Production Linked Incentive Scheme or PLI, announced in December last year, had offered varying degrees of fiscal support to different categories for the development of the semiconductor and display manufacturing ecosystem in India. . These ranged from 30 to 50%.

Now this has been unified – the government will fund 50% of the project cost in all tech nodes for setting up semiconductor factoriesincluding not only advanced computer chips, but also those used in the energy, telecommunications and automotive industries.

State IT Minister Rajeev Chandrasekhar said the total spend on the package will remain the same, but the 50% incentive harmonization will make the semiconductor “extremely competitive” policy and attracting investment across a range of opportunities, namely silicon and compound fabs, packaging units, display factories, and the design and innovation ecosystem.

Global companies, he said, are planning to explore India as a viable investment destination for semiconductors. India is positioning itself as one of Asia’s most attractive destinations for “all things electronics and semiconductors”, and the government is “confident” that investments of nearly Rs 2 lakh crore will arrive over the next two years.

“We believe this move will further increase interest and create additional proposals that have been discussed with us over the past 4-5 months,” Chandrasekhar told reporters.

Earlier Wednesday, the Cabinet, led by Prime Minister Narendra Modi, approved fiscal support of 50% of the project cost on a pari passu basis for the establishment of semiconductor and display manufacturing plants as well as other categories such as compound semiconductors. Pari-passu is a Latin phrase which means “on an equal footing”.

The move comes days after mining tycoon Anil Agarwal’s Vedanta Group announced an investment of Rs 1.54 lakh crore for setting up semiconductor and display manufacturing units in Gujarat.

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The PLI program was announced in December 2021 as a chip shortage, which has eased somewhat now, has hampered businesses at all levels – from automakers to toymakers.

India’s semiconductor market was valued at $27.2 billion in 2021 and is expected to grow at a healthy CAGR of nearly 19% to reach $64 billion in 2026. is made in India.

Setting up semiconductor units, also known as fabs, is a highly specialized, complex, and expensive task. Fabs require complex technology, are high risk and require long gestation and recovery periods, perhaps the reason why India has failed to crack this gap so far.

While Vedanta and Taiwanese contractor Foxconn, IGSS Ventures and Abu Dhabi-based Next Orbit Venture’s ISMC have offered to set up microchip manufacturing plants, Vedanta and Elest Pvt Ltd have offered to build a manufacturing unit. of screens.

Three submissions arrived in the semiconductor maker category and two in the display maker space.

Previously, companies looking to make chips 28 nanometers (nm) or smaller were eligible to get up to 50% of the project cost under the program.

Similarly, companies setting up fabs to manufacture 28-45nm node chipsets and 45-65nm chips were eligible for 40% and 30% project cost reimbursement, respectively.

The program for setting up display factories to manufacture TFT LCD/AMOLED screens included reimbursement of up to 50% of the project cost with a ceiling of Rs 12,000 crore per factory.

Asked about the reason for the decision to soften the incentives, the minister said that while the incentives were 50% for silicon factories, India wanted to attract players from across the ecosystem.

“We would like the whole integrated ecosystem, from design to manufacturing to packaging and testing, to be present here. The risk was that we would have fabs and then the packaging would go somewhere else. And that’s not something we want… We prefer that if the fabs are here, we also want to pack here,” Chandrasekhar said.

Later, if the number of players arriving requires an increase in total expenditure, the government will reconsider the matter.

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“Many players are in conversation with us. Our proposition as India is that we are a big market for semiconductors, we have a proven track record of growing the electronics industry and we are building a vibrant ecosystem of design and innovation…it’s an attractive proposition for almost anyone in the semiconductor space,” Chandrasekhar said.

In the Indian market, trailing edge nodes, 65nm and above, have “tremendous potential”, especially in the automotive and high power segment, and the incentive adjustments will also bring proposals aimed at this segment.

“We also said there would be no restrictions on the silicon manufacturing side of the nodes in terms of taking advantage of this incentive,” the minister said.

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