Industry welcomes modifications to India's semiconductor policy

In welcoming news for the semiconductor industry, the Union Cabinet on Wednesday approved changes in the “Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India.” Unlike different, incentives for technology nodes, the government will now offer 50 per cent incentives for semiconductor fabs across the technology nodes. Given the niche technology and nature of compound semiconductors and advanced packaging, the modified programme shall also provide fiscal support of 50 per cent of Capital Expenditure in pari-passu mode for setting up of compound semiconductors / silicon photonics / sensors / discrete semiconductors fabs and ATMP/OSAT.

“The modifications in the semiconductor policy that was announced in December 2021, essentially point to a strategy where we are harmonizing the incentive schemes across the various categories of semiconductor fabs, ATMP/OSAT and compound fabs. By doing this, the semiconductor policy is extremely competitive, and will attract investments across the spectrum of opportunities. We believe that this will further increase the interest and create additional proposals that have been in discussions with us over the last four or five months and move our country closer to India’s semiconductor mission,” said Rajeev Chandrasekhar, Union Minister of State for Electronics and Information Technology.

The decision of the government has been praised by the industry veterans. “This is an extremely good and positive development. It will accelerate setting up the Fabs and ATMP units which do not require as much investment as advanced node fabs. For example, a typical Compound Semiconductor Fab (GaN Fab), which requires a total investment of less than $100 million, will now get the same incentives and can be set up quickly. At the same time, the larger projects are being set up,” Satya Gupta, president of VSLI society, told Business Today.

50 per cent incentive for all technology nodes

The semiconductor fab and display scheme, aimed at attracting significant investments for setting up semiconductor wafer fabrication facilities in the country, extended a fiscal support for setting up Silicon CMOS-based Semiconductor Fab in India depending on the technology node. The 28nm or lower were eligible for up to 50 per cent of the project cost, above 28 nm to 45nm , and up to 40 per cent of the project cost and above 45nm to 65nm up to 30 per cent of the project cost. This has changed, and all of them will get a 50 per cent incentive.

50 per cent incentive for display fabs

Earlier, the financial support proposed to be extended was up to 50 per cent of project cost (subject to a ceiling of Rs 12,000 crore per display fab), but now the fiscal support has been revised to 50 per cent of Project Cost on a pari-passu basis.

Compound semiconductor, ATMP/OSAT

Even the incentive for ATMP, which has received the most interest from global and Indian companies, has been increased to 50 per cent. It is not just restricted to ATMP but also to Compound Semiconductors / Silicon Photonics / Sensors Fab and Semiconductor ATMP /OSAT facilities in India. Additionally, target technologies under the scheme will include Discrete Semiconductor Fabs.

“A realisation that seems to have dawned upon the government late but better late than never. It's a good decision, especially the recognition of the fact that 45 and older technology nodes have a lot of demand still markets and still form 50% or more of the market. Making incentive 50% for all helps in preventing people from having to tweak proposals, and they will do whatever they are comfortable with,” Arun Mampazhy, a semiconductor veteran and analyst, told Business Today.

India Electronics and Semiconductor Association (IESA) welcomed the approved modifications in the Semiconductor Policy by stating that this landmark policy and the ensuing modification, as made public today, possesses an astute clarity in terms of the deliverables, timelines and percentages of capital outlays as compared to many policies in this space, worldwide. “The policy is clear on support infrastructure, demand aggregation, support for R&D in the near future and Skill Development by leveraging EMC 2.0 Scheme. This seminal modification will energise various sectors to include electronics, automotive, defence and aerospace. This will further accrue large investments by companies to set up chip design and manufacturing facilities in India. Both the Production Linked Incentive (PLI) scheme of Government of India and ‘Make in India’ will make sure that local sourcing of semiconductors and associated components are a reality in the recent future. We at IESA are committed to ATMANIRBHAR BHARAT in thought, word and deed,” says Anurag Awasthi Vice President (Public Policy, Government and Corporate Relations), IESA.

Amidst the global semiconductor shortage, countries have realised the importance of semiconductors and are introducing schemes to strengthen and develop semiconductor bases in their respective country. The government of India announced the semiconductor scheme with an outlay of Rs 76,000 crore in December 2021 and received some credible proposals by mid-February, including a joint-venture between Vedanta-Foxconn for 28nm technology nodes and the display manufacturing unit to produce Generation 8 displays catering to small, medium and large applications. However, the government is still evaluating the proposals and is yet to decide on the approved applications. USA, too, introduced the CHIPS Act in August this year, which has already witnessed big players like Micron committing $15 billion over the next ten years.
 

Also read: Tata Motors shares: Rs 500 target in sight despite chip shortage worries

Also read: Cabinet approves 50% incentives for semiconductor manufacturing