Cabinet approves Rs 76,000-cr scheme for development of semiconductor, display manufacturing ecosystem

The Union Cabinet on Wednesday approved a Rs 76,000-crore program for development of sustainable semiconductor and display manufacturing ecosystem in the country, I&B Minister Anurag Thakur announced in a press conference. Sources had earlier confirmed to BusinessToday.In of the development.

The Rs 76,000 crore will be spent on this project in 6 years. Incentives of Rs 2.3 lakh crore will be given, the minister said. The setting up of 'India Semiconductor Mission' will drive this sector, the minister further informed.

Telecom and IT Minister Ashwini Vaishnaw said the decision will help design, fabrication, packing and testing of the microchips and develop a complete ecosystem. Moreover, the incentives include 25 per cent subsidy on capital expenditure for establishing unit of Compound Semiconductor Wafer Fabrication (Fab), assembly, testing, and packaging facility.

The incentive approved for the development of semiconductors and display manufacturing ecosystem in India include Semiconductor Fabs and Display Fabs, Semi-conductor Laboratory (SCL),  Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs and Semiconductor ATMP / OSAT units and semiconductor design companies. 

To elaborate, the scheme for setting up of semiconductor Fabs and display Fabs shall extend fiscal support of up to 50 per cent of project cost on pari-passu basis to applicants who are found eligible and have the technology as well as capacity to execute such highly capital intensive and resource incentive projects. 

For SLS, the Cabinet has also approved that Ministry of Electronics and Information Technology (MEITY) will take requisite steps for modernization and commercialization. 

Further, the scheme for setting up of compound semiconductors / silicon photonics / sensors (including MEMS) fabs and semiconductor ATMP / OSAT facilities will extend fiscal support of 30 per cent of capital expenditure to approved units. The government also added that at least 15 such units of compound semiconductors and semiconductor packaging are expected to be established under this scheme.

As for the semiconductor design companies, the government stated that the Design Linked Incentive (DLI) scheme shall extend product design linked incentive of up to 50 per cent of eligible expenditure and product deployment linked incentive of 6 per cent - 4 per cent on net sales for five years.

The government also added that support will be provided to 100 domestic companies of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), Systems & IP Cores and semiconductor linked design and facilitating the growth of not less than 20 such companies which can achieve turnover of more than Rs 1,500 crore in the coming five years.

Semiconductors are used for making a wide range of products ranging from automobiles to handsets. 

This mega incentive by Prime Minister Narendra Modi-led government comes at a time when carmakers, other electronic giants across the world are facing acute chip shortage as supply chain disruptions and demand for consumer electronics has increased.

(The story has been corrected to remove words 'PLI scheme' from the headline and copy.)