India’s semiconductor Budget allocation piques foreign firms’ interest

The Indian government’s decision to allocate the highest outlay for semiconductor and display manufacturing subsidy in the Interim Budget 2024 has been a strong message. Earlier, Business Today had reported that the Budget will be closely watched by key stakeholders across the world as many international players are considering making long-term investments in India. While the Budget allocation is promising, the industry still has concerns.

“Across international semiconductor ecosystem players, a consistent slew of queries and reflections over past few days post India budget 2024 revolves around three aspects, firstly granularity of budget allocation across semiconductor types; secondly a roadmap view of budget allocation beyond 2024, since all semiconductor projects are for multiple years. Lastly, if there is roadmap for subsidies beyond initial $10 billion allocation,” says Danish Faruqui, CEO, Fab Economics, a US-based boutique semiconductor services firm.

Faruqui told BT that chip players are very interested in knowing the granular distribution of Rs 6,903 crore with respect to Si-based CMOS Fab, Compound Semiconductor Fab, Display Fab, Assembly Test and Packaging, Design Linked Incentives, and Semiconductor R&D.  He adds, Players interested in foraying in India are distributed across 6 categories as mentioned above, so each wants to understand the piece of the pie they can expect in 2024 in their semiconductor project.

Secondly, many players have questioned about road map of such priority and allocation beyond 2024 and if Government of India would continue to support the domestic semiconductor ecosystem development with the same vigour—this clarity is critical for international players who may commit multi-billion dollar projects spanning multiple years in India with breakeven point well beyond 5 years – such a long term commitment requires clear line of sight—political stability is also a part of it.

Lastly, many international players have expressed the concern that India’s $10 billion allocation for developing Si based CMOS Fab, Compound Semiconductor Fab, Display Fab, and Assembly Test and Packaging unit ecosystem in India via ISM, will get exhausted in first few proposals given the percentage of CAPEX subsidy is one of the highest in the world. World would like to know if India has plans in place to provide next tranch of allocation beyond the first $10 billion to scale the semiconductor ecosystem of India – since scaling is an existential need for surviving in semiconductor industry.

To this, both Minister Ashwini Vaishnaw and Rajeev Chandrasekhar had in the past stated that Rs 76,000 crore for semiconductor and display fabs is just the beginning. India is open to offering more incentives, if need be, in the future.

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