Cabinet approves Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India
About Manufacturing Ecosystem in India:
Under the vision of Aatmanirbhar Bharat and positioning India as the global hub for Electronic System Design and Manufacturing, The Union Cabinet chaired by Hon’ble Prime Minister has approved a financial outlay of Rs 76,000 crore for the semiconductor manufacturing ecosystem in India, announcing incentives for every part of the supply chain including electronic components, sub-assemblies, and finished goods. The government of India will work closely with the state governments to establish High-Tech Clusters with requisite infrastructure in terms of land, semiconductor grade water, high-quality power, logistics and research ecosystem to approve applications for setting up at least two greenfield semiconductor fabs and two display fabs in the country. At least 15 such units of compound semiconductors and semiconductor packaging are expected to be established with government support under this scheme. The Union Cabinet has also approved that the Ministry of Electronics and Information Technology will take requisite steps for the modernisation and commercialisation of semiconductors The program will usher in a new era in electronics manufacturing by providing a globally competitive incentive package to companies in semiconductors and display manufacturing as well as design. This shall pave the way for India’s technological leadership in these areas of strategic importance and economic self-reliance.
The programme 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), Semiconductor Design.
Semiconductors and displays are the foundation of modern electronics driving the next phase of digital transformation under Industry 4.0. Semiconductors and display manufacturing is very complex and technology-intensive sector involving huge capital investments, high risk, long gestation and payback periods, and rapid changes in technology, which require significant and sustained investments. The program will give an impetus to semiconductor and display manufacturing by facilitating capital support and technological collaborations.
Following broad incentives have been approved for the development of semiconductors and display manufacturing ecosystem in India:
- Semiconductor Fabs and Display Fabs: The Scheme for Setting up of Semiconductor Fabs and Display Fabs in India shall extend fiscal support of up to 50% 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. Government of India will work closely with the State Governments establish High-Tech Clusters with requisite infrastructure in terms of land, semiconductor grade water, high quality power, logistics and research ecosystem to approve applications for setting up atleasttwo greenfield Semiconductor Fabs and two Display Fabs in the country.
- Semi-conductor Laboratory (SCL): Union Cabinet has also approved that Ministry of Electronics and Information Technology will take requisite steps for modernization and commercialization of Semi-conductor Laboratory (SCL). MeitY will explore the possibility for the Joint Venture of SCL with a commercial fab partner to modernize the brownfield fab facility.
- Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs and Semiconductor ATMP / OSAT Units: The Scheme for Setting up of Compound Semiconductors / Silicon Photonics / Sensors (including MEMS) Fabs and Semiconductor ATMP / OSAT facilities in India shall extend fiscal support of 30% of capital expenditure to approved units. Atleast 15 such units of Compound Semiconductors and Semiconductor Packaging are expected to be established with Government support under this scheme.
- Semiconductor Design Companies: The Design Linked Incentive (DLI) Scheme shall extend product design linked incentive of up to 50% of eligible expenditure and product deployment linked incentive of 6% – 4% on net sales for five years. 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.1500 crore in the coming five years.
- India Semiconductor Mission: In order to drive the long-term strategies for developing a sustainable semiconductors and display ecosystem, a specialized and independent “India Semiconductor Mission (ISM)” will be set up. The India Semiconductor Mission will be led by global experts in semiconductor and display industry. It will act as the nodal agency for efficient and smooth implementation of the schemes on Semiconductors and Display ecosystem.
- Comprehensive Fiscal Support for Semiconductors and Electronics
With the approval of the programme for development of semiconductors and display manufacturing ecosystem in India with an outlay of Rs.76,000 crore (>10 billion USD), Government of India has announced incentives for every part of supply chain including electronic components, sub-assemblies, and finished goods. Incentive support to the tune of Rs.55,392 crore (7.5 billion USD) have been approved under PLI for Larges Scale Electronics Manufacturing, PLI for IT Hardware, SPECS Scheme and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme. In addition, PLI incentives to the quantum of Rs.98,000 crore (USD 13 billion) are approved for allied sectors comprising of ACC battery, auto components, telecom & networking products, solar PV modules and white goods. In total, Government of India has committed support of Rs. 2,30,000 crore (USD 30 billion) to position India as global hub for electronics manufacturing with semiconductors as the foundational building block.
In the current geopolitical scenario, trusted sources of semiconductors and displays hold strategic importance and are key to the security of critical information infrastructure. The approved program will propel innovation and build domestic capacities to ensure the digital sovereignty of India. It will also create highly skilled employment opportunities to harness the demographic dividend of the country.
Development of semiconductor and display ecosystem will have a multiplier effect across different sectors of the economy with deeper integration to the global value chain. The program will promote higher domestic value addition in electronics manufacturing and will contribute significantly to achieving a USD 1 Trillion digital economy and a USD 5 Trillion GDP by 2025.
What is semiconductor?
Semiconductors possess specific electrical properties. A substance that conducts electricity is called a conductor, and a substance that does not conduct electricity is called an insulator. Semiconductors are substances with properties somewhere between them. ICs(integrated circuits) and electronic discrete components such as diodes and transistors are made of semiconductors. Common elemental semiconductors are silicon and germanium. Silicon is well-known of these. Silicon forms most of ICs. Common semiconductor compounds are such as gallium arsenide or indium antimonide.
Semiconductors became essential for many electronic appliances as well as for social infrastructure that support our everyday life.
Semiconductors play an important role in equipment control in a variety of fields, such as operating air conditioners at a comfortable room temperature, improving automobile safety, laser treatment in cutting-edge medical care and many more. Moreover, the advances of semiconductor technology have driven systems efficiency, miniaturization and energy savings, which in turn help to preserve the global environment in addition to achieving safe and comfortable life and to create prosperous future.
Semiconductors were discovered all the way back in 19th century. In the 1940s, transistors were invented. Radios, which used vacuum tubes until then, were significantly downsized and became portable.
A widely known semiconductor is silicon. Electronic components using semiconductors are called semiconductor devices, including the IC, which is an integrated circuit of transistors. Semiconductor devices mounted inside many electronics appliances are important electronic components that support our everyday live.
To promote overall growth and open job opportunities, projected to be more than 28 million by attracting investments worth $100 billion, the Indian central government has sought to reduce the country’s electronics import bill from 65% in 2014–15 to 50% in 2016 and gradually to a net-zero electronics trade by 2020. India has pursued a two-pronged strategy of import substitution and export encouragement, through the Make in India campaign coupled with the Digital India campaign, along with the Startup India and the Skill India campaigns. The government has fostered an environment conducive to foreign direct investment (FDI) inflow in a number of ways, as outlined in the National Electronics Policy and the National Telecom Policy.
- Increased liberalisation of Foreign Direct Investment (FDI): 100% FDI through an automatic route.
- Relaxation of tariffs.
- Establishment of Electronic Hardware Technology Parks (EHTPs) and Special Economic Zones (SEZs).
- Implementation of Preferential Market Access (PMA).
- Imposing basic customs duties on certain items falling outside the framework of the IT free trade agreement.
- Exempting import-dependent inputs/components for PC manufacturing from a Special Additional Duty (SAD).
- Incentivising the export of certain electronics goods in the Focus Products scheme under the Foreign Trade Policy.
- Funding 3000 PhD students in electronics and IT across the Indian universities.
- Imposing an education cess on imported electronic products for parity.
- To offer incentives of up to $1.7 billion by 2020 to electronics hardware manufacturing entities setting up shops in India to help offset disadvantages of developing the new industry in the country, a Modified Special Incentive Package Scheme (MSIPS) has been initiated. The government has approved 40 proposals worth over INR9538 crore between January 2014 and June 2015 under the scheme.
- The establishment of greenfield and brownfield Electronic Manufacturing Clusters (EMCs) is encouraged under the EMC scheme. Some 200 EMCs are projected by 2020, of which 30 are already in the process of establishment.
The National Institution for Transforming India (NITI Aayog), a policy think-tank under the Indian central government, has suggested in a draft report that a policy be adopted to provide a tax holiday for a period of ten years to firms investing US$1 billion or more that also create 20,000 jobs. The report, hinting at a policy tilt toward the Information Technology Agreement-2 (ITA -2), also suggests that India should re-strategize its defensive policies regarding Free Trade agreements (FTAs) and aggressively pursue export-oriented policies to utilize these FTAs as opportunities to obtain duty-free access to the electronics markets of its FTA partners