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Fabrication facilities: Self-reliance in semiconductor chips crucial

How the PLI and DLI schemes will be game changers for India’s semiconductor ambitions

Fabrication facilities: Self-reliance in semiconductor chips crucial
More than 90% of global companies already have their R&D and design centres in India but have never established their IC fabrication units here.

By Sanjay Gupta

The COVID-19 pandemic hit the Indian economy in 2020 and turned the spotlight on the Atma Nirbhar Bharat Abhiyan. Pursuant to which, ‘Make in India’ and the Production Linked Incentive (PLI) and Design Linked Incentive (DLI) schemes have become crucial in shaping India as an efficient, equitable, and resilient semiconductor manufacturing hub. Semiconductors are used in the manufacturing of electronic devices, including transistors and integrated circuits, which in turn run consumer electronics such as smartphones, modern cars, TV, computers, etc. More than 90% of global companies already have their R&D and design centres in India but have never established their IC fabrication units here.

With no local manufacturing, India meets its semiconductors needs through imports, which is estimated to reach around $100 billion by 2025 from about $24 billion now. However, the recent announcement of the Rs 76,000-crore incentive package and the extended 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 will attract incentive support for companies engaged in silicon semiconductor fabs, display fabs, compound semiconductors, silicon photonics, sensors fabs, semiconductor packaging, and semiconductor design. The initiative will help India achieve its goal of being self-reliant in electronics manufacturing by attracting significant investments and creating around 1.35 lakh jobs over the next four years.

Demand for chips
India has become the hub for semiconductor design with nearly 2,000 chips being designed per year and more than 20,000 engineers working in various aspects of chip design and verification. The number of design bases in India and the rise in the number of skilled professionals and engineers are also expected to foster the growth of the semiconductors market.

Semiconductor attracts utmost attention from every sector like healthcare, automotive, consumer electronics, industrial devices, smart grid, gaming, smart payment, etc. Though the PLI scheme’s benefits might take some time to come into effect, in the long run it will ensure that there is no sudden shortage of chips that trigger massive price hikes across various segments of electronics, cars, and hi-tech goods.

India Semiconductor Mission (ISM) will be the nodal agency to drive long-term strategies for the sustainable development of the chips in the right direction. It will be instrumental in building a vibrant semiconductor and display ecosystem to enable India’s emergence as a global hub for electronics manufacturing and design.

ATMP/ OSAT facilities
As per the ministry of electronics and information technology (MEITY), 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% of capital expenditure to approved units. At least 15 such units of compound semiconductors and semiconductor packaging are expected to be established under this scheme. As ATMP units are coupled with strong fab linkages, it will accelerate efforts to set up semiconductor fabs in India, and its capability will improve the availability of semiconductors here.

For India, the foremost reason to develop the capacity to manufacture semiconductors is to tackle future supply shocks. Around 50 crore more people are expected to use the internet in the next decade, and demand for phones, laptops, servers, internet connectivity, and cloud usage will only skyrocket.

The writer is vice-president, and India managing director, NXP Semiconductors

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First published on: 24-02-2022 at 02:30 IST