1

Centre reopens window to apply for $10 bn chip manufacturing plan

|

Why in news?

  • The Centre has decided to reopen the window for applying to its Rs 76,000 crore semiconductor manufacturing plan.
    • First announced in December 2021, it is a roughly $10 billion dollar production-linked incentive (PLI) scheme to encourage semiconductor and display manufacturing in the country.
    • The scheme was modified in September 2022 as govt increased the amount of fiscal support.
  • The new window, set to open on June 1, will remain until December 2024.
  • This is because the three applications it had received under the previous window last year have run into hurdles in setting up their respective plants.

Background: First window for entities to apply to the scheme

  • Timeline
    • The government opened the first window for entities to apply to the scheme in January 2022 and closed it in 45 days.
  • Three proposals received
    • The government had received three proposals to set up a fab in the country:
      • Vedanta-Foxconn joint venture,
      • international consortium ISMC and
      • Singapore-based IGSS Ventures.
  • Current status
    • At the moment, the Vedanta-Foxconn proposal is the only one that the Centre has on its table.
      • Even this proposal has been unable to find a partner that could licence them the technology to manufacture 28-nanometre chips.
    • SMC, backed by Abu Dhabi-based Next Orbit and Israel’s Tower Semiconductor, has asked the Centre not to consider its proposal owing to a pending merger between Intel and Tower Semiconductor.
      • The merger continues to be delayed more than a year after its first announcement.
    • Singapore-based IGSS Venture’s proposal was not found to be up to the mark by the government’s advisory committee.

What’s in today’s article:

  • Semiconductor manufacturing in India

Semiconductor manufacturing in India

Need for domestic manufacturing of semiconductors

  • Foundation stone of modern electronics industry
    • Semiconductors and displays are the foundation of modern electronics industry.
    • These are critical components that power electronics – from computers and smartphones to the brake sensors in cars.
  • To reduce import dependency
    • As India does not produce any semiconductors, the country’s demands are met with imports.
    • The demand for semiconductors in India will reportedly reach around USD 100 billion by 2025, up from the current demand of USD 24 billion.
  • To overcome the disruption in supply-chain
    • The absence of local manufacturing affected India the most during the lockdown imposed due to the Covid-19 pandemic.
    • The chip-making industry is a highly-concentrated one, with the big players being Taiwan, South Korea and the U.S. among others.
  • Geopolitical significance
    • In the current geopolitical scenario, trusted sources of semiconductors and displays hold strategic importance.
    • These are key to the security of critical information infrastructure.
      • E.g., The Department of Telecommunications has in the past raised concerns over possible bugs in the telecom equipment sold by the Chinese company.
    • U.S.-China tensions over Taiwan, and the supply chain blockages owing to the Russia-Ukraine conflict have forced countries to boost the domestic manufacturing of chips.

Steps taken by the Govt to promote indigenous semiconductor industry

  • In December 2021, the Central government had approved the comprehensive program for the development of sustainable semiconductor and display ecosystem in the country. This includes:
  • India Semiconductor Mission –
    • It will be set up as the nodal agency for efficient and smooth implementation of the schemes on Semiconductors and Display ecosystem.
    • It will drive the long-term strategies for developing a sustainable semiconductors and display ecosystem.
    • The Mission will be led by global experts in semiconductor and display industry.
  • Semiconductor Design Companies –
    • Support will be provided to 100 domestic companies of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), etc.
    • The scheme intends to facilitate the growth of not less than 20 such companies which can achieve turnover of more than Rs. 1500 crore in the coming five years.
  • 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.
    • Central Government will work closely with State Governments to approve applications for setting up at least two greenfield semiconductor fabs and two display fabs in the country.
  • Fiscal Support –
    • The Central Government has announced incentives for every part of supply chain including electronic components, sub-assemblies, and finished goods.
    • The Government 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.
  • Production Linked Incentive (PLI) scheme for semiconductor
    • In September 2022, Union Cabinet recently approved changes to the Rs 76,000-crore semiconductor Production Linked Incentive (PLI) scheme.
    • With this, all semiconductor fab plants will receive fiscal support of 50 per cent, irrespective of node size.
      • Node size refers to the size of the smallest feature that can be reliably manufactured on a semiconductor wafer using a particular fabrication process.
      • It is often measured in nanometers (nm).
    • Earlier, incentives for semiconductor fabs were based on the size of the node.
      • For example, higher end nodes were given an incentive of 30 per cent of the project cost.
  • Chips to Startup (C2S) programme
    • The government has also introduced the Chips to Startup (C2S) programme aims to train 85,000 engineers (Bachelors, Masters and Research level combined) qualified in ESDM disciplines over a period of 5 years.
      • ESDM – Electronic System Design and Manufacturing.