Recent modifications to the Rs 76,000 crore semiconductor Production Linked Incentive (PLI) scheme were approved by the Union Cabinet.

Companies are given incentives under the PLI scheme to improve their domestic manufacturing.

The relevant Ministries/Departments carry out the PLI schemes.

The Union Budget for 2021–2022 included the announcement of PLI Schemes for 13 industries. Later, the textile industry was included.

This will now make it possible for semiconductor fabs across all technology nodes and the production of displays to get uniform financial support of 50% of project costs.

Incentives for semiconductor factories in the past were determined by the node's size.

For instance, a 30% project cost incentive was granted to higher end nodes.

With recently authorised revisions to the PLI for semiconductors, regardless of node size, all fab operations will receive financial support of 50%.

About

The current electronics industry is built on semiconductors and screens.

The electronics in everything from computers and smartphones to car brake sensors depend on semiconductors.

Manufacturing of semiconductors and displays is a very complicated and technologically advanced industry.

India does not produce any semiconductors, hence imports are necessary to satisfy domestic demand.

According to reports, India's demand for semiconductors would increase from its present level of USD 24 billion to over USD 100 billion by 2025.

Additionally, during the Covid-19 pandemic-related lockdown, India was the country most negatively impacted by the lack of domestic manufacture.

Electronics saw a huge increase in demand during this time period on a global scale.

The comprehensive programme for the nation's development of a sustainable semiconductor and display ecosystem was authorised by the central government in December 2021.

This includes

India Semiconductor Mission

It will be established as the central organisation for the effective and seamless implementation of the plans for the ecosystem of semiconductors and displays.

It will direct the long-term plans for creating a stable ecosystem for semiconductors and displays.

International leaders in the semiconductor and display industries will be in charge of the Mission.

Semiconductor Design Companies

100 indigenous semiconductor design companies for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), etc. will receive support.

The programme aims to support the expansion of at least 20 businesses with a potential to generate more than Rs. 1500 crore in revenue over the next five years.

Semiconductor Fabs and Display Fabs

The Scheme for Establishing Semiconductor Fabs and Display Fabs in India will provide financial support for projects worth up to 50% of their cost.

To accept proposals for the construction of at least two greenfield semiconductor fabs and two display fabs in the nation, the Central Government will closely collaborate with State Governments.

Fiscal Support

Every link in the supply chain, including electronic components, sub-assemblies, and final goods, has received incentives from the central government.

With semiconductors serving as the fundamental building block, the government has pledged funding of Rs. 2,30,000 crore (USD 30 billion) to establish India as a global centre for electronics manufacturing.

Three applications have thus far received approval for the construction of semiconductor fabs: a Vedanta-Foxconn joint venture, the multinational consortium ISMC, and Singapore-based IGSS Ventures.

The Gujarat government and the Vedanta-Foxconn joint venture recently signed a contract for the construction of a USD 20 billion semiconductor and display manufacturing facility in Gujarat.

Both Singapore-based IGSS Ventures and Abu Dhabi-based Next Orbit are supporting the establishment of ISMC in Karnataka and Tamil Nadu, respectively.

Vedanta and Elest have applied to establish a display manufacturing facility.

Reason behind this policy change

The more expensive nodes are often employed for applications like lower-end laptops and desktops, automobiles, and telecom.

One of the main reasons the government was raising support for these legacy nodes was because it claimed that this segment made up around 50% of the whole semiconductor market.

Investor interest in the plan will rise as a result of these modifications to the semiconductor policy, which will also lead to new suggestions.

Source: Business Standard