The Ministry of Electronics and Information Technology (MeitY) has launched a groundbreaking programme for the development of semiconductors and display manufacturing ecosystems in India. With proposed incentives amounting to Rs 76,000 crore over the next six years, the government’s initiative aims to aid the production of these crucial components pivotal to the electronic industry.
Understanding Semiconductors
Semiconductors are a class of crystalline solids with intermediate conductivity between a conductor and an insulator. Being essential in producing various electronic devices such as diodes, transistors, and integrated circuits, semiconductors have been instrumental in generating compact, reliable, power-efficient, and cost-effective solutions. They are extensively used in manufacturing power devices, optical sensors, and light emitters, including solid-state lasers.
Incentives and Proposals Under the Programme
Several key measures and incentives have been announced under the scheme. For setting up semiconductor and display fabrication units, it proposes a fiscal support of up to 50% of the project cost. Furthermore, efforts will be made to modernize and commercialize the Semi-conductor Laboratory (SCL). The government also plans to provide financial assistance of 30% of capital expenditure to approved units producing compound semiconductors.
The Role of the India Semiconductor Mission
To ensure long-term sustainable development of semiconductors and display ecosystem, the India Semiconductor Mission (ISM) will be established. Led by global industry experts, ISM will act as a coordinating agency for efficient implementation of the schemes.
Strategic Importance and Impact on Employment
In the current geopolitical context, the trusted sources of semiconductors and displays hold strategic value and are integral to the security of critical information infrastructure. The initiative will create highly skilled jobs and boost various sectors of India’s economy. Besides, the programme will also contribute towards making India’s electronic sector globally competitive and technologically self-reliant.
State of the Indian Electronic Sector
The demand in the Indian electronics sector is anticipated to surpass USD 400 billion by 2023-24. Domestic production has witnessed impressive growth from USD 29 billion in 2014-15 to nearly USD 70 billion in 2019-20. However, the main concern is the increasing dependence on imports for most chips and components used in Indian communication and critical systems. This reliance poses a potential threat to national security and sovereignty.
Challenges and Way Forward
Despite the promising growth of electronic production in India, the net value addition is quite low, as most components are imported. There’s limited capability in upstream industries that involve greater value addition prior to assembly, like the production of processors, display panels, memory chips, cameras, etc. The absence of semiconductor fabrication plants, termed as foundries, compels India to depend on foreign contractors for microchip production.
To overcome these challenges, the new mission should focus on providing fiscal support to other parts of the chip-making chain, including design centers and testing facilities. Increased investment in the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) could attract microchip giants. Harnessing the potential of India’s Public Sector Enterprises, such as Bharat Electronics Ltd or Hindustan Aeronautics Ltd, could be beneficial in setting up a semiconductor fab foundry. Establishing favourable trade policies will be critical in building a plurilateral semiconductor ecosystem.