On 15th December, 2021, the Union Cabinet approved a production linked incentive (PLI) plan for semiconductor and display board production in India. The government had expressed hope that over the next 5-6 years, the scheme will invest Rs 76,000 crore (US$ 9.95 billion) in semiconductor production.
The initiative intends to give beneficial incentive support to firms and consortia involved in silicon semiconductor fabs, display fabs, compound semiconductors / silicon photonics / sensors (including MEMS) fabs, semiconductor packaging (ATMP / OSAT), and semiconductor design.
According to the government, the programme will bring in a new era in electronics manufacturing by providing a globally competitive incentive package to companies involved in semiconductors and display manufacturing, as well as design. Semiconductors and displays are the foundation of modern electronics, driving the next phase of digital transformation under Industry 4.0.
Almost immediately after the announcement of the policy by the government of India, several companies have expressed interest in setting up semiconductor fabrication units in India. These included Israel’s Tower Semiconductor, Apple’s contract manufacturer Foxconn, and a Singapore-based consortium.
Now the policy has started fructifying. Taiwan’s electronics giant Hon Hai Technology Group, better known as Foxconn, has entered into partnership with Anil Agarwal-led Vedanta Ltd to make chips in India, as part of the new supply chains that are developing, as there has been a global chip shortage in recent years, hitting the output of several goods ranging from cars to electronics.
Foxconn said in a statement – “This first-of-its-kind joint venture between the two companies will support Indian Prime Minister Narendra Modi’s vision to create an ecosystem for semiconductor manufacturing in India”.
According to the statement – “The targeted project plans to invest in manufacturing semiconductors. It will provide a significant boost to domestic manufacturing of electronics in India. Discussions are currently ongoing with a few state governments to finalize the location of the plant.”
This will be the first joint venture in the electronics manufacturing space after the announcement of the policy by the government of India.
Foxconn is the world’s largest contract electronics manufacturer and a major supplier to Apple. It has also expanded into areas such as electric vehicles (EVs) and semiconductors in recent years.
According to the Foxconn statement, it would invest $118.7 million to set up a joint venture company with Vedanta. While the Indian company would hold a majority stake, the Foxconn would have a 40% share.
India mainly imports semiconductors to use in industrial manufacturing and has been hurt severely by its global shortage. An increase in demand for consumer products, which use semiconductors, even as the pandemic disrupted production and supply chain, has resulted in a shortage of semiconductors and a steep rise in prices. So, domestic production of semiconductors was very essential for the Atmanirbhar Bharat Abhiyaan.
However, the government move is not limited to meeting the home demand only. The government aims to position India as a worldwide hub for hi-tech production. The policy boost for the country’s semiconductor and display manufacturing ecosystem, by providing a globally competitive incentive package to enterprises in manufacturing, as well as design, the programme is projected to usher in a new era in electronics manufacturing. It will also boost India’s scientific capacity and economic self-sufficiency in these vital areas. Under the PLI scheme, eligible applicants would get financial assistance of up to 50% of the project cost for establishment of semiconductor and display fabs in India.
To approve applications for at least two greenfield semiconductor fabs and two display fabs in the country, the Centre will work closely with state governments on high-tech clusters with the necessary infrastructure in terms of land, semiconductor grade water, power, logistics, and research ecosystem.
According to an official statement, “the Scheme for setting of compound semiconductors / silicon photonics / sensors fabs and Semiconductor ATMP / OSAT facilities in India shall extend fiscal support of 30% of capital expenditure to approved units.”
That is huge, but in fact there is more. Under the PLI for Large-Scale Electronics Manufacturing, PLI for IT Hardware, SPECS Scheme, and Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme, Rs 55,392 crore (US$ 7.25 billion) in incentive support has been granted.
PLI incentives of Rs 98,000 crore (US$ 12.83 billion) have also been approved for allied industries such as ACC batteries, auto components, telecom & networking equipment, solar PV modules, and white goods.
“The Government of India has committed Rs 2,30,000 crore (US$ 30.11 billion) in overall support to establish India as a worldwide powerhouse for electronics manufacturing, with semiconductors serving as the fundamental building block
