The Centre has decided to reopen the window for applying to its Rs 76,000 crore semiconductor manufacturing plan.

Ø  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.

Ø  The scheme was modified in September 2022 as govt increased the amount of fiscal support.

Ø  The new window, set to open on June 1, will remain until December 2024.

Ø  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 -

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 —

Ø  The government had received three proposals to set up a fab in the country:

Ø  Vedanta-Foxconn joint venture,

Ø  International consortium ISMC and

Ø  Singapore-based IGSS Ventures.

Current status —

Ø  At the moment, the Vedanta-Foxconn proposal is the only one that the Centre has on its table.

Ø  Even this proposal has been unable to find a partner that could licence them the technology to manufacture 28-nanometre chips.

Ø  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.

Ø  The merger continues to be delayed more than a year after its first announcement.

Ø  Singapore-based IGSS Venture’s proposal was not found to be up to the mark by the government’s advisory committee.

Need for domestic manufacturing of semiconductors -

Ø  Foundation stone of modern electronics industry —

Ø  Semiconductors and displays are the foundation of modern electronics industry.

Ø  These are critical components that power electronics - from computers and smartphones to the brake sensors in cars.

To reduce import dependency —

Ø  As India does not produce any semiconductors, the country’s demands are met with imports.

Ø  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 —

Ø  The absence of local manufacturing affected India the most during the lockdown imposed due to the Covid-19 pandemic.

Ø  The chip-making industry is a highly-concentrated one, with the big players being Taiwan, South Korea, Japan and the U.S. among others.

Geopolitical significance —

Ø  In the current geopolitical scenario, trusted sources of semiconductors and displays hold strategic importance.

Ø  These are key to the security of critical information infrastructure.

Ø  E.g., The Department of Telecommunications has in the past raised concerns over possible bugs in the telecom equipment sold by the Chinese company.

Ø  U.S.-China tensions over Taiwan, and the supply chain blockages owing to the RussiaUkraine conflict have forced countries to boost the domestic manufacturing of chips.

Ø  Steps taken to promote indigenous semiconductor industry –

Ø  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 –

Ø  It will be set up as the nodal agency for efficient and smooth implementation of the schemes on Semiconductors and Display ecosystem.

Ø  It will drive the long-term strategies for developing a sustainable semiconductors and display ecosystem.

Ø  The Mission will be led by global experts in semiconductor and display industry.

Semiconductor Design Companies –

Ø  Support will be provided to 100 domestic companies of semiconductor design for Integrated Circuits (ICs), Chipsets, System on Chips (SoCs), etc.

Ø  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 –

Ø  The Scheme for Setting up of Semiconductor Fabs and Display Fabs in India shall extend fiscal support of up to 50% of project cost.

Ø  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 –

Ø  The Central Government has announced incentives for every part of supply chain including electronic components, sub-assemblies, and finished goods.

Ø  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 —

Ø  In September 2022, Union Cabinet recently approved changes to the Rs 76,000-crore semiconductor Production Linked Incentive (PLI) scheme.

Ø  With this, all semiconductor fab plants will receive fiscal support of 50 per cent, irrespective of node size.

Ø  Node size refers to the size of the smallest feature that can be reliably manufactured on a semiconductor wafer using a particular fabrication process.

Ø  It is often measured in nanometers (nm).

Ø  Earlier, incentives for semiconductor fabs were based on the size of the node.

Ø  For example, higher end nodes were given an incentive of 30 per cent of the project cost.

Chips to Startup (C2S) programme —

Ø  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.

Ø  ESDM – Electronic System Design and Manufacturing.