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MEITY to Seek More Funds for Semiconductor Mission
Context: Ministry of Electronics and Information Technology (MeitY) is seeking additional funding from the Finance Ministry to further support semiconductor mission.
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- Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) ended on March 31, 2024.
- Nearly ₹70,000 crore out of ₹76,000 crore for the mission has already been committed.
Strengthening India’s Semiconductor Ecosystem
- Additional funds are required to support new and existing manufacturers, suppliers, and equipment manufacturers within the semiconductor industry.
- Approximately 300 vendors will require support and need to be located in close proximity to fabrication facilities (fabs).
- Supporting the ecosystem involves establishing facilities such as laundries for cleaning the bunny suits worn inside semiconductor units.
- While India’s design workforce is strong, there is a crucial need to enhance manufacturing precision.
- Diversification of the semiconductor supply chain is essential for strategic and geopolitical reasons.
- The pandemic emphasised the need for supply chain diversification.
- India sourced nearly 70% of its semiconductor devices and diodes from China.
- Electronics manufacturing operates within a global value chain, with components often crossing borders multiple times.
- India’s total electronics export stands at approximately $110 billion, with significant activity concentrated near Chennai.
- However, value addition in these exports is around 18-20%, primarily due to assembly and labour.
- To retain and expand its electronics manufacturing sector, India must deepen its value chain.
- The next critical stage for India in this process is component manufacturing.
The India Advantage
- With 20% of the world’s semiconductor design workforce, rapidly evolving tech landscape, and thriving domestic market, India is poised to build a semiconductor ecosystem.
- Initiatives like National Electronics Policy and $10 billion PLI scheme bolster chipmaking aspirations.
- Budget 2024 increased funding for the semiconductor ecosystem and established $12 billion R&D innovation corpus.
- India’s strategic positioning to attract global semiconductor companies is clear.
Challenges
- The US and EU offer more lucrative semiconductor incentives, pushing India to focus on mature nodes (28 nm and older) instead of cutting-edge ones.
- Advanced manufacturers like Taiwan Semiconductor Manufacturing Company (TSMC), which produces 3 nm chips, are currently out of reach, and attracting them may take time.
- India has many design engineers but lacks skilled workers for fabrication plants.
- India lacks original research in semiconductor design.
- Government is setting up an R&D lab at Semiconductor Laboratory (SCL) in Mohali and a Rs 10,000 crore modernization plan, including Bharat Semiconductor Research Centre, to develop chips for India’s needs.
Government Support and Subsidies
- New semiconductor units have 75% of their costs covered by government subsidies, paid progressively as projects advance to align government and investor interests.
- Semicon India Programme for development of semiconductors.
- Government approved three semiconductor plants (two in Gujarat and one in Assam).
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- It includes India’s first semiconductor fabrication plant, a collaboration between Tata Electronics and Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC), to be established in Dholera, Gujarat.
India Semiconductor Mission (ISM)
- Launched in 2021 with a financial outlay of Rs76,000 crore under MeitY
- Objective:
- Development of a sustainable semiconductor and display ecosystem and a robust semiconductor design ecosystem in collaboration with government, industry, and academia.
- Promote secure microelectronics adoption and establish a trusted semiconductor supply.
- Support growth of Indian semiconductor design industry by providing Electronic Design Automation (EDA) tools, foundry services, and other resources for early-stage startups.
- Promotes indigenous Intellectual Property (IP) generation and incentivizes Technology Transfer (ToT).
- Following four schemes have been introduced under the aforesaid programme:
- Modified Scheme for setting up of Semiconductor Fabs in India
- Modified Scheme for setting up of Display Fabs in India
- Modified Scheme for setting up of Compound Semiconductors / Silicon Photonics / Sensors Fab / Discrete Semiconductors Fab and Semiconductor Assembly, Testing, Marking and Packaging (ATMP) / OSAT facilities in India
- Semicon India Future Design: Design Linked Incentive (DLI) Scheme.