Cabinet today approves Cr 76,000 program to advance semiconductor manufacturing in India

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The Union cabinet is likely to approve billions of dollars in capital assistance and a production-related incentive on Wednesday to help drive semiconductor manufacturing in the country, sources told News18.com. The cabinet led by Prime Minister Narendra Modi is ready to launch a mega-incentive worth 76,000 billion rupees for semiconductor manufacturing. The incentives are likely to be processed in three ways. The program will include 25 percent capital spending incentives to set up a unit for compound semiconductor wafer manufacturing (fab), assembly, testing and packaging equipment, sources added. It would also include incentives for startups to develop semiconductor designs. The proposed scheme involved investments of Rs. 1.7 lakh crore from industry, called sources. According to sources, the government also plans to set up over 20 semiconductor design, component manufacturing and display manufacturing (fab) units in India over the six years.

Once the cabinet approves the plan, the Department of Electronics and Information Technology (MeitY) will work out the details. With this mega-incentive, the government wants to attract the top semiconductor manufacturers such as Mediatek, Intel, Qualcom, Samsung and Texas Instruments. This step came at a time when a global chip shortage was having a massive impact on industrial production in several sectors.

The center also planned to set up two fab units for semiconductor displays and 10 units each for developing and manufacturing components. This much-needed stimulus from the central government can help India become an electronics hub, especially in the face of the ongoing global semiconductor shortage crisis.

The government will also reportedly provide financial support for capital expenditures, tariff cuts for certain components, and benefits through programs.

This move will expand the scope of manufacturing and export from India and deepen India’s manufacturing base. Last month, the Department of Electronics and Information Technology (MeitY) released the first volume of the vision document “Increasing India’s Electronics Exports and Shares in GVCs”. The aim was to increase exports and India’s share in global supply chains. “Local Goes Global”, according to a government release. The vision document focused on the opportunities and key factors to increase India’s share of the global value chain and build large-scale manufacturing capabilities to achieve a significant share of global electronics exports. It also recommended short-term (1-4 years) and long-term (5-10 years) strategies to increase electronics exports from India, shift investments to the electronics manufacturing ecosystem, and expand exports by increasing competitiveness and scale. The vision document also emphasized strategies for building national champions and the need to link their products with lead firms and GVCs, the press release said.

Semiconductors are the main components used in the manufacture of various types of electronic devices, including smartphones, laptops, automobiles, and other devices and vehicles. The global shortage of semiconductors has affected many industries for more than a year. The shortage has impacted smartphones, PCs, game consoles, cars, and medical equipment. It also impacted global vehicle production in 2021 and the following year, causing huge losses to the auto industry. The global auto industry may produce 6.3-7.1 million fewer vehicles this year due to the acute shortage of semiconductor chips.

In a report, IHS Markit said the chip crisis won’t be over until the second quarter of next year. Global automakers such as Toyota Motor Corp and Ford Motor Corp have decided to cut production sharply in the wake of the chip crisis. Production delays have become common in the domestic auto industry.

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