Govt unveils ₹76k-cr plan to boost semiconductor manufacturing

India finally took a giant leap towards getting semiconductor and display fab manufacturing into the country through a Rs 76,000-crore incentive package at a time when its shortages have hit production across automobiles, electronics and other sectors.

Communications and IT minister Ashwini Vaishnaw announced the decision. The government feels the presence of a strong domestic market as well as suitable incentives and enablers will get the companies to invest in India.

Lack of local semiconductor manufacturing increased forex outflow

The Cabinet meeting, chaired by PM Narendra Modi, cleared the proposal which seeks to put India in the global league of top electronics manufacturing nations such as China, Taiwan, South Korea and Malaysia.

Previous efforts at getting companies to invest in India had not yielded much results.

With no local manufacturing, India meets its semiconductors needs through imports, which is estimated to reach around $100 billion by 2025 from the about $24 billion now.

Foreign exchange outflows have been assuming alarming proportions with rapid growth in the adoption of digital products such as smartphones, laptops, electronic gadgets and IoT devices as well as new-age cars and vehicles.

The biggest pinch from the absence of local manufacturing was felt during lockdown when a global surge in the demand for electronics saw a worldwide shortage of chips.

The bigger fab factories (two for semiconductors and two for display) — which will entail heavy investments ranging between Rs 30,000 crore and Rs 50,000 crore — will come up over two-four years, the minister said, and a design ecosystem will be developed “in parallel”.

The Cabinet decision also took note of the pressing need to develop the requisite talent in the country to cater to the needs of semiconductor manufacturing. “Development of talent and human capital was seen as an important ingredient and thus the Cabinet decision also entailed developing a pool of 85,000 highly talented engineers. As many as 60 institutes will join hands here, that will include all the IITs and best of the NITs.”

The government expects a total of 100 units to come up as part of the semiconductor ecosystem and the manpower is being developed to cater to this industry. “This would be for compound semiconductor, design, packaging and bigger fabs.”

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