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Government now Offers $10 Billion for Chip and Display Development

CIO Insider Team | Thursday, 16 December, 2021
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The government has authorized a $10 billion incentive package to help India develop chip and display centers as part of its efforts to become an electronics manufacturing hub and reduce reliance on China, with which it has tense ties.

Companies will be granted production-linked incentives (PLI) over a six-year period. It plans to attract 1.70 trillion in investments for more than 20 units.

Two chipmakers and two display manufacturers are anticipated to build up plants under the plan in the next four years with each predicted to be investing 30,000-50,000 crore. In addition, 20 enterprises, including chip packaging firms and compound semiconductor firms that create chips for the automotive sector, power equipment, and other applications, are scheduled to be operational in three years with investments ranging from 3,000 to 5,000 crore.

In the midst of a global chip crisis that has hampered the production of most sectors from cars to computers, India is attempting to rearrange supply chains in order to reduce its reliance on China. The government has previously requested that local automakers minimize their reliance on Chinese electronics.

“In the current geopolitical scenario, trusted sources of semiconductors and displays hold strategic importance and are key to the security of critical information infrastructure”, adds the ministry of electronics and information technology

“The demand-supply gap was widening by the day, disrupting the supply chain and increasing overall manufacturing costs. The red carpet rolled out by the cabinet can make India not only self-sufficient but also a global supplier of chips”, says Kulraj Ashpnani, PLI specialist, Dhruva Advisors.

The government expects that the incentive package will make it easier to manufacture crucial components for autos and mobile phones in the US. The scheme's incentives are expected to aid in the design, fabrication, packaging, and testing of semiconductor chips, as well as the development of a comprehensive ecosystem.

The government also intends to provide financial assistance of up to 50 percent of the project cost to companies who are selected to build semiconductor and display fabs in India under the scheme. It will also cooperate closely with governments to develop high-tech clusters with the necessary infrastructure to house the fabs, including land, semiconductor-grade water, high-quality power, logistics, and a research ecosystem.

“Any country that does not learn to make wafers (semiconductors) will lag behind others in the days to come. Any economy that does not have control over semiconductors, quality and design and does not have a focus on talent development will not be able to move forward”, Ashwini Vaishnaw, communications and information technology minister.

The initiative is aimed at creating 35,000 direct and 100,000 indirect jobs, according to Vaishnaw, who also mentioned the potential for job creation.

The government will extend product design linked incentives of up to 50 percent of qualifying spending and product deployment linked incentives of six percent to four percent on net sales for five years under a separate design linked incentive (DLI) scheme.

100 local enterprises working on integrated circuits, chipsets, system on chips (SoCs), systems and IP cores, and semiconductor-linked design will also receive assistance. According to the government, this initiative will facilitate the creation of at least 20 such businesses with a revenue of more than Rs 1,500 crore in the next five years.

“In the current geopolitical scenario, trusted sources of semiconductors and displays hold strategic importance and are key to the security of critical information infrastructure”, adds the ministry of electronics and information technology.

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