GOI to launch a mega-billion plan for semiconductor manufacturers

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The government of India is planning to roll out a mega multi-billion capital and production linked incentive (PLI) plan to boost the manufacturing of semiconductors in the nation. This move comes at a time when industries are facing cut in production due to global chip shortages.

The government is in talks with some of the largest semiconductor manufactures in the world, like Taiwan Semiconductor Manufacturing Company (TSMC), Fujitsu, United Microelectronics Corporation, Intel AMD.

The Prime Minister’s Office (PMO) is monitoring and coordinating efforts for implementing the ambitious plan. PMO and various ministers are finalizing the plan to woo the semiconductor manufacturers. The US, Europe, and other countries are also chasing these companies.

The government is looking forward to providing capital support to manufacturers.  It is likely to provide financial support on capital expenditure, tariff cuts on products, and benefits through programs such as – Production Linked Incentives (PLI) and Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).

Previous government attempts failed to persuade companies to invest in manufacturing semiconductors because the sophisticated process requires the purchase and maintenance of heavy instruments and uninterrupted flow of water and electricity supply, problems that India is still tackling.

The domestic demand is rising and will continue to increase further.  The government expects the domestic production of electronics to move up to $350-400 billion by 2025, against the earlier estimates of $75 billion.

India is powerful in chip design but has failed to get manufacturers in the country. It lost an opportunity of $5 to $10 billion investment. After the onset of the pandemic and China’s Plus one policy for procurements, India has become an attractive place for investments.

China’s Plus one policy avoids only investing in China. Western companies used to make investments in China due to the large consumer market and low cost of production. The new plus one policy encourages businesses to diversify their products in other markets.

Presently, India imports all the semiconductors to meet the expected demand of $100 billion by 2025 from $24 billion now. The government is confident enough that the fast-growing electronic segment will prompt companies to invest in India.

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