Electronics Cos Seek ₹10K cr for Chip Production Scheme

The electronics industry has urged the government to extend the promotion of the manufacturing of electronic components and semiconductors (Specs) scheme by five years with an increased outlay of at least ₹10,000 crore, from ₹3,000 crore at present, in the Union budget for 2023–24.

“As the scheme was launched for three years, the sunset period of Specs will be in March 2023, which means the industry will not be able to take the benefits beyond this time," the Indian Cellular and Electronics Association has submitted in its recommendations to the government. The note was reviewed by Mint.

The industry, through the association, argued that while the demand for over a threefold increase to the existing outlay approved in 2020 may seem high, it would make the scheme more attractive for new companies.

The demand comes at a time countries such as the US and China are focusing on building and increasing their semiconductor and components manufacturing capacities amid geopolitical situations threatening to disrupt the global supply chains.

China, for instance, is reported to be readying a $143 billion fiscal incentive package for chip manufacturers amid curbs from the US. The US, on the other hand, signed a landmark bill in August to provide $52.7 billion in financial incentives for domestic semiconductor production and research.

India has a few schemes specifically targeted at enhancing local capabilities and capacities of semiconductor and allied component manufacturing.

Under Specs, the Centre is offering financial incentives of 25% on capital expenditure for manufacturing electronic components, semiconductor or display fabrication facilities, assembly, testing, marking and packaging units, specialized sub-assemblies and capital goods that comprise the downstream value chain of electronic products.

Under the scheme, the government approved 32 applications with a total project outlay of ₹11,130 crore and committed incentives of ₹1,519 crore, said Ashwini Vaishnaw, minister of electronics and information technology in a written reply in Lok Sabha on Wednesday. The employment generation potential of the approved applications is at 32,457, he added.

To promote electronics manufacturing, the Cabinet approved a comprehensive programme with an outlay of ₹76,000 crore for developing semiconductors and display manufacturing ecosystem last year and modified it in September to provide financial support of 50% of project cost for semiconductor fabrication laboratories across technology nodes and for compound semiconductors, packaging and other semiconductor facilities.

This package is available for setting up silicon-based semiconductor fabrication units in all tech nodes, TFT-LCD- or AMOLED-based display manufacturing units, compound semiconductors or silicon photonics or sensors, fab or discrete semiconductor fabs and semiconductor ATMP units and outsourced assembly and testing (OSAT) facilities. The government has also created a design-linked incentive scheme to offer financial incentives and design infrastructure support across various stages of development and deployment of semiconductor design for integrated circuits, chipsets, system-on-chips systems and IP cores and semiconductor-linked design.