Semiconductor PLI: Industry Seeks Greater Clarity on Incentives and Support

The electronics and semiconductor industry has sought greater clarity on the nature of sweeteners being offered under the government’s Rs 76,000 crore production-linked incentive (PLI) scheme for the sector, even as they hailed the package as being both progressive and comprehensive.

Stakeholders also want to know whether states can offer incentives to the semiconductor ecosystem that is over and above the Centre’s grants and how fast approvals will come through for fabs, or fabrication units, to be set up.

“A bit of the devil is in the details,” said Arun Mampazhy, an expert on semiconductor fab technology. “We’re waiting for that.”

This is a big push in the right direction, he added.

“At least one silicon-based semiconductor fab and one display fab will take off or possibly two. And at least one or two of gallium nitride or silicon carbide semiconductor fabs will also happen. There’s also the design aspect which a lot of companies will be interested in,” Mampazhy said.

Chipmakers said that the nearly $10 billion package will start showing results only in about three-five years and around 30% of the 300,000 engineers graduating every year could get absorbed in this industry.

They, however, cautioned that component shortages will continue to plague the sector over the next 6-9 months.

“The fight for talent will increase,” said K Krishna Moorthy, president for India Electronics and Semiconductor Association.

Moorthy expects the policy to address the challenges of wafer design, and product assembly in the country over the next three-five years.

Along with other PLI schemes in electronics manufacturing, he added that the government is committed to “$30 billion” and within the next five years, India had the potential to be at par with the United States, Germany and Singapore.

The much-needed relief for the sector comes at a time when India has been facing a component shortage that has handicapped automotive, consumer electronics and handset makers.

“In the long term, issues like sudden surge in demand for semiconductors will also be addressed. This move will also make the Indian manufacturers globally competitive to attract investment in the areas of core competency and cutting-edge technology,” said Sanjay Gupta, India managing director of semiconductor maker NXP.

The industry is, however, seeking clarifications over a host of issues.

“We need clarity on whether the Rs 76,000 crore is purely a cash incentive, or whether the land subsidy, duty subsidy, and all of those incentives are also included in that,” Mampazhy said.

Another aspect that stakeholders seemed confused about was whether this is just the Centre’s funds and if states can top up this.

For instance, industry experts said certain states have 25% capex exemption, while others have different policies in place.

The concerns are slightly different for players like Abu Dhabi-based Next Orbit Ventures, which formed a consortium with Israeli Tower Semiconductors and floated an Expression of Interest (EoI) for a $3 billion analogue 65-nanometre semiconductor fabrication unit in Dholera, an industrial hub in Gujarat.

“The only thing we want to make sure of is that the approval should be given to EOI applicants soon. We have been ready for ground-breaking since the last one year,” Ajay Jalan, founder and managing partner of Next Orbit Ventures . “It should not happen that the approval of the incentive will take another year’s time because we submitted the detailed project plan to the government in responded.”

Since Taiwan has recently been facing trouble in the form of water scarcity and some plants are shutting down, experts said this would spur global semiconductor giants to diversify their footprint and supply chains.

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