The multiple production-linked incentive (PLI) schemes for telecom, semiconductors and associated gear are gathering momentum despite a few setbacks. The policy support is strong, with policy amendments aimed at expanding the scope of eligible projects. This has induced more companies to sign up or express interest. These include multinational corporations such as Foxconn, Samsung, Nokia, Micron, Cisco and Apple, as well as various Indian companies and institutions, although the breakup of the Vodafone-Foxconn joint venture for manufacturing semiconductors has dealt a blow. Nevertheless, Foxconn and Videocon could be looking to partner with other players.
The policy support includes time extensions for various PLIs, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) notified in April 2020, clarity on design-linked incentives, additional financial support, and active engagement with corporates and potential national partners.
India and the US have signed an MoU for cooperation in the semiconductor sector, in line with the CHIPS and Science Act of the US, and India’s Semiconductor Mission. In addition, the Ministry of Electronics and Information Technology (MeitY) has constituted a nine-member task force to make India a product developer and manufacturing nation.
According to Rajeev Chandrasekhar, Minister of State for Electronics and Information Technology and Skill Development and Entrepreneurship, the government aims to increase its electronics manufacturing capability to Rs 24 trillion by 2026. He said that the initiative would create 1 million jobs.
According to Ashwini Vaishnaw, Minister of Railways, Communications and Electronics and Information Technology, the government is open to investing more in the India Semiconductor Mission. He informed that the recently proposed investment of $10 billion under the PLI scheme was just the first tranche of investment. He believes that the semiconductor industry is poised to reach the $1 trillion mark in the next five to six years.
The cabinet has approved the PLI scheme for semiconductor and display board production, with an estimated investment of Rs 760 billion over the next five to six years. The government will extend support of up to 50 per cent of project cost to eligible applicants. Its aim is to approve applications for setting up at least two greenfield semiconductor fabs and two display fabs. In September 2022, the cabinet approved changes in the PLI scheme. Under the revised terms, the PLI scheme will now provide uniform support of 50 per cent of the capital expenditure of a project in pari passu mode. The modification is based on the assessment that mature technology nodes of 45 nanometres (nm) and above will continue to garner high demand. The 45 nm and above market segment still constitutes around 50 per cent of the total semiconductor market.
The union cabinet also approved a proposal for the modernisation and commercialisation of a semiconductor laboratory. To this end, MeitY will provide fiscal support of 30 per cent of capex to approved units. In addition, the design-linked incentive (DLI) scheme will extend an incentive of up to 50 per cent of the eligible expenditure and a product deployment-linked incentive of 4-6 per cent on net sales for five years. The move aims to facilitate the growth of 20 companies capable of achieving a turnover of over Rs 15 billion in the next five years.
Telecom equipment vendors can now claim benefits for local production of 5G fixed wireless access (FWA) equipment under the PLI scheme for telecom and networking products. The step is expected to increase the availability of affordable 5G FWA equipment as operators roll out 5G networks. Companies can claim financial benefits for manufacturing FWA equipment, as part of the PLI scheme, by applying to get the product included in their approved list.
The government has already approved 34 electronic components manufacturing proposals worth Rs 111.87 billion as of March 30, 2023. Rajeev Chandrasekhar stated in Parliament that the government had notified SPECS on April 1, 2020, and 120 applications were received, of which 34 applications with a total project cost of Rs 111.87 billion have been approved. The approved proposals include those from Tata Electronics, Samsung Display Noida Private Limited, Salcomp Technologies, Sahasra Semiconductors, IdemiaSyscom, Deki Electronics, Molex India and Continental Device India Private Limited.
MeitY has also granted an extension to SPECS by a year. The scheme was launched to remove cost disabilities and strengthen electronics manufacturing, targeting the downstream value chain comprising digital parts, semiconductor/display fabrication units, ATMP items, specialised subassemblies and capital goods for manufacturing these components. The government offers financial incentives of 25 per cent on capital expenditure for setting up new units and modernising old units.
The government has launched in collaboration with the Manufacturers’ Association for Information Technology (MAIT) to establish India as an electronics repair hub. The initiative involves relaxing import-export regulations to reduce the time required for import and export approvals from up to 10 days to just one day. India will also allow the re-export of imported electronics goods to countries other than their original destination, which is currently prohibited under foreign trade rules. In addition, the government plans to address other bottlenecks, including an e-waste mandate that currently prohibits local disposal of non-repairable products. It aims to permit domestic recycling of 5 per cent of imported goods as a trial. MAIT estimates the value of the Indian repair industry in India to reach $20 billion within five years as it could benefit from labour arbitrage. India, with its lower labour costs, possesses a total cost advantage of 57 per cent over China and 26 per cent over Malaysia, both of which dominate global repair outsourcing.
The electronics repair services outsourcing (ERSO) pilot is being conducted in Bengaluru and it has been identified as a game changer for India. Five companies, namely, Flex, Lenovo, CTDI, R-Logic and Aforeserve, have volunteered for the pilot. Following the pilot, a detailed assessment will be carried out and necessary modifications will be made to the process and policies. Over the next five years, India’s ERSO industry could fetch up to $20 billion in revenue and generate millions of jobs.
The government has invited applications, starting from June 1, 2023, for setting up semiconductor fabs and display fabs, under the Modified Semicon India Programme. The applications will be received by the India Semiconductor Mission, the designated nodal agency. A fiscal incentive of 50 per cent of the project cost is available to companies/consortia/joint ventures for setting up semiconductor fabs of any node (including mature nodes). Similarly, an incentive of 50 per cent of the project cost is available for setting up display fabs of specified technologies.
The application window is open until December 2024. The application window of the DLI scheme is also open till December 2024. At least 26 applications have been received under the DLI and five applications have been granted approval.
Cisco has announced its plan to start manufacturing in India as part of a strategy to create an even more diverse and resilient global supply chain. Cisco aims to drive more than $1 billion in domestic production and exports. Meanwhile, Foxconn is set to invest $500 million in a new electronics manufacturing facility in Hyderabad. This will lead to the generation of 25,000 jobs and will be spread across 200 acres.
The government has cleared another tranche of financial incentives worth Rs 7.65 billion under the PLI scheme for the large-scale electronics manufacturing sector. According to data provided by the India Cellular and Electronics Association, Wistron Corporation, Apple’s contract manufacturer, will receive incentives of Rs 6.02 billion. Meanwhile, Padget Electronics, a 100 per cent subsidiary of Dixon Technologies, will receive Rs 1.49 billion. The government has also approved incentives for AT&S (Rs 75.8 million), Shogini (Rs 30 million) and Alcon Electronics (Rs 20.4 million).
The UK-based SRAM & MRAM Group has announced plans to set up a semiconductor fabrication unit in Odisha’s Ganjam district, with an investment of Rs 300 billion in the first phase. The semiconductor unit will produce memory chips used in mobile phones, TV sets, laptops, air conditioners and ATMs. The company aims to establish the unit within two years and to provide direct employment to 5,000 people. It also plans to expand in subsequent phases by investing around Rs 2 trillion by 2027. The company requires 500-800 acres of land to establish the unit.
Micron has signed an MoU with the government of Gujarat to set up a semiconductor plant for the assembly and testing of chips in Sanand in Gujarat. The facility in the Gujarat Industrial Development Corporation will be fully integrated, wherein wafers would go in and finished dynamic random access memory and random access memory chips would come out.
The government has approved setting up of an electronics manufacturing cluster worth Rs 1.8 billion at Dharwad in Karnataka. The project is expected to catalyse investments of over Rs 15 billion soon. Nine companies, including start-ups, have already together committed to investments of Rs 3.4 billion with a potential to employ 2,500 people. With this, Karnataka will become an electronics manufacturing hub, further complementing its status as a telecom hub, with Apple plants in Kolar (Wistron) and Devanahalli (Foxconn).
There has been significant activity on the research and development (R&D) front. The Prime Minister’s Office (PMO) has asked ministries to actively contribute to the creation of 5G use cases. Senior officials at the PMO have reached out to 14 ministries, urging them to collaborate with DoT to develop 5G use cases in specific sectors, with a deadline set for the India Mobile Congress 2023, which is typically held in October.
ITI Limited recently signed a tripartite MoU with the Centre for Development of Telematics (C-DOT) and Telecommunications Consultants India Limited (TCIL) to synergise their R&D efforts. The partnership between TCIL, ITI and C-DOT aims to jointly execute projects of mutual interest. Each project will be governed by a separate project agreement, in which TCIL will be the lead partner, C-DOT will be the technology partner and ITI will be the manufacturing partner.
Vedanta Spark has announced its collaboration with MeitY and Nasscom’s centre of excellence for internet of things (IoT) and artificial intelligence (AI) to accelerate the adoption of digital technology innovations. The Vedanta Spark programme has already engaged 80 start-ups for more than 120 projects.
MeitY issued a notification for the PLI scheme for IT hardware on March 3, 2021. The scheme extends an incentive of 4 per cent to 2 per cent/1 per cent on net incremental sales (over a base year) of goods manufactured in India and covered under the target segment, to eligible companies, for a duration of four years. The target segment under the PLI IT hardware scheme includes laptops, tablets, all-in-one personal computers and servers.
Bhagwati Products Limited received a disbursement of Rs 53 million from MeitY under the PLI scheme for IT hardware. It is the first domestic company to receive disbursement under the scheme. The company manufactures smartphones, LED TVs, tablets, laptops and air conditioners from its two facilities in Bhiwadi and Hyderabad, with an annual capacity of 20 million units. Another 13 companies, including Dell, ICT (Wistron), Flextronics and Rising Stars Hi-Tech (Foxconn), Lava International Limited, Dixon Technologies India Limited, and Infopower Technologies (JV of Sahasra and MiTAC), have received approval for incentives under the scheme.
Among the more interesting 5G applications, IG Drones, an Odisha-based startup, has developed India’s first 5G-enabled drone. The drone, named Skyhawk, has vertical take-off and landing capabilities. It can be used in defence and medical applications. It can carry a 10 kg payload with an endurance of around five hours.
NXP Semiconductors has inaugurated a state-of-the-art systems and silicon innovation lab at the NXP Semiconductors Campus in the Manyata Tech Park, Bengaluru. The state-of-the-art lab will be used to design, verify and validate NXP technologies in areas of security, connectivity, sensing, and processing and build market-specific system solutions in automotive, industrial, IoT, and consumer areas.
The Indian Institute of Science (IISc) and Samsung Semiconductor India Research will collaborate on R&D in on-chip electrostatic discharge (ESD) protection. According to IISc, the partnership seeks to build cutting-edge ESD device solutions to protect ultra-high speed serial interfaces in advanced integrated circuits and system-on-chip products. The solutions will be deployed in Samsung’s advanced process nodes.
India is poised to become the world’s second-largest of driven by demand from smartphones and wearables, automotive components, and computing and data storage sectors. By 2026, India will consume semiconductors worth up to $80 billion to manufacture electronic products worth $300 billion. The semiconductor market, pegged at $119 billion in 2021, will grow at a compound annual growth rate of 19 per cent to $300 billion by 2026.
The PLI and DLI packages are expected to attract investments and establish India as a manufacturing centre. These initiatives can leverage existing design skills, a talented engineering workforce and the vast scale of the domestic market, positioning India as a global powerhouse in the telecom equipment, IT hardware and semiconductor manufacturing industry.